Stock price when the opinion was issued
They have a hostile bid from Suncor (SU-T). They own the same asset, Syncrude, an oil sands producer. This has been down over the last few years because the price of oil has gone down, also the whole oil sands situation and the difficulty in getting it to market. There is likely a higher bid forthcoming. Dividend yield of 2%.
Should the offer from Suncor (SU-T) be accepted? He thinks Suncor is going to do a better job with those assets than Canadian Oil Sands. This is very opportunistic of Suncor to be doing this at this time. Doesn’t expect there will be a better offer coming. There aren’t a lot of companies that can buy an asset this size.
100% correlated to the price of oil, and he is not bullish on the price of oil. This is the biggest part of Syncrude, which keeps having operational problems. Thinks Suncor (SU-T) wants to buy this and become the majority owner of Syncrude, throw Imperial Oil (IMO-T) out as an operator, and run it themselves. He would tender to Suncor’s offer.
This is just a “pass through” for the oil price. They own a percentage of the oil sands project. Operationally it has not been the best, running at a 65% efficiency rate where 80%-85% would be ideal. With oil prices above $100, there was enough breathing room for them. If there is a prolonged oil price drop, he expects to see market starting to fret and the dividend may be at risk. Large company with a pretty solid balance sheet so there isn’t a big risk. He prefers others.