“I have no plans to increase the offer,” Suncor Energy CEO Steve Williams told BNN on Wednesday. “My view is that this is a full and fair offer and I believe it will be accepted.”
The Calgary-based company launched a hostile takeover bid in early October for Canadian Oil Sands – which counts a 37 percent ownership stake in the Syncrude Canada oil sands consortium as its only asset. The offer is for 0.25 Suncor shares in exchange for each COS share tendered for a total value of $4.3-billlion. Since then, the bid has faced mounting criticism for being, according to COS, both “undervalued” and “opportunistic”.
Last week, COS accused Suncor of attempting to buy support for its bid through the use of so-called “dealer solicitation fees” which reward brokers with payments of up to $1,500 for convincing any clients with at least 300 COS shares to accept Suncor’s offer. On Wednesday, Williams accused his company’s acquisition target of not handling Suncor’s offer with respect.
Imperial Oil, the Canadian subsidiary of ExxonMobil that owns 25 percent of Syncrude (or slightly more than double Suncor’s current stake), could make an offer of its own, Williams said. However, he maintained Suncor’s offer would provide the best value for shareholders.
“We believe this is a situation in which one plus one equals three,” Williams said.
Canadian Oil Sands initiated its shareholder rights plan last month in hopes of buying more time to find another suitor. The Alberta Securities Commission will hear Suncor’s challenge of the plan on November 26th. Suncor’s bid is due to expire on December 4th.
Suncor also unveiled plans late Tuesday evening to increase spending in 2016 to as much as $7.3-billion (which would be 15 percent above current levels). At the same time, Suncor plans to produce roughly five percent less, or a maximum of 565,000 barrels of oil equivalent per day, in 2016 — primarily due to significant maintenance activities planned for the Firebag oil sands project.
Despite the increased spending plan, Williams said the company stands ready to tighten its purse strings further if crude oil prices do not recover soon.
“We do actually have some contingency plans if commodity prices were to stay very low, or go very lower, that we could enact fairly quickly,” Williams said. “Those plans are similar to what we did this year except now those plans are already in place,” he said, adding the company has saved in excess of $1-billion in capital spending this year relative to its initial 2015 spending plans and had saved a similar amount on operational spending.
Asked whether Suncor would consider asset sales in the event of a sustained period of low oil prices, Williams responded “we have the option,” while stressing the decision to sell would depend on the circumstances. Williams refused to disclose which assets Suncor may consider placing on the auction block.
Suncor has stress-tested its assets to be capable generating cash flow even if oil prices languish at the US$30 per barrel for most of 2016, Williams said. Although he went on to warn the rest of the sector is not quite as resilient.
“At $40 [Canada] is struggling… we can compete, we can make cash, but it is tough,” Williams said. “The weaker members of the Canadian oil industry will struggle to survive at $40 oil prices.”
“I personally went to see the Chairman and the Chief Executive [of COS] and I was summarily dismissed,” Williams said, adding he hasn’t “heard of any interlopers” and other bidders were unlikely to emerge “as we approach the finish line.”