Stifel FirstEnergy Morning Research Package
Parex Resources (PXT-TSX); BUY, C$34.50 ― FLASH: 2,700 bbl/d discovery at La Belleza, “best in class” reserve recycle ratios posted again in 2019 | Pinnacle Renewable Energy (PL-TSX); BUY, C$13.50 ― FLASH: CEO Mr. Robert McCurdy to retire | Suncor Energy (SU-TSX); HOLD, C$43.00 ― Reducing TP to $43.00 on lower oil prices
Suncor Energy Parex Resources
07 Feb 20
SU – 4Q18 sees dividend up 17%, NCIB up $2.0B
Q4 financials were slightly behind the Street in a volatile quarter. We view the misses on pricing and opex as likely being one-offs. With a 17% dividend bump, SU is now yielding 3.8%. At the strip, we estimate 2019e FFO exceeding capex and the new dividend by $2.5B. Go-forward estimates relatively unchanged. TP up $1.00 to $47.00/share. HOLD.
07 Feb 19
SU – 3Q18 financials resilient
Q3 FFO of $3.14B or $1.93/share dil. matched our estimate and was $0.03/shr ahead of consensus. At strip pricing, SU expects Q4 FFO to be similar to Q3. 2018 guidance was essentially unchanged, except for a $150 mm reduction to the midpoint of current tax expense guidance. Our ‘19e/’20e estimates are essentially unchanged.
02 Nov 18
SU – guides to weak 1Q18e production
SU expects 1Q18e production of ~685 mboe/d, which is ~100 mboe/d below expectations. The January plant outage had a bigger impact than we realized, while the turnaround start at Syncrude has been moved up to mid-March. Our 2018e production and CFPS estimates are down 3%. Our 1Q18e CFPS estimate is down $0.21 to $1.30, but would be ~$1.49 if we were using quarter-to-date commodity prices, which is in line with where consensus was prior to this update. $46.00/share target price and HOLD rating unchanged.
14 Mar 18
SU – 3Q17 beats; projects on track
CFPS beat all estimates on strong operations and lower cash costs. ’17 guidance essentially unchanged. ’18 guidance is expected in midNovember. Our ‘18e estimate for capex is up $0.4 billion to align with notional indications, while our ‘18e production and CFPS estimates are both down 3% to align our Fort Hills ramp-up with Management’s suggestion. Target up $1.00 to $42.00/share. HOLD rating maintained.
27 Oct 17
Commodity Price Update – Impact on Integrateds, Large Cap E&P, Oilsands
3Q16e WTI prices look set to average ~US$44.50/bbl vs. our $50.00/bbl prior estimate. We have also reduced our 4Q16e WTI forecasts by US$5.00 to US$50.00/ bbl, but left our 2016e+ oil & gas price deck largely unchanged. For the second time in three months we are increasing our forecasts for Canadian refined product premiums relative to New York Harbor.
SU CVE HSE IMO CNQ ECA ATH MEG PXX
28 Sep 16
ISSUING C$1.0 BILLION IN NOTES - MORE DRY POWDER, OR MERELY OPPORTUNISTIC FINANCING?
Suncor announced it will issue C$1.0 billion of senior unsecured notes, consisting of C$700 mm of 2026 notes (3.00% coupon priced at $99.751) and $300 mm of 2046 notes (4.34% coupon priced at $99.900), and noted the intent is to use the proceeds to repay some of its existing short-term indebtedness.
08 Sep 16
SALES AGREEMENT FOR EAST TANK FARM DEVELOPMENT
Suncor has agreed to sell a 34.3% equity interest in the East Tank Farm Development to Fort McKay First Nation ("FMFN"), in exchange for FMFN paying proportionate capital costs of the project, which Suncor estimates to be ~$350 mm.
06 Sep 16
SUNCOR BUYS 30% STAKE IN UNDEVELOPED UK ROSEBANK FIELD
Suncor announced that it is acquiring a 30% non-operated interest in the Chevron-operated Rosebank project, offshore UK. Suncor will pay US$50 mm, plus additional consideration of US$165 mm should the project get sanctioned and Suncor choose to participate.
