Market Monday – Suncor bets on Canada

Suncor Alberta Refinery 

Suncor bets on Canada

I’m glad I don’t play poker against Suncor CEO Steve Williams.

During last weeks Suncor earnings call, Steve mentioned two things regarding Canada, first the bad: “We’re having to look at Canada quite hard. The cumulative impact of regulation and higher taxation than other jurisdictions is making Canada a more difficult jurisdiction to allocate capital in,” Williams said.(No doubt! Pipeline debates and government Interference is a tough combination)

Next the good (If you work for and invest in Suncor!) Canada’s largest energy company is insulated from low prices being paid for Western Canadian Select heavy oil (Remember in Canada most deal in WCS and not WTI as you see on the news) because it has plenty of contracted pipeline capacity and is able to use its crude in its refineries, Williams said told a conference call following the company’s latest financial results. When asked about buying opportunities “It clearly gives Suncor an advantage,” (No kidding!)

Fast forward to today, when it was announced it would buy the five per cent stake owned by Mocal Energy Ltd., a subsidiary of Japan-based conglomerate Mitsubishi Corp.

The purchase price of $920 million CAD.

You win Suncor. I fold.

You get what you paid for!

So, why does Suncor see value in this Syncrude project in Canada? Value enough to spend almost $1 Billion dollars on it?

Good question! Two reasons: 1st, Syncrude converts heavy sticky bitumen from open pit mines into a synthetic crude which fetches prices similar to U.S. benchmark West Texas Intermediate or WTI… Remember when I said there’s a huge price difference between West Canada Select and WTI… Well Syncrude, and now Suncor, have the ability to close the gap!

2nd, and more relevant now, is Pipelines… and guess what?! Yup, they’ve got ’em!

Suncor Pipelines group manages over 1,700 km of pipelines across Canada and the United States. Products moved within our pipelines include natural gas, crude oil, diluent, diluted bitumen, blended products, jet fuel, diesel fuel and water. *According to Suncor

Also, a 3rd bonus goes to the $17-billion Fort Hills oilsands project which started to kick into production late last year.

When is a good time to say you’re reluctant to spend any more money on Canadian projects? I’d say a couple months after you just open a shiny new $17 billions dollar operation.

We need more bets on Canada, folks!

So, Back to the pipeline debate…. We have a CANADIAN company… buying up Canadian based assets! Purchasing them AWAY from foreign investors, why?? Because they have the technology… the money… the PIPELINE ACCESS and the passion to invest in CANADA, with Canadian Jobs and Canadian Talent!

How is this a bad plan, Canada?

Oh, and one more thing…

Suncor and it’s partners are involved in four operational WIND power facilities. These wind power facilities have a generating capacity of over 100 megawatts (MW) in Ontario, Saskatchewan, and Alberta. (Not bad!)

Sounds like a Full house…

That’s your Market Monday.


Kelly Hall

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