RE:What's next for Suncor?Obscure1 wrote: 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.
Interesting points, however my view is the Head Cockroach and his band of circus clowns need to do a flip flop on Cdn energy more specifically to Oil and Gas sector. The current regime has an agenda and has implemented policies that are unfavourable to the energy sector, hence the sector has responded by using a strategy that is more freindly to shareholders. Paying off debt, buying back shares and either implementing or increasing dividends to shareholders seems to be the motto for most companies. There seem to be a few that can be debt free within a few years if things keep going to plan and Oil/Gas prices stay high.
Seems to me that with increasing interest rates, paying off debt is smart. Lots of companies are initiating longer term debt at low rates and using it to buy up nearer term notes. These are smart moves as the longer dated debt is cheaper than the nearer term debt.
Now both MEG and CVE are great examples of paying off debt, which is the higher priority than dividends, and both have increased share buybacks.
In the case of CVE, they probably reached the $10B mark prior to end of 2021 and are on their way to the $6-$8B by 2022. Probably gonna happen much sooner but CVE states that dividend growth is tied to deleveraging and net debt targets.
As for SU and most others, maintaing status quo is the most important. Until the clowns come out and ask us to please grow and we will support you because we realize how so important you are to the every day lives of humankind, the GDP of our country, and we are complete idiots for thinking we can run on electricity only, why should any energy company change from the status quo to growth. Now I know that only a change in government is probably the only way to achieve this change to growth mode, or perhaps more pain with higher interest rates and cost of food, housing, everday goods increases along with gas prices will help force the stupid clowns to reverse their sickening policies but I doubt it.
So, stay the course and enjoy the ride while we have it. See what happens to the clowns in Canada and the US later on in the year and plan accordingly.
IMO