09 Aug 16
2Q16 CFPS $0.58/SHARE BEATS EXPECTATIONS
Market Impact: Positive. Cash flow of $0.58/share handily beat expectations, as Oil Sands cash costs were not as high as we had guessed, and refining margins were better than we had modeled, partially due to FIFO. There was no cost update for Fort Hills, but first oil is now targeted for year-end 2017 instead of the fourth quarter, due to delays caused by the forest fires. 2016 guidance is unchanged
27 Jul 16
Integrateds, Oilsands & Large Caps
The Fort McMurray wildfire took more than 1.2 mmbbl/d of oilsands production offline at one point, disrupting operations of many companies within our coverage universe. We expect production estimates for many oilsands producers (HSE, IMO, SU, ATH) to be more varied than usual with more variables to account for than usual (downtime, ramp up, sales volumes). SCO prices were boosted by the wildfire, with CNQ best positioned to have taken advantage, given the upgrader at Horizon was only mildly affected by wildfires. CVE, HSE and SU likely benefited from a positive FIFO impact. We estimate a positive FIFO impact of $4-5/bbl of throughput assuming a 30 day lag, with a larger positive FIFO impact on longer lags. We are generally close to consensus for most CFPS estimates, with the exception of Suncor, where we are estimating $0.34/share versus consensus at $0.44/share. There are no target price or ranking changes with this publication.
Commodities - Energy
20 Jul 16
Sustaining Capital and Implied Free Cash Flow
We have analyzed recent Company estimates of sustaining capital. Relative to our approximations of sustaining capital, post Horizon expansion, at current prices CNQ offers a far better free cash flow yield than the Canadian Integrateds, even in a high case refining margin scenario (see charts on page 2). We are upgrading our ranking on CNQ to Top Pick from Outperform, increasing our target price by $3.00 to $47.00/share, while we have reduced our target prices for both HSE and CVE by $1.00/share, to $18.00/share. In our view CNQ is clearly better value than any of the Canadian Integrateds.
SU CNQ CVE HSE IMO MEG
07 Jul 16
ANNOUNCED TENDER OFFER FOR CANADIAN OIL SANDS' SENIOR NOTES
Suncor announced this morning that it is offering to repurchase any and all of the outstanding senior notes of Suncor Energy Ventures Holding Corporation (formerly Canadian Oil Sands, ~US$1.5 billion) at premiums to par value. The tender offer expires at 5 PM ET on June 22nd. .
16 Jun 16
Suncor Equity Issue - Speculating on Acquisition Targets
Suncor is raising $2.9 billion (assuming the 15% greenshoe is exercised) via a bought deal equity financing overnight. Buying out the remaining 49.2% of Fort Hills would likely cost at least ~$2.5 billion if based on last fall’s transaction metric plus capital invested since . SU may be interested if CNOOC is a seller of oilsands (7.23% of Syncrude, Long Lake, 25% of Meadow Creek), and if Shell is a seller of its Sarnia refinery. We continue to expect SU to buy into Statoil/Husky’s Flemish Pass discovery area
08 Jun 16
1Q16, Syncrude Acquisition, & NAV Update
We view 1Q16 results positively given cost trends and Buzzard output, but recent forest fires will hamper results. We applaud SU’s move to get a majority stake in Syncrude. Our rebuilt NAV yields a RENAV (10% Atax) of only $16.29/share, but between a lower discount rate and other value attribution not included in the NAV, we can talk our valuation up to the high $20s at our price deck. Based on 2018e DACF multiples, SU’s shares appear to be pricing in WTI >US$70/ bbl while most of its peers’ shares imply mid US$60s/bbl WTI. Target price reduced $1.00 to $29.00/share. Underperform ranking maintained.
16 May 16
REDUCING PRODUCTION DUE TO FOREST FIRE IN FORT MCMURRAY
A nearby forest fire moved into the town of Fort McMurray yesterday afternoon. The entire town of ~83,000 people was ordered to evacuate, and some homes and neighbourhoods have been decimated by the fire. Thankfully there have been no fatalities reported. People are largely being accommodated in previously unutilized camp housing space at oilsands projects in the region.
04 May 16
BUYING ANOTHER 5% OF SYNCRUDE, DISCLOSES 1Q16 RESULTS
Market Impact: Positive. Suncor will own a majority of Syncrude by mid-year. We are not fussed that cash flow missed expectations due to weak price realizations, as operating results were strong and unit costs declined once again.
28 Apr 16
Downgrading on Valuation, Amidst Lower Oil Prices and Falling Refining Margins
Suncor reported 4Q15 CFPS of $0.89/share (diluted) on total production of 582,900 boe/d. 2015e results were generally better than the midpoint of original guidance. The 2016e capex budget has been reduced by ~$750 mm at the midpoint, to $6.0-$6.5 billion, before capitalized interest, with reductions largely coming from in situ oilsands and refining growth project deferrals. Our 2017e capex forecast has been reduced to $5.0 billion, while our 2018e-2020e capex forecasts are $4.3-$4.7 billion as we now assume no major growth project spending in that timeframe.
