Suncor announces two for one share split

Figures released by the company in early February stated that January production had averaged 245,000 barrels per day (bpd); currently Suncor is targeting annual production of between 275,000 bpd and 300,000 bpd for 2008. That’s by no means the end of it.
Suncor announces two for one share split
Subject to shareholder approval at its annual meeting on April 24, 2008, Calgary, AB based Suncor Energy Inc. announced that it intends to implement a two-for-one share split to boost stock liquidity of its issued and outstanding common shares. Providing approval is granted the share split has been scheduled for May 14, 2008. It’s not the first time that Suncor has split its shares the last and third time was back in May, 2002 when Suncor shares were trading at just $27.75. Suncor’s shares were trading on Monday, March 3, 2008 at $104.37 on the TSX. Reflecting the surge in the price of oil globally the company’s stock has appreciated 20 percent in the last 12 months and has a current “bullish,” rating.

Suncor is one of two of the biggest players in Alberta’s oil sands with around a 50 percent share of the oil sands; Syncrude is the other. The company extracts, upgrades and markets feedstock and diesel fuel, has a natural gas operation throughout Western Canada, operates a refining and marketing business in Ontario under the Sunoco brand, and has a downstream retail operation in Colorado and Wyoming under the Phillips 66 brand.

A real bonus for Suncor is that its oil sands operation is already in production near the oil boomtown of Fort McMurray in Northern Alberta. Figures released by the company in early February stated that January production had averaged 245,000 barrels per day (bpd); currently Suncor is targeting annual production of between 275,000 bpd and 300,000 bpd for 2008. That’s by no means the end of it. Suncor intends to go much further and has a capital plan to invest a further $20.6bn in the oil sands with a view of producing 550,000 bpd by 2012. “Our long term growth strategy called for us to double our business and now, with the Board’s support, we’re constructing an expansion project that is thoroughly planned and engineered,” said Rick George, Suncor’s president and CEO.“ Over ten percent of the investment has already been spent on engineering work and fabrication of vessels.

It’s not all easy money though. There are challenges. The environment is an increasing issue in the Alberta oil sands. Its very appearance has detracted it globally and getting the oil from the sands is not exactly a clean process right now, although there are possibly long-term alternatives to the massive use of water. “The years of pre-work leading up to this point will also help us deliver another commitment to our stakeholders — that we would work to ensure all future growth is completed in a safe, reliable and environmentally responsible manner,” said George. There is also an environmental level of uncertainty because of Suncor’s large final emitter (LFE) tag. There is a lack of harmonization between federal and provincial governments over emissions meaning that Suncor has to go move forward on its own hoping its going to be right or near to it.

Then there’s the cost issue. In boomtown Alberta for the last few years, costs have been spiraling as human resources and construction costs have soared. The high value of the Canadian dollar, currently nearly two percent over par with its U.S. counterpart has also eroded the Canadian advantage. However, bad economic news could be good news for long-term investment in the oil sands as with a general decline in Canadian economic activity being reported those construction and human resources will be more plentiful and perhaps cheaper. Then we have the royalties to the Province of Alberta issue. Under much controversy, Alberta Premier Ed Stelmach’s government has recently overhauled the royalty program. Some say the province doesn’t get enough, others that it’s too much. Whatever the opinion, it’s done and dusted, unless by some unlikely event the Progressive Conservatives lose power in today’s provincial election. In the oil sands, Suncor was under a separate contractual agreement but nevertheless the company recently agreed to come into line with the new government scheme, essentially agreeing to pay an additional maximum 20 percent to the provincial government from 2010.

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