CALGARY The CEO of Suncor Energy is throwing cold water on speculation that its hostile takeover offer for Canadian Oil Sands will be sweetened.
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.
When the 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, 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.
The board and management of COS have rebuffed Suncor’s advances, calling the bid exploitative, opportunistic and not in the best interest of shareholders.
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.
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.”
Canadian Oil Sands reports its third-quarter earnings after markets close on Thursday.
The other Syncrude partners include China’s Sinopec and CNOOC, Mocal Energy and Murphy Oil.