08 Feb 16
Reduced Oil Price Forecasts – Impact on Integrateds, Large Cap E&P, Oilsands
With the reduction to our oil price deck (see our commodities analyst Martin King’s note), we have made significant reductions to our target prices for this group of companies. Notably, we have taken our rankings for Imperial Oil and Suncor to Underperform, as we believe the equity valuations for these two companies are implying much, much higher oil prices, AND much better refining margins, going forward, than we believe is reasonable to assume at this time. We do not believe these two stocks will participate in much of the upside if oil prices rally in the near term, and to the downside, refining margins year-to date are looking weaker, with Eastern Canada margins the only bright spot, and that may not last.
SU CVE HSE IMO CNQ ECA ATH MEG PXX
08 Feb 16
4Q15 CFPS (DIL.) $0.89, FIREBAG CAPACITY INCREASED, $1.6 BILLION IMPAIRMENTS
Market Impact: Likely Neutral. Cash flow was in line with our forecast but behind "consensus". However the 2016e capex budget has been cut by ~$0.5 billion at the midpoint, while street estimates for Firebag production likely need to go up.
04 Feb 16
4Q15 CONFERENCE CALL HIGHLIGHTS
Management noted that the deferral of Firebag maintenance spending into 2017e accounted for only ~$50-$100 mm of the ~$750 mm reduction to capex guidance. Other significant reductions included the deferral of spending on SAGD growth projects and the Montreal coker project, as timelines for those projects, which were not previously determined, will fall behind by at least a year.
04 Feb 16
4Q15e Preview, Liquidity Analysis, & Bitumen Pricing Update
4Q15 results will be ugly, but 1Q16e is obviously shaping up to be much worse. We anticipate further capex budget reductions and have moved capex estimates below current guidance for several companies. Bitumen prices are single digits. If they go negative we suspect some bitumen producing projects could curtail output at least modestly. Liquidity Analysis: futures strip pricing would imply massive debt increases in 2016e-2017e for most names, but most names have sufficient liquidity arranged. We have reduced our ECA target price by US$2.00/share to more appropriately reflect commitments associated with non-core assets.
SU CVE HSE IMO CNQ ECA ATH MEG PXX COS
25 Jan 16
Suncor Increases Bid for COS
We are changing our COS ranking to Tender, with our new COS target price of $10.65/share based on a SU/COS exchange ratio of 0.28x from Suncor’s bid and our Suncor target price of $38.00/share. On a risk adjusted basis, we believe Suncor’s amended offer is fair to COS shareholders.
Suncor Energy Canadian Oil Sands
19 Jan 16
Revised Commodity Price Forecasts – Impact on Canadian Integrated Oils, Senior E&Ps, Oilsands
FirstEnergy has reduced its 2016e WTI oil price forecast from US$57.00/bbl to US$49.75/bbl, and also reduced its natural gas price forecasts going forward. We have updated our estimates and target prices, also incorporating this past week’s guidance and news disclosures. Given no significant changes to our oil price forecasts for 2017e+, and the predominance of long life oil producing assets within this group of companies, our target prices have only been reduced modestly, while we have made no changes to rankings, which continue to be biased towards stocks that should benefit the most from a recovery in oil prices.
SU CVE HSE IMO CNQ ECA ATH COS MEG PXX
14 Dec 15
EXTENDS COS BID TO JANUARY 8TH, 2016
Suncor announced after market close on Thursday that it has extended its bid for COS to January 8th, 2016, which would qualify it as a permitted bid under COS' new Shareholder Rights Plan ("SRP"). Recall the ASC ruled the SRP can stipulate a bid be valid for 90 days, but not the 120 days as COS had changed the SRP to after Suncor made its bid.
04 Dec 15
FirstEnergy - GLIMPSE : FIRST REACTION
This morning Suncor made available documents submitted to the Alberta Securities Commission in advance of today's hearing on whether to approve Canadian Oil Sands' new shareholder rights plan, which would require any permitted bid to be valid for 120 days instead of 60 days.
