National Post (Latest Edition) - - FINANCIAL POST - Jonathan Rat­ner

Higher debt stem­ming from the pur­chase of Cana­dian Oil Sands Ltd. will likely lead Sun­cor En­ergy Inc. to di­vest some non- core as­sets, but if oil prices re­main de­pressed, its retail gaso­line busi­ness may also be put up for sale.

The $6.67-bil­lion takeover in­cludes $2.4 bil­lion of debt, while at the same time giv­ing Sun­cor a long- life, low-de­cline as­set dur­ing a com­mod­ity cy­cle trough.

As Arthur Grayfer at CIBC World Mar­kets points out, the Cana­dian en­ergy gi­ant’s strong track record of­fers the po­ten­tial for im­proved prof­itabil­ity at the Syn­crude oil sands joint ven­ture.

The an­a­lyst likes the ac­qui­si­tion de­spite not­ing that “Sun­cor es­sen­tially ac­quired debt and lit­tle free cash flow.”

He doesn’ t an­tic­i­pate that Sun­cor will cut its div­i­dend, sug­gest­ing that it will in­stead choose to sell non­core as­sets whose val­ues are less im­pacted by cur­rent oil prices. Some pos­si­ble can­di­dates are its re­new­ables busi­ness ( six wind farms), pipe­line as­sets and 13 ma­jor re­fined prod­uct ter­mi­nals.

If oil prices re­main lower for longer, Grayfer thinks Sun­cor may di­vest its retail busi­ness, which in­cludes ap­prox­i­mately 1,500 PetroCanada gas sta­tions.

The an­a­lyst es­ti­mates the com­pany will tar­get some­where be­tween roughly $ 1 bil­lion and $2 bil­lion in as­set sales in 2016. He be­lieves the retail busi­ness is worth close to $3 bil­lion.


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