Canada‘s premier integrated energy company, Suncor Energy (SU), together with an affiliate, signed a deal with a subsidiary of British company Dana Petroleum plc. As per the agreement, Suncor will sell a number of its UK offshore assets for £240 million (approximately C$390 million) to Dana Petroleum, with an effective date of July 1, 2010.
The sale agreement includes Petro-Canada UK Limited’s interests in 12 offshore production and exploration licenses in the UK sector of the North Sea. Till date, production from the assets averaged approximately net 16,000 barrels of oil equivalent per day.
The deal also involves the sale of Triton floating production, storage and offloading vessel (FPSO) related to the Guillemot West/North West and Bittern fields.
Suncor’s divestiture is expected to close in the fourth quarter of 2010, subject to approval and certain closing conditions.
As part of the previously announced business strategy, Suncor sold off a number of non-core assets over the last few months. This includes the disposal of oil and gas producing assets in the United States Rockies, non-core natural gas properties in Western Canada, all Trinidad and Tobago assets and shares in Petro-Canada Netherlands B.V.
Suncor set an asset sale target of $2 billion to $4 billion for 2010. Including this deal, the company’s asset divesture program reached approximately $3.3 billion. Remaining properties that are likely to be divested in the future comprise some natural gas assets in Western Canada.
We expect Suncor to benefit from its attractive asset base which allows greater flexibility in reinvestment decisions, a strong inventory of visible oil sands growth projects and the overall bullish outlook for the oil sector.
The sale agreement includes Petro-Canada UK Limited’s interests in 12 offshore production and exploration licenses in the UK sector of the North Sea. Till date, production from the assets averaged approximately net 16,000 barrels of oil equivalent per day.
The deal also involves the sale of Triton floating production, storage and offloading vessel (FPSO) related to the Guillemot West/North West and Bittern fields.
Suncor’s divestiture is expected to close in the fourth quarter of 2010, subject to approval and certain closing conditions.
As part of the previously announced business strategy, Suncor sold off a number of non-core assets over the last few months. This includes the disposal of oil and gas producing assets in the United States Rockies, non-core natural gas properties in Western Canada, all Trinidad and Tobago assets and shares in Petro-Canada Netherlands B.V.
Suncor set an asset sale target of $2 billion to $4 billion for 2010. Including this deal, the company’s asset divesture program reached approximately $3.3 billion. Remaining properties that are likely to be divested in the future comprise some natural gas assets in Western Canada.
We expect Suncor to benefit from its attractive asset base which allows greater flexibility in reinvestment decisions, a strong inventory of visible oil sands growth projects and the overall bullish outlook for the oil sector.
However, considering Suncor’s high debt level, operational challenges and risks related to the expansion of the oil sands operations, we remain cautious on the stock in the long run, reflected through the Neutral rating.
With an expectation that the stock will perform in line with the broader equity market, we currently retain a Zacks #3 Rank (short-term Hold rating).
SUNCOR ENERGY (SU): Free Stock Analysis Report
Zacks Investment Research
