Gas under scrutiny in merger deal

Despite the buzz surrounding the future of shale and tight gas, Suncor Energy is closely scrutinizing the role of “old” gas as its merger with Petro-Canada makes steady progress towards completion.

Suncor Chief Executive Officer Rick George, who will retain that post in the new entity, dropped some strong hints that the combined gas operations — which currently produce about 900 million cubic feet per day — could be headed for a shake-up.

“We’re definitely going to take a look at the whole natural gas business,” he told analysts.

But he cautioned the analysts not to “jump on the divestment bandwagon too quickly. … I have not talked about divestment and I won’t until we’ve had a look at the asset base.”

George said the merger is a “chance to move us in some different directions,” with an emphasis on a low-cost company that puts its emphasis on return on capital.

While restricted by the Canadian anti-trust review in what he could say, George said his objective is to achieve a “top-quartile cost position” to offset forecasts that there will be a “lot of gas around and prices are likely to remain relatively low … for quite a period.”

Once the two companies have received expected shareholder and Competition Bureau approval, he said the focus will be on cleaning up existing operations and freeing capital to invest in new opportunities.

For the near term, he said the focus will be on the “protected” assets, such as the oil sands holdings and the refineries, so that the new company can achieve its promised goals of lowering annual expenses by C$300 million and capital spending by C$1 billion.

Suncor alone is chasing a 10-15 percent reduction in total oil sands cash operating costs within 12 months, George said. For the opening quarter those costs were C$33.70 per barrel, up C$2.15 per barrel from a year earlier.

—Gary Park