It didn’t take long for Suncor Energy to make a big splash upon CEO Rich Kruger’s return to the Canadian oilsands.
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Varcoe: With new CEO at helm, Suncor pulls trigger on blockbuster $5.5B oilsands deal
Suncor Energy announced Thursday the $5.5-billion acquisition of TotalEnergies’ Canadian operations, a blockbuster acquisition that continues the consolidation within the Alberta oilsands — and the exodus of international players from the world’s fourth-largest oil reserves.
Kruger said the deal is a “major step” in securing long-term bitumen supply for Suncor’s base plant upgraders when the base mine’s life span wraps up in the mid-2030s.
“These are valuable oilsands assets that are a strategic fit for us,” he said in a news release.
The agreement includes 135,000 barrels per day (bpd) of bitumen production capacity, with Suncor snapping up the French company’s 31 per cent stake in the Fort Hills oilsands mine.
It gives the Canadian company full ownership of the project, a $17-billion development that was completed in 2018 but has struggled to reach its full potential.
Suncor also acquires half of the Surmont thermal oilsands project, which is co-owned and operated by ConocoPhillips.
The all-cash deal could include an additional $600-million payment to France’s TotalEnergies, depending upon certain production targets and the benchmark price of Western Canadian Select heavy crude being met.
The acquisition marks the first significant move by Suncor under Kruger, its new chief executive. The former head of Imperial Oil came out of retirement to take over the company just 24 days ago.
“It all adds up,” said Laura Lau, chief investment officer with Brompton Group, which is a shareholder in Suncor.
“It’s not a surprise, Rich Kruger is there to get stuff done.”
For Suncor, it marks another key step forward following a tumultuous year that saw a major activist shareholder call for a shakeup, shine a spotlight on recent fatalities at the oilsands operations and unsuccessfully press the board to sell Suncor’s Petro-Canada retail chain.
Last June, CEO Mark Little left the company, which eventually led to Kruger’s hiring.
Last year, Suncor also added to its position in Fort Hills by acquiring a 14.6 per cent stake in the mine from Teck Resources for $688 million. Meanwhile, TotalEnergies exercised its right of first refusal to buy a seven per cent interest in Fort Hills from the Canadian mining firm at the time, a stake Suncor had initially tried to acquire.
The latest deal will be debt-financed and is expected to temporarily push Suncor’s net debt past its $12-billion to $15-billion target, although the company intends to return to its planned range next year.
For TotalEnergies, the move pre-empts its previously discussed plan to spin out its Canadian oilsands assets into a separate entity through an initial public offering.
“This amount is comparable to the $5-(billion) to $6-billion valuation at (an) initial listing of the spinoff company, had the spinoff project concluded,” TotalEnergies said in a news release.
For an international player looking to leave the oilsands, this made for a simple decision.
Several multinational producers have already left the region, despite the enormous size of the resource base.
Analyst Phil Skolnick of Eight Capital said the sale by TotalEnergies continues the trend of European firms leaving the oilsands amid decarbonization concerns from investors, but it offers a more prominent role for Canadian-based producers in developing the resource.
It also means Suncor won’t necessarily have to build a new oilsands development to replace production from its base mine, solving an issue for the new CEO.
“It makes total sense. The other choices they have are to do a greenfield project . . . or they bought — and buying makes way more sense than building,” Skolnick said, citing regulatory hurdles and capital cost risks.
Replacing the bitumen supply to its two upgraders at the base plant north of Fort McMurray has been an issue under close examination by Suncor officials.
Suncor does have an extension application on the base mine in place, which would produce about 225,000 barrels per day.
However, federal Environment Minister Steven Guilbeault wrote a letter to Suncor’s CEO last spring about the proposed extension plan, noting it would produce an estimated three million tonnes of emissions annually.
With the recent deal involving Teck and the TotalEnergies transaction, Suncor has acquired 163,000 bpd of bitumen production capacity to partially replace the 260,000 bpd of base plant output.
Suncor documents indicate the purchase ensures it can keep its upgraders full from the company’s Firebag, MacKay River and Fort Hills facilities upon the end of the base mine’s life. It also has other options under consideration, including increased thermal output from its Firebag South and Lewis properties.
According to Sayer Energy Advisors, this is the biggest deal in the Canadian oilpatch since Cenovus Energy’s $15-billion acquisition of Husky Energy in 2020.
Sayer president Tom Pavic noted the acquisition was more expensive on a per-barrel basis than Suncor’s purchase of Teck Resources’ stake in Fort Hills, but in line with other recent asset sales in the oilsands.
“Basically, they have the keys to the (Fort Hills) car now, and they don’t have to worry about any partners,” Pavic said.
“They can develop this at their own pace.”
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TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
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Yuri Kageyama is on X:
The Canadian Press. All rights reserved.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
Companies in this story: (TSX:SHOP)
The Canadian Press. All rights reserved.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
Companies in this story: (TSX:REI.UN)
The Canadian Press. All rights reserved.
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