RE:Tech sale of Fort Hills interest provides benchmark Yes, it does put an exact number on it.
4 things stand out to me in this press release:
1) 5% reduction in production compared to guidance
2) 5% increase in production costs compared to guidance
3) A Q3 impairment charge will be made due to the lower value of the existing Fort Hills mine asset
This transaction sets a current market value for Fort Hills and Suncor will therefore recognize a non-cash accounting impairment charge on its existing 54.1% interest of approximately $2.6 billion(1) after-tax in its third quarter results which will be announced on November 2, 2022. 4) WTI long term forecasts used in SU financial models seem extraordinarily low at $60/bbl, as the WTI futures backwardation curves looking years ahead are much higher and flatter now than when these models were made.
It seems SU has taken a position on where they stand, and traded it's renewable holdings for a larger stake in bitumen mining operations.
The direction may not appeal to many investors waiting for SU to move to a larger renewable footprint, but it is sticking to what it does best. Instead of expanding into a renewable portfolio, it is moving forward with CCS initiatives for the future as it's get out of jail free card.
I see the transaction as a short term drag on the stock price, but a higher upside on the long term. It is costly in terms of the new lower mine asset rerating, and uses up cash, but it extends and secures it's share in a future long life source of oil sands feedstock without the need for new development, which is already in operation as a going concern.
The next logical step would be to buy Total's remaining 25% to get full mine ownership.
Obscure1 wrote: In anticipation of Tech and Total selling their interest in Fort Hills to SU I posted on Sept 30th (Post # 3499787):
What is 72,000 bpd of WCS worth?
Well, now we have the answer.
Teck owned 21.3% of the 45.9% of Fort Hills that SU didn't own which equates to 46.4%.
46.4% of 72,000 bpd = 33,411 bpd
SU has purchased the 33,411 bpd for $1 billion. That equates to $29,930 (lets call it $30,000) for each bpd.
This info should add a bit of insight to analysts towards updating their valuation models