26 Nov 15
ASC HEARING ON COS' NEW RIGHTS PLAN
The Alberta Securities Commission will hold a hearing on November 26th to consider Suncor's request to "cease trade" (essentially strike down) COS' new shareholder rights plan. Recall that COS' new plan requires a takeover bid to be open for 120 days (60 days under the original plan) to constitute a "permitted bid", which would not trigger shareholder rights to be exercisable. Suncor's offer, open for 60 days, is obviously not a permitted bid under COS' new plan. Suncor's bid is open until 5 PM MT on December 4th
05 Nov 15
Suncor 3Q15 – Strong Results – Increasing Target Price to $39.00/share
Suncor’s 3Q15 results exceeded our forecasts due to better margins at its Oil Sands and Refining & Marketing businesses. The Line 9 reversal is unfortunately timed, as currently there is virtually no cost advantage to processing in-land crudes in Montreal, after considering pipeline tolls of ~US$5.50/bbl. We continue to expect Suncor to eventually raise its bid for COS to the 0.32 share exchange ratio it offered COS’s Board in April. Our 2016e-2019e capex forecasts have declined by $1.85/share (sustaining capex, Libya), so we are increasing our target price by $2.00/ share, to $39.00/share, and maintaining a Market Perform ranking.
03 Nov 15
3Q15 Preview – Integrated Oils, Large Cap, E&P, Oilsands
This document reviews our expectations for upcoming quarterly updates for the Canadian Integrated Oils, Large Cap E&Ps, and Oilsands names. Our 3Q15 CFPS estimates are notably ahead of ‘consensus’ for IMO, and notably behind ‘consensus’ for CVE and SU. We have made no ranking or target price changes with this report, but note that earlier this week we increased our target price for Canadian Oil Sands to reflect our belief that Suncor will ultimately raise its bid to the 0.32 share exchange ratio it previously offered COS’s Board in April (current bid is a 0.25 exchange ratio).
SU CVE HSE IMO CNQ ECA COS MEG
22 Oct 15
Synergy Potential Drives Suncor’s Bid for COS
We view Suncor’s all-share offer to acquire Canadian Oil Sands shares for 0.25 Suncor shares as a good move for Suncor. On a risk-adjusted basis we believe the bid is fair to COS shareholders. If Suncor became Syncrude’s largest owner, we believe massively synergistic lease swap transactions between Syncrude, Suncor, and perhaps Imperial/Exxon are much more likely to occur, albeit not guaranteed, while Suncor may also be able to help effect reliability improvements at Syncrude’s upgrading operations. While the timing of this bid may be opportunistic on Suncor’s part, the bid represents a very healthy premium to COS’s recent trading price and Net Asset Value, in an environment where the near and long term outlook for oil prices and the regulatory environment in Alberta feel much more uncertain than in the past. We do not expect another bidder to surface for COS (we believe Imperial has other fish to fry and realizes that SU could likely outbid IMO for COS if a bidding war broke out). However COS’s share price closed at a 10% premium to the Suncor offer, implying the market expects COS to extract a higher bid price from SU or another entity. We are revising our ranking for Canadian Oil Sands from Market Perform to Tender, and revising our target price from $9.00/share to $9.25/share, equating to 0.25x our Suncor target price of $37.00/share (unchanged). We continue to carry a Market Perform ranking for Suncor.
Suncor Energy Canadian Oil Sands
06 Oct 15
MAKES UNSOLICITED OFFER FOR CANADIAN OIL SANDS
Market Impact: While shares of Suncor may be weaker today on this all share acquisition offer, we view the offer as a very positive move for Suncor, given the potentially massive synergies should Suncor and Syncrude work together to more fully integrate the operations and resource development between these two assets. We do not expect Imperial Oil to make a competing offer for COS, as we believe that Suncor has the synergy incentives to outbid Imperial Oil, and we believe that Imperial likely understands this, and probably has its eyes on acquiring other oilsands assets.
05 Oct 15
INTEGRATEDS, OILSANDS & LARGE CAPS - Commodity Price Deck Update – Impact for Canadian Integrated Oils, Large Cap E&Ps, Oilsands
Our 3Q15e estimates have been updated to reflect quarter-to-date commodity prices (see Martin King’s notes on oil and natural gas prices), and recently available production data and company disclosures. Going forward, our commodity price forecasts are largely unchanged, other than a US$0.35/mcf reduction to our NYMEX Henry Hub forecast in 2016e, a narrower AECO discount, and a reduction to our 4Q15e and 2016e Canadian dollar forecast.
