Suncor Bid for Canadian Oil Sands Pits Promise Against Results

Best Hope

The best shareholders can hope for if Canadian Oil Sands remains independent is an improvement in operational reliability that would boost production and cash flow without requiring new capital, Ollenberger said. No analysts give Canadian Oil Sands a buy rating, while 12 say hold the stock and four recommend selling. Suncor has 15 buy ratings, 10 holds and one sell.

Canadian Oil Sands is on track for a fifth straight year of production declines, while cash flow per share over the past 12 months has trailed the 16 largest Canadian oil and gas producers, according to data compiled by Bloomberg. The company also slashed its dividend late last year to 5 cents from 35 cents, while Suncor raised its payout this year to 29 cents from 28.

Canadian Oil Sands, which has C$2 billion in outstanding debt, also is causing bondholders concerns. Moody’s Investors Service placed the company under review for a downgrade. Its currently rated Baa3, one step above non-investment grade.

“When there’s been so many years of underperformance, you can’t bake any enhanced performance into any of the numbers we look at and that’s what has brought us to this negative outlook for them,” said Terry Marshall, a senior vice president at Moody’s in Canada.

--With assistance from Rebecca Penty.

To contact the reporter on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Dan StetsCasey at scasey4@bloomberg.net Robin Saponar

©2015 Bloomberg News

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