2023-05-01 21:23:47
(Photo: 123RF)
What to do with the securities of Suncor, Imperial Oil and Valero? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed.
Suncor Energy (SU, $42.42): The purchase of Canadian assets from TotalÉnergies is a positive event according to the analyst at ATB Capital Markets
Last Thursday, the Calgary oil company announced an agreement to acquire the Canadian oil sands assets of TotalÉnergies for $5.5 billion. The transaction covers 31.23% of the Fort Hills facilities and 50% of the Surmont thermal project. This will add 135,000 barrels per day of production capacity to Suncor, says Patrick J. O’Rourke, analyst at ATB Capital Markets.
The firm will finance the transaction from its cash and an addition to its debt. The analyst notes that at the end of the 1st quarter of 2023 Suncor’s debt totaled $15 billion, and this without taking into account the transaction. In the same breath, management announced a 10% increase in the quarterly dividend, bringing it to $2.28 per share, for a dividend yield of 5.7%.
The analyst welcomes this transaction for Suncor, but he notes that it will delay its capital return program to shareholders. It allocated 50% of its free cash flow to buyouts and was preparing to increase this allocation to 75%, to eventually devote 100% of its cash flow to it when its debt was going to fall to $9 billion. The transaction will delay this timeline.
But the added capacity to generate cash flow combined with the increase in the dividend compensates well for this delay, estimates the analyst. The acquisition fills a strategic need in Suncor’s portfolio while adding a significant stake in a high-quality thermal project.
The analyst’s recommendation is sector-matched, and his one-year price target is $52.00
Imperial Oil (IMO, $69.06): 14% dividend increase despite somewhat disappointing results
1682979020
#Watch #Suncor #Imperial #Oil #Valero