SU CVE HSE IMO CNQ ECA ATH COS MEG PXX
28 Sep 15
Picking up Another 10% W.I. at Fort Hills
We believe Suncor’s purchase of a 10% W.I. stake at Fort Hills from Total SA was a good move, as the eventual total cost of this stake should be less than the cost of an organic build out from scratch. The purchase boosts Suncor’s W.I. at Fort Hills to a majority ownership stake of 50.8%, and we would not be surprised to see the Company acquire further ownership in this project, with this recent purchase’s price setting bid expectations on future purchases.
23 Sep 15
PURCHASES ADDITIONAL 10% STAKE IN FORT HILLS
Suncor announced before market open today it has purchased an additional 10% W.I. in the Fort Hills project from Total for $310 mm, boosting its ownership to a majority position of 50.8%. We view this as a positive acquisition for Suncor, with the incremental spending of ~$1 billion ($700 mm remaining project spend, $310 mm acquisition capex) roughly 2/3 of what this new ownership stake would have cost organically to build.
21 Sep 15
INTEGRATEDS, OILSANDS & LARGE CAPS - Reduced Oil Price Forcecasts - Impact For Canadian Integrated Oils, Large Cap E&P, Oilsands
With our firm reducing our WTI price forecasts by more than US$10/bbl for the second half of this year and 2016e, and by US$5/bbl longer term, we have reduced our target prices across the board (see FirstEnergy commodity analyst Martin King’s note on oil prices). Our target prices continue to be derived primarily in relation to our Risked NAVs (‘RENAVs’). Generally, we have looked at a weighted average of our estimated RENAVs (75% FirstEnergy price deck/25% futures strip) for the Integrateds & Large Caps, with an average target price reduction of 11% for those companies.
Commodities - Energy
31 Aug 15
Suncor Knocks It Out of the Park
Suncor’s 2Q15 update provided several positive data points, as financial results beat expectations soundly on strong reliability and lower costs, guidance for capex and production has been improved, the dividend was raised for the 13th straight year, and a share buyback program was reinitiated. We have reduced our Oil Sands operating and sustaining capital costs estimates going forward. Our 2016e+ and 2018e CFPS estimates are up 1% and 3% respectively.
31 Jul 15
STARTS UP RADIO FREQUENCY IN-SITU PILOT
Suncor announced yesterday that, in co-operation with project partners Harris Corporation, Nexen, and Devon, it has begun an in-situ pilot testing radio frequency heating of the bitumen reservoir at the Dover site (Mackay River). The testing is expected to occur over the next two years. Physical testing of this technology had occurred in 2012 into the side of the mineface at Suncor's Steepbank mine, so the decision to move forward with an in-situ pilot implies that the testing at the Steepbank mine showed promise.
15 Jul 15
EXCHANGES WIND POWER FACILITIES FOR COGEN FACILITY
On July 7, after market close, Suncor announced it will exchange its ownership interests in two wind facilities, the 20 MW Kent Breeze project near Thamesville, Ontario and the 88 MW (51% W.I.) Wintering Hills facility near Drumheller, Alberta, for eventual full ownership of TransAlta's Poplar Creek cogeneration facility, which provides electricity and steam to Suncor's base oilsands site near Fort McMurray.
07 Jul 15
Commodity Price Deck Update: Impact for Canadian Integrated Oils, Senior E&Ps, Oilsands
FirstEnergy’s updated commodity price forecast has resulted in significant increase to our cash flow estimates for 2Q15e for our group, driven by strong Canadian oil prices. Beyond this quarter we are calling for heavy oil differentials to be narrower than previously forecast, and as a result our cash flow estimates beyond 2015e have increased (see Martin King’s notes on oil and gas). Estimates for names with the highest leverage to heavy oil prices (i.e. MEG, CVE, CNQ, PXX) see the largest lift, while our COS estimates have been reduced due to its negative leverage to heavy oil prices. We have upgraded MEG to Outperform and taken our target up by $3.00 to $25.00/share, and reduced our target price for COS by $1.00 to $10.00/share.
SU CVE HSE IMO CNQ ECA COS MEG
25 Jun 15
Operating results were very strong in 1Q15, with oilsands production (previously disclosed) coming in at a record, while cash operating costs of $28.40/bbl were the lowest in seven years. The strong SOR of 2.6x at Firebag in 4Q14 continued into 1Q15e. Our $38.00/share target price is unchanged, based on a 17% premium to our RENAV of $32.43/share using a 9% discount rate. Similar to other peers within our Canadian Integrated universe, the share price is trading above our target price; within this context, our Market Perform ranking remains unchanged.
04 May 15