Tuesday, January 5, 2010

Rick George’s quixotic role in killing income trusts, ended up serving no constructive purpose

Even in self serving terms (which is all that matters to CEOs like Rick George of Suncor), Rick George’s role in helping to kill income trusts served no purpose at all. You see, Rick George of Suncor was motivated to join in with the self serving gang (i.e. Power Corp, TD Bank and Manulife) that wanted to kill income trusts, in order that he could acquire more of Alberta’s natural gas assets on the cheap. This was essential to Rick George of Suncor at the time because the production of heavy oil takes endless amounts of energy like natural gas to release the hydrocarbons from the sand.

This insightful revelation took place at an analysts meeting in New York as follows and reported in the US business press in 2007:

“Suncor CEO Rick George said at a New York investment conference that the company is returning to the acquisition market after an absence of more than 10 years, seeking to boost gas production as it ramps up output from its oil sands operations.

"We will be looking at acquisitions," George said, "Because of changes in the income trust model in Canada, finally after a decade of being unable to compete for assets ... we can look at purchases of natural gas properties."

Well isn’t that dandy Mr. George. You helped kill an investment vehicle that millions of Canadians relied upon for retirement income, and who lost $35 billion of their life savings because of your lobbying actions, in order for Suncor to pick up some gas reserve assets on the cheap. And now that you’ve headed down a completely different and quixotic direction with the purchase of Petro-Canada, you are.......selling natural gas assets.

Thanks for nothing, Rick George of Suncor. Remind me to rain all over your parade, if I ever get the chance.

Suncor to sell billions in natural gas assets

Finding buyer may be tough, analysts say
By Dan Healing, Calgary Herald
December 31, 2009

CALGARY - Suncor Energy has put Canadian assets producing 360 million cubic feet per day of natural gas on the block, about 90 per cent of the volume it announced it would sell after taking over Petro-Canada last fall.

But reaching its goal of selling the assets -- estimated to be worth $2 billion to $3 billion -- in the next 12 months could be difficult, analysts say, given the poor prospects for natural gas prices and the limited number of buyers that are big enough to bid for large parcels.

Suncor spokesman Dany Laferriere said Wednesday the company intends to complete the sales within a year, but it won't sell if the price isn't right. He wouldn't comment on what a minimum price might be.

"It is not a fire sale," he said. "But we're expecting and hoping to have most if not all of the sales completed by the end of 2010."

In November, Suncor chief executive Rick George said the company will likely first sell Petro-Canada's U.S. Rockies natural gas assets. It also plans to sell some small North Sea interests, Trinidad and Tobago assets and a corporate plane.

The assets for sale -- producing 60,000 barrels of oil equivalent per day -- are listed for sale on the divestitures page of investment bank Macquarie Tristone's website.

The assets are split into three regions, with 22,000 barrels of oil equivalent per day in the Alberta and British Columbia Foothills region, 20,000 in the Alberta Deep Basin and 18,000 in northeastern B.C.

The energy equivalent in natural gas is 360 million cubic feet per day. Suncor said it would sell about one-third of its gas production, about 400 million cubic feet per day, after taking over Petro-Canada.

"We've looked at this before and I'd say (it's worth) $2 billion to $3 billion, if they can find a buyer for that much product," said Alan W. Tambosso, president of Sayer Energy Advisors.

That's $33,000 to $50,000 per flowing barrel. In a mergers and acquisitions report released last week, investment bank Peters & Co. reported western Canadian gas-weighted assets had sold for an average of $54,700 per flowing barrel in the fourth quarter, up from $35,000 in the third.

Analyst Paul Cheng, who covers Suncor for Barclays Capital in New York, said he thinks Suncor will take in less than $30,000 per flowing barrel, noting the assets compare poorly with those in the most recent big natural gas weighted sale, ExxonMobil Corp.' s $41-billion US takeover of unconventional gas producer XTO Energy Inc. of Texas, valued at $85,000 US per flowing barrel.

"This is conventional. I can't imagine they are going to sell for a lot of money," he said. "I can't imagine the company has high expectations, either."

Tambosso said Suncor could probably get more for the assets if they were split up into small packages that more bidders could aff ord, but Laferriere said that's not the plan.

"We are not looking at selling these assets individually," he said. "We would be bundling them in groups of assets in a number of bundles that would each constitute a good strategic fit for a prospective buyer."

A total of 15 bundles have been made.

Data rooms providing details of the assets for prospective buyers are to open in three phases, starting early in the new year, in the spring and next fall.

On a map, the assets for sale cover wide swaths of land from the northern border of B.C. to the deep southwest corner of Alberta.

On the website, the assets are described as "operated, high working interest, legacy gas reserves and production."

© Copyright (c) Canwest News Service


Anonymous said...

You are on the mark with this one Brent. Happy New Year! Sue

Anonymous said...

What a SOB!