What's next for Suncor?On Oct 21, 2021, the Financial Post reported that Suncor was investigating selling its Norwegian assets which amounts to the equivalent to about 30,000 barrels per day. At the time, Brent was trading at $85 and the selling price was expected to be about US$500 million. I haven't seen anything since until yesterday
Yesterday, www.upstreamonline.com published an update that Scotia has been hired to oversee the sale. It is a paid service and I haven't seen anyone else pick up the article yet.
Is this a tit-for-tat move in response to the Norwegian Sovereign Wealth Fund announcement last May that it was exiting the tar sands? I doubt it. If the sale proceeds, I expect Suncor will use the Cdn$750 million to further pay down debt.
I think the company has guided that their overall debt would be down to $15 billion by the end of 2021. If SU completes the sale and continues to pay down debt at the same rate as it did in 2021, we might see overall debt at $10 billion to $11 billion by the end of this year.
In comparison, ENB has total debt of about US$71 billion and total liabilities of US$100 billion
Now, I know that comparing ENB to SU debt is like comparing apples and oranges because the pipeline is regulated to the gills and debt servicing costs get built into the regulated rates. But still, ten to one!
By the end of 2022, SU may end up halving its debt in two years and put itself in a position to be debt free by 2025. Is that a good thing? Not really for a public company.
For example, ENB just raised Cdn$750 million at 5% maturing in 2082. ENB stated that it is going to use the money to pay off another debt instrument, but the bottom line is that ENB has investment thresholds of 15% on renewables and 20% on hydrocarbon investments. One of the benefits of being a public company is the ease of access to debt and equity markets.
If Suncor is going to simply pay down its debt to zero in the next couple of years, why bother being a public company?
Given that top level management of public companies get compensated on performance, it doesn't make sense that Little and the gang would want to sacrifice growth at the cost of running debt-free.
As such, I have to think that SU has expansion plans. Will that be in the form of the acquistion of international partners who want out of the tar sands? Or will SU be dipping its toe (or maybe diving in) into renewables? Or maybe SU has its eye on a completely different business such as buying TMX.