RE:Irving Oil…Yes newtonboy....There is a lot of speculation about Irving Oil.
IMO there is little doubt that the Irvings want to sell their oil business for a number of reasons.
Essentially they have two oil related businesses, the refinery at St John and one small refinery in Ireland, and oil distribution which includes about 900 gas stations and storage terminals. It would seem to me that SU would be interested in the refinery but not the gas stations. Couche Tarde could be interested in buying the gas stations. One option would be a JV between SU and Couch Tarde to buy the whole thing.
So what would the St John refinery be worth? Mikinsey and Company recently put out a report that shows that the current price would be in and around $4,000 per barrel of production. This would put the St John refinery valuation at around $1.25 billion which is certainly a price that SU could afford. Interestingly, the Mikinsey report also said that the valuation of a refinery has fallen about 50% over the last 5 years. This reduced cost certainly makes the economics of buying a refinery more attractive in terms of a shorter payback period. With this in mind and offset by the fact that the refinery is also facing issues related to the carbon tax, preferential taxation which may not be extended, and other environmental issues, it would seem to me that there is a lot of scope for negotiation in regards to the price.
Given that the current president of Irving OIl is leaving the company effective in June and Sarah Irving (heir apparent) is no longer listed as an officer of the company suggests to me that a deal announcement is imminent.
Given the current political climate, it would seem to me that it would be a stretch to think that any company other than SU would be interested in buying the refineries.
Curiously, at current valuations of a refinery and current oil prices, a purchase of the refinery would be accretive to SU earnings but at the same time it would call into question the current valuation of SU's other refineries and whether their valuation needs to be written down. In such a scenario, where SU buys the Irving refinery and has to write down the value of its current refineries (kinda like they did with the purchase of the Teck share of Fort Hills) {alternatively even without a writedown, analysts might question the underlying asset valuation compared to the SP} we could see the SP going down in response but IMO such an event may well present a short term buying opportunity which I would certainly take advantage of.
Anyway in the meantime, I will sit on my eagle perch on the cliff and be ready to swoop down if the opportunity presents itself.