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Suncor Energy Inc. T.SU

Alternate Symbol(s):  SU

Suncor Energy Inc. is a Canada-based integrated energy company. The Company's segments include Oil Sands, Exploration and Production (E&P), and Refining and Marketing. Its operations include oil sands development, production and upgrading, offshore oil and gas production, petroleum refining in Canada and the United States and its Petro-Canada retail and wholesale distribution networks, including Canada’s Electric Highway, a coast-to-coast network of fast-charging electric vehicles (EV) stations. Petro-Canada has a network of over 1,800 retail and wholesale locations across Canada, providing customers with a wide variety of fuel and service offerings including low-carbon fuel options. It is developing petroleum resources while advancing the transition to a low-emissions future through investment in power and renewable fuels. It also wholly owns the Fort Hills Project, which is located in Alberta's Athabasca region, approximately 90 kilometers north of Fort McMurray.


TSX:SU - Post by User

Post by Obscure1on Jul 21, 2021 11:39am
284 Views
Post# 33581390

SU options with its free cash flow

SU options with its free cash flowSU terminated its short term Line of Credit in Q1.  In addition, they also paid off the current portion (2021) of their long term debt.

Long-Term Debt
  As of December 31, 2020 (in $millions)

3.10% Series 5 Medium Term Notes, due 2021 C$748million......paid
9.40% Notes, due 2021 (US$220)   C$281million .....paid
4.50% Notes, due 2022 (US$182)  C$224million
2.80% Notes, due 2023 (US$450)  C$574million
3.60% Notes, due 2024 (US$750)  C$953million

SU only has C$224mm of debt due next year, which represents about one week of the free cash flow that the company is currently generating.

The company likely generated enough free cash flow during Q2 to completely retire the debt that is due until the end of 2024, which it can't do unless it pays a penalty.

NCIB's are limited to 5% of the outstanding float (currently 1.5 billion shares).  They have probably already bought back 40mm of the 44mm of their current NCIB.  If SU extends its NCIB to the max this year (until Feb 7th 2022) it could spend about $1 billion more on buying back the extra 35mm shares which represents about one month of free cash flow.

SU can't buy back any more debt without paying penalties.  SU can only spend about $1 billion more on buying back shares if they max out purchases allowed under the NCIB rules. 

SU likely made 2+ billion dollars of free cash flow in Q2.  They can't buy back any more debt this year and can only use about one week of free cash flow to buy out the debt that is due next year.  They are limited to about $1 billion of additional spending on their NCIB if they max out the purchases until February. 

The company has three options when it comes to utilizing the $8 billion dollars of free cash that they will likely earn after Q1.  They can sit on the money, which is extremely unlikely as the market will penalize them for it.  They could buy something big, but purchasing oil assets is an unlikely goal and they don't have the expertise to suddenly slide billions of dollars into green operations.  Or, they could bump the dividend.

When you read the fear mongering nonsense posts, please keep the facts in mind.

 


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