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We expect a neutral market reaction. Midpoints of 2020 guidance for capex/production were 4% above/1% below consensus. We are raising our TP to $43.00/share from $39.00 (12.2x ‘20e P/FCF*).
Companies: Suncor Energy Inc.
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.
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.
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 u
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.
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.
Companies: CVE IMO SU CNQ ECA ATH MEG PXX
Market Impact: Likely neutral. While the $105 mm charge is large, in the context of SU's outstanding shares this amounts to only $0.06/share.
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.
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.
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.
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
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 aff
Macros: Commodities - Energy
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
Companies: CNQ CVE IMO MEG SU
Commodity Price Update – Impact on Integrateds, Large Cap E&P, Oilsands
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.
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Companies: Sylvania Platinum Ltd.
Forecast and valuation update
Companies: IOG PLC
Arc has recently signed an agreement with Anglo American (LSE:AAL, Market Cap $45bn) on a JV for its highly prospective Zambian licences (subject to final due diligence). The deal sees (3) main staged payments of up to $74m in the ground and $14.5m to Arc (by end of stage 1) and significantly leaving Arc with a 30% stake in the project. On a detailed reflection over the deal we want to reiterate how positive we see this is for Arc: i) Arc could never have raised this sort of capital to bring exp
Companies: ARC Minerals Limited
Jubilee today provides an operational update on the ongoing commissioning at the new Inyoni chrome and PGM plants with Jubilee building up to steady state production for nameplate capacity of 1.2Mt chrome concentrate and 44koz PGM production per year. Remember processing chrome creates the upgraded PGM tailings for Jubilee to recover the PGMs (Jubilee being paid a small margin to preconcentrate its own feed) and with the expanded Inyoni there is no need to share the PGM revenues via a JV struct
Companies: Jubilee Metals Group PLC
Jubilee today confirms the appointment of a new Chairman to take over from Colin Bird (who set up the company) and who will we believe have the experience to take them to the next stage. The stage has been set by the outgoing Chairman with Manuel Lino Silva de Sousa Oliveira (Ollie) appointed as independent non-executive director and Chairman to help realise the next moves. He brings with him a wealth of experience with senior executive positions within the Anglo-American Group and at De Beers
Last week Tamesis visited a number of Tharisa PLC's assets including the Tharisa Mine and Arxo Metals Beneficiation Site (AMBS) in South Africa and the Karo Platinum Project in Zimbabwe. Overall it was an extremely well received trip with evidence of efficiency improvements at the Tharisa mine, unexpected cash generation from the Vulcan Plant, further cash from the Salene Chrome Plant and, it also impressed on us that the Zimbabwe risk to the build out of Karo is lower than the market perhaps th
Companies: Tharisa Plc
Pantheon Resources announced that it has contracted a rig (the Nabors 105AC) to the Alkaid #2 well, which the company indicated is scheduled to spud in July 2022. The company indicated that if the well is successful, Pantheon Resources will commence a long-term production test and truck and sell the produced oil to a nearby North Slope facility.
Companies: Pantheon Resources plc
RCE-2 well flow test result
Companies: Arrow Exploration Corp.
Chariot has conditionally raised gross proceeds of US$25.5m (before costs), providing the Company with sufficient funds to advance the Anchois Gas Development towards a Final Investment Decision (FID) and to progress its renewable power pipeline. The placing was significantly oversubscribed, highlighting the market's confidence in Chariot's business model and its management team. We maintain our price target at 51p, with the recent rise in the European gas price forward curve offsetting the dilu
Companies: Chariot Limited
A pre-feasibility study for the c10 GW green hydrogen project named “Project Nour” has confirmed that Mauritania is exceptionally well-placed for green hydrogen due its world class solar and wind resources, with the project having the potential to produce some of the cheapest green hydrogen in the world. With up to 10GW of electrolysis installed, Project Nour has the potential to become one of the largest green hydrogen projects globally by 2030. Geographically proximal to the European markets,
Cornish Metals Inc (“Cornish”) has announced the closing of a £25m strategic investment by Vision Blue Resources (“VBR”) and £15.5m from a private placing to existing and new UK institutional investors as well as a subscription by existing Canadian investors and eligible private investors. The proceeds will be used to advance South Crofty to Feasibility whilst dewatering the mine over a 30-month period and ultimately, subject to funding, commence mining in two years’ time.
Companies: Cornish Metals Inc.
Diversified has announced the acquisition of a portfolio of East Texas upstream assets and related facilities from a private seller for US$50m – an attractive 1.4x multiple based on the NTM adjusted EBITDA of US$35m and before any potential synergies. At US$50m, the net purchase price approximates a >PV40 valuation at the effective date and represents an attractive discount of c51% to the estimated PV10 using the NYMEX strip as of the 19 April 2022. The assets include PDP reserves of 18mmboe (11
Companies: Diversified Energy Company PLC
ARC has announced it has signed a JV agreement with Anglo American (LSE:AAL, Market Cap $45bn) over its Zambian licences. This has long been in the offing and we view the terms as advantageous to Arc and a validation of the prospectivity that it (and we) see in its licences. The headline JV payments are staged but could ultimately lead to Anglo owning 70% of the licences, by investing $74m in exploration and paying Arc $14.5m. The licences will be held under a JV which will have an initial ow
*A corporate client of Hybridan LLP
Dish of the day
EnSilica (ENSI.L), has join AIM. EnSilica provides an end-to-end service for the design and supply of mixed signal ASICs, outsourcing certain elements such as the wafer fabrication of the manufacturing and packaging to third parties - otherwise known as a Fabless Semiconductor Model. ASICs are Integrated Circuits or semiconductor chips developed for a particular use or product rather than for general purpose usage. ASICs help
Companies: YGEN AFRN ALBA ART BLV CCS EPWN FIPP NWT KETL