Suncor Energy Inc. T.SU

Implications of Fort Hills acquisition

[Obscure1]

It cost $17 billion to build Fort Hills

Teck owned 31.23% of Fort Hills which represents $5.3 billion at cost

SU just picked up the 31.23% share of Fort Hills for $1.5 billion which represents twenty eight cents on the dollar. 

So what are the possible takeaways from the deal?

* Kruger is a genius....oh wait, Kruger came on board in April, long after the terms were created

* Teck is stupid......maybe

* All of the other potential suitors are stupid....maybe

* Maybe nobody wants to buy into a future of land locked tar sands, even at $0.28/dollar

With the acquistion, the market value of Fort Hills will have to be adjusted.  The adjusted value of Suncor's existing Fort Hills asset should readjusted to:  $17 billion x 68.77% x 28% = $2.1 billion. 

SU's original cost would have been $11.7 billion.  If SU hasn't already written down its cost on Fort Hills, the company will be looking at a $9.5 billion write down.  

Back to the bullet points above, is the SU managment team Superman, or did they they pick up assets that Teck was desperate to sell and nobody else wanted them? 

There is no question that SU's cash flow will benefit from the Fort Hills deal.  Hopefully the BoD will jack up the dividend payment as planned.  Just remember that SU got such an amazing deal on the back of the $9.5 billion writedown on a project that is only 5 years old.   

On another front, Tesla's just lowered the price on the world's best selling car including all the gas guzzlers. Today, Tesla's luxury SUV is now sells for $4,000 less than the average cost of ICE vehicles in America.  Lop off $7,500 EV tax credit which will taken off the sticker price on Jan 1, 2024 and we are talking $11,500 lower than the average.  In California, the 5th biggest car market in the world, lop off another $7,500 to take the price $19,000 lower than the average ICE vehicle.    

At some point in 2025, Tesla's new Model 2 compact is expected to begin production.  The vehicle is anticipated to sell for $25,000 before the $7,500 federal EV credit and another $7,500 California EV credit which will take the price down to $10,000.  

Just in case the ICE automakers are not facing a difficult enough path, the UAW is making sure that the price of Fords and GMs and Chryslers will skyrocket going forward.  

Tesla is going to be capable of producing about 6 million vehicles per years in the USA and north eastern Mexico when Giga Texas expands and Giga Mexico gets up and running.  Suncor shareholders better hope that America keeps the Chinese automakers out of the States.     

Tesla is so confident that "Range Anxiety" will no longer be an issue going forward that it lowered the range for it its new Model Y down to 260 miles (420 km).  More than 80% of Tesla owners charge at home and the number will increase as people do the math before buying their next vehicle.  Muliple unit buildings (apartment buildings and condos) will have to add charging capacity to maintain their value. In the meantime, Tesla alone added 400 new Super Charging station in North America last year (the new station in Richmond BC has 40 chargers). 

I don't care whether anyone buys or sells SU shares as I don't have a dog in the fight.  People should know the facts.  There are a lot of investment options available and everyone should be asking themselves what serves them best.  If SU fulfills your investing goals then breathe easy.

[mrbb]

I guess CNRL, Imperial Oil, Shell, Chevron, need to follow your advice too and writedown their surface mining asset based on this latest valuation of SU-TotalEnergies deal. LOL

[Lawisfun]

As of 2024, Tesla will no longer qualify for the $7,500 rebate due to requirements detailed in the Iflation Reduction Act (IRA). 

[mrbb]

keep posting contrarian news about EV as i longer have desire to play with Robin with free education. (I notice MC is doing the same). I had already called batman and robin out on their confirmation bias tunnel view of EV and keep bashing o SU, now robin label you with confirmation bias about bearish EV view on SU's board, LOL, too funny. i'm not sure when you join the SU board, but

[Experienced]

At the time of acquisition of Teck's share of Fort Hills, SU wrote down about 3.4 billion (if I recall correctly). Frankly, I was surprised that they didn't do another writedown when they announced the deal with Total.  I would assume that their accountants are still doing the math and we will likely see it when they announce their 4Q results early next year. The other thing that I

[liljohnnyjoke]

no money now for an increase to the regular divy or even a special divy based on the money pile generated in q3? certainly record year end bonuses must be in the cards though?

[meritmat]

  Yes Exxon is buying pioneer.  Not sure old oil is on its last legs yet!!!