Suncor 'not looking to do M&A,' interim CEO says following Teck deal

Speculation about Suncor’s efforts to acquire new bitumen supply comes as the company faces regulatory obstacles to its plan to extend the life of its biggest mine. (REUTERS/Candace Elliott)
Speculation about Suncor’s efforts to acquire new bitumen supply comes as the company faces regulatory obstacles to its plan to extend the life of its biggest mine. (REUTERS/Candace Elliott)

Suncor Energy's (SU.TO)(SU) interim chief executive officer says the company is not hunting for more deals following its recently announced plan to raise its stake in the Fort Hills mine in northern Alberta.

Speaking on a post-earnings conference call on Thursday, Kris Smith stressed the integrated Calgary-based energy company is "not looking to do M&A," while remaining disciplined and opportunistic towards future growth.

Last month, Suncor announced it reached a deal to buy Teck Resources' (TECK-B.TO)(TECK) 21.3 per cent ownership of Fort Hills for $1 billion. The price reflects a lower market value for the mine, resulting in a $3.4 billion non-cash impairment charge as Suncor reported third-quarter financial results on Thursday.

"We had an opportunity to take a partner interest in an asset that we operate [and] we know well. It's a long-life asset that has low-intensity greenhouse gas barrels, and we were able to transact at a very compelling value for our shareholders," Smith said on the call.

The deal, expected to close in the first quarter of 2023, will raise Suncor's total interest in Fort Hills to 75.4 per cent, from 54.1 per cent. TotalEnergies EP Canada owns the remaining 24.6 per cent stake in the project.

Speculation about Suncor's efforts to acquire new bitumen supply comes as the company faces regulatory obstacles to its plan to extend the life of its biggest mine near Fort McMurray, Alta. In April, the federal government warned Suncor its proposed Base Mine extension project would likely cause unacceptable environmental impacts.

In a recent note to clients, analyst Phil Skolnick of Eight Capital wrote that he "would not be surprised if the company is in negotiations to purchase (TotalEnergies SE)'s 24.6 per cent interest in Fort Hills … as Teck's move could also push Total to sell as opposed to spinning out its oilsands assets as it previously intended to potentially do."

Skolnick also suggests Suncor may look to acquire CNOOC and Sinopec's combined 16.2 per cent interest in Syncrude.

"We're not in the mode of looking to do M&A," Smith said on Thursday's call. "As those types of opportunities present themselves, then we'll obviously take a close look at it if it's going to create compelling value for our shareholders."

Suncor booked a $609 million net loss in its third fiscal quarter financial results on Thursday as the company absorbed the writedown on its Fort Hills asset. Suncor says it earned $2.6 billion for the quarter ended Sept. 30, or $1.88 per share, compared to $1.0 billion or 71 cents per common share in the same three months of 2021.

Toronto-listed shares added 3.50 per cent to $48.30 as at 12:03 p.m. ET, adding to a more than 47 per cent gain year-to-date.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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