The following is an excerpt from Canaccord Genuity’s Morning Coffee newsletter.
While Carl Icahn’s disclosure of 61.5 million shares, or roughly 6% ownership, in
Talisman Energy Inc. (
TSX: T.TLM,
Stock Forum) took the spotlight on Tuesday. It’s worth noting that Icahn is the latest high profile money manager to come north of the 49
th parallel – note Warren Buffett – Suncor and Bill Ackman –
Canadian Pacific Railway Ltd. (
TSX: T.CP,
Stock Forum).
Suncor Energy Inc. (
TSX: T.SU,
Stock Forum), the largest Canadian integrated oil company, also with the position in the oil sands industry, has been under the investor microscope globally ever since Buffett disclosed in August that
Berkshire Hathaway Inc. (
NYSE: BRK.A,
Stock Forum) had purchased 17.8 million shares valued at roughly $524 million (a ‘dip your toe in’ position for Buffett?).
While BRK did not disclose reasons for the purchase, some market watchers commented that the stake was purchased because BRK believes
TransCanada Corp.'s (
TSX: T.TRP,
Stock Forum) Keystone XL Pipeline will be approved, which will benefit SU greatly.
The Financial Post quoted Peter Tertzakian, Chief Energy Economist at ARC Financial Corp. in saying, “This may be a turning point, possibly, Mr. Buffett is obviously recognized as a value investor, and the oil sands sector represents significant value.”
Remember when Buffett first bought into rails? It was a little bit of a head scratcher then, not so much of a head scratcher now. While Hollywood types are running around decrying Keystone and “dirty oil” from Canada’s tar sands – Buffett is buying Suncor.
Recently, SU announced that its ex-Syncrude oil sands production in September averaged 365 million barrels per day.
This was below Canaccord Genuity Energy Analyst Phil Skolnick’s estimate of 380 to 390 million barrels per day. Recall that September was impacted by planned maintenance on the vacuum unit of the U2 upgrader for four to five weeks.
Skolnick’s estimate of the impact of this maintenance was 50-60 million barrels per day; which was as disclosed by the company.
Despite the miss, Skolnick believes the mid-point of SU guidance is still easily achievable; In order for SU to meet its ’13 ex-Syncrude oil sands production target of 350-380 million barrels per day, production for October-December needs to average 368-488 million barrels.