Suncor Energy Inc. T.SU

SU options with its free cash flow

[Obscure1]

SU 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.

 

[Praxis1]

No brainer...DIVIDEND!!!!

[Vlosun]

I think NCIB could represents 10% of public float, about 150 M. So they can increase the actual NCIB. For exemple, between may 2018-2019 the bought back 69M shares. Paying penalities on debt could be ok too, you will save interest to expand dividend and made Suncor stronger

[Spanito]

This post has been removed in accordance with Community Policy

[Vlosun]

think there are a few things missing from your analysis. The number of shares was not maintained solely by the effect of stock options. Over the past 10 years the company has issued 47 million shares as compensation. Or 5 million per year on average. The company bought back 300 million shares for disposal. If you add the 220 million shares issued for the purchase of COS in 2015 we can then

[PabloLafortune]

If as you say Suncor generated $2B of cashflow in Q2, then pay all of it out as dividend ie ~$1.33 or $5.33 annualized or 20% yield ...would be a heck of a lot more effective to raise the share price than buybacks which is simply put a colossal waste of money for this company.

[firstworld]

Govt and proxies now own most of SU they need the money badly after buying every Canadian kid Gucci belts and parents new cars LOL. SU needs to pay back all the welfare it received on the backs of people working 20 hrs a week before they pay out and welfare funded div money. It's nothin buy a social communist entity now polluting beyond anything Nigeria has seen...I wonder how many Tesla

[Chris007]

Obviously a payout of approx $8 billion in annual dividends is not feasible...unless (1) oil goes goes higher stays substantially higher for the rest of the year (2) they don't plan to do anything with FCF other than pay a dividend (which is pretty unrealistic) 5.33 x 1,506,484,194 = $8,029,560,754 According to TD Securities Energy Report from July 15 If  WTI  averages $65

[PabloLafortune]

Well I'm not going to borrow Suncor's watch to tell them what time it is.  If you go back to 2018 and 2019, the cashflow (working capital + debt changes, dividend, buyback, capex) for the first 9 months was back of the napkin ~$7.9B and $8.5B on avg WTI of ~$65 and $58 respectively.  Is $2B net of sustaining capex in the cards at a forthcoming quarter? I believe so. As for

[Spanito]

This post has been removed in accordance with Community Policy