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Providing coverage of Alaska and northern Canada's oil and gas industry
January 2016

Vol. 21, No. 3 Week of January 17, 2016

Energy sellers sitting tight

GARY PARK

For Petroleum News

Investors are positioned to spend billions of dollars acquiring energy assets across North America.

BMO Nesbitt Burns estimates there is C$150 billion in private equity money and another C$25 billion in pension funds available for deals.

Yet there is a prevailing wait-and-see mood in the market while oil prices keep tumbling to new lows and bidders “hold back because they believe the better assets are still to come,” said John Armstrong, head of Canadian M&A at the bank.

He said many investors apparently suspect that many companies, faced with “cutting into the muscle,” could be forced in the next six to 12 months to sell important assets, rather than those on the fringe.

Awaiting Suncor outcome?

For now, many players are thought to be waiting for the outcome of the hostile C$4.3 billion bid by Suncor Energy to acquire Canadian Oil Sands, the largest shareholder in the Syncrude Canada oil sands consortium at 37 percent, while Suncor holds 12 percent.

The latest deadline for COS shareholders to tender to Suncor’s offer passed on Jan. 8 without Suncor garnering enough support.

Although Suncor declined to comment on the response, insiders believe it was endorsed by less than half the COS shareholders, well short of Suncor’s target of two-thirds.

Suncor immediately extended its offer to Jan. 27, with Chief Executive Officer Steve Williams suggesting the initial results did not amount to a resounding defeat.

That puts added pressure on Suncor to sweeten its bid, a move Williams has resisted since launching the play in October, saying the current offer is “full and fair. So the choice is clear.”

COS believes offer rejected

COS said that “while only Suncor has access to all the tender results, the best information that COS currently has is that a strong majority of COS shareholders rejected the substantially undervalued and opportunistic Suncor bid.”

The company said it believed that “immediate disclosure of the number of shares tendered is required under Canadian and U.S. securities law in this situation as a material fact that would reasonably be expected to affect the decision of shareholders to accept or reject the Suncor bid. ...”

Williams said in a statement that his company was “encouraged by the number of shares that have been tendered,” after previously telling reporters he would need a “high degree of confidence” that a deal would close to keep up the pursuit.

For now, Suncor continues to heap criticism on COS for its spotty results at Syncrude, insisting it can leverage its financial strength and experience running oil sands mines to improve performance at the aging plant.

Williams has pointed to a string of unplanned outages that lowered 2015 output to 248,300 barrels per day from Syncrude’s capacity of 350,000 bpd, making 2015 “their worst year in the last five years for production.”

He said meetings with some of Syncrude’s biggest stakeholders have shown “there is no support for an independent” COS.






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