Suncor Energy to Sell Cardium-Focused Wilson Creek Assets - Analyst Blog


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Suncor Energy Inc. ( SU ), Canada's biggest energy firm and the largest oil sands outfit, declared that it has signed a deal with Tamarack Acquisition Corp., an affiliate of Tamarack Valley Energy Ltd., to sell its Wilson Creek assets. The transaction is valued at C$168.5 million.

The Cardium-focused Wilson Creek assets are located near Rimbey, in Alberta and have a year-to-date net production of about 1,702 barrels of oil equivalent per day (boe/d). The closure of the deal - expected in the fourth quarter of the year - is subject to regulatory approvals.

Suncor Energy holds over 80% working interest in the Wilson Creek assets. The company also has a 52% working interest in the liquid-rich gas producing Wilson Creek Unit No.1 and related facilities.

Management at Suncor stated that the sale is in accordance with its portfolio restructuring plan. While the company is selling non-core assets, it also intends to invest in assets that fit in its long-term growth strategy.

Calgary, Alberta-based Suncor's operations include oil sands development and upgrading, conventional and offshore crude oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand.

Suncor is anticipated to generate significant cash flows in the long run after its Golden Eagle and Hebron projects start operating. Notably, the company's oil sand production has been increasing at a record rate. The favorable trend is expected to continue going forward. However, we remain concerned about the company's high debt level and capital expenditure.

In keeping with these views, Suncor Energy carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. market in the next one to three months.

Meanwhile, one can consider better-ranked players from the broader energy sector such as PetroChina Co. Ltd. ( PTR ), Sunoco Logistics Partners L.P. ( SXL ) and Patterson-UTI Energy Inc. ( PTEN ). All these stocks sport a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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