Steve Williams said Thursday the $4.3-billion bid should be good enough for shareholders given the gloomy outlook for oil prices, operational woes at the Syncrude oilsands mine, the absence of a competing offer and Suncor’s better resilience to commodity swings than its target.
“We think it is a full and fair offer and compelling,” he said Thursday, a day after Suncor posted a net loss of $376 million and a nearly 69 per cent drop in operating earnings.
When Suncor’s all-stock bid was announced earlier this month, it was worth $8.84 a share. COS (TSX:COS) shares have been trading higher than that — they closed Thursday at $9.88 on the Toronto Stock Exchange — suggesting investors are anticipating a better deal.
The COS board rejected an attempted friendly bid in the spring that was worth $11.84 a share, prompting Suncor to go directly to shareholders.
COS and Suncor (TSX:SU) are both partners in the Syncrude project north of Fort McMurray, Alta. — COS with a 37 per cent interest and Suncor holding 12 per cent.
COS has rebuffed Suncor’s advances.
“The board of directors and management of COS will not tender to the Suncor bid, and we strongly recommend that all shareholders join us in rejecting this undervalued, opportunistic and exploitive bid,” the company reiterated as it released its third-quarter results.
Williams said COS shareholders should make their own decisions.
“Our view is that since we made the offer, crude prices have come down and most of the commentators now believe it’s lower for longer,” he said.
“We have looked at all historical periods and almost any of them will show you that Suncor is as exposed to a crude upside as Canadian Oil Sands is.”
Suncor argues if it’s able to increase its ownership share of Syncrude to just under half, it can do more to help the project run more smoothly. Syncrude has been dogged by operational woes over the years. Most recently, a fire in late August damaged pipes, power and communication lines. And then there were hiccups restarting it.
Williams said Syncrude ran at about 67 per cent of its capacity during the third quarter and performance in the fourth quarter so far has fared worse.
On Thursday, COS posted a net loss of $174 million for the third quarter compared to a profit of $87 million a year earlier as the price of the crude oil it produces fell to an average of $60.20 a barrel compared to $102.58 in the same 2014 quarter.
The company has lowered its production outlook for Syncrude to between 92 million and 97 million barrels for 2015 from an earlier estimate of between 96 million and 107 million.
Imperial Oil Ltd. (TSX:IMO), controlled by U.S. heavyweight ExxonMobil Corp., has a 25 per cent share of Syncrude and manages its day-to-day operations.
Williams said the goal of the COS bid is not to take control of operations from Imperial, but rather to marshal more of its resources to lend support. Suncor discussed the hostile bid with Imperial Oil as a “matter of courtesy” after it was announced, Williams said, calling Imperial a “very competent operator.”
“We have a ton of expertise that we can bring to support Imperial as the operator. Our plans are not to take over operatorship, but more as we move from 12 per cent to 49 per cent, to be able to offer our best assistance and experts to Imperial.”
The other Syncrude partners include Sinopec, CNOOC, Mocal Energy and Murphy Oil.
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