Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

The downturn in oil prices has made weaker companies targets as better-capitalized rivals like Suncor seek to grow.

Ben Nelms/Bloomberg

Suncor Energy Inc. is scouting for more deals after building up a sizable war chest, as weak prices hammer profits and drive expectations that industry consolidation is poised to accelerate.

The Calgary-based company reported a third-quarter loss of $376-million late Wednesday despite higher output and lower costs at its sprawling oil sands operations.

But it ended the period with $5.4-billion in cash, a holdover from periods of stronger prices. Its chief executive officer said Thursday that the company was not done shopping for possible acquisitions.

Story continues below advertisement

Suncor is trying to sway Canadian Oil Sands Ltd. shareholders to accept a hostile takeover bid. The all-share deal would not significantly dent Suncor's balance sheet, Steve Williams said. "So we still remain in a very powerful position."

The 16-month slump in oil markets has forced major energy producers to abandon growth projects and slice billions of dollars from spending plans. On Thursday, Athabasca Oil Corp. slashed its head office and field workers by 25 per cent, adding to a litany of cuts announced this week.

The downturn has also made weaker companies targets as better-capitalized rivals seek to grow with crude prices languishing around $50 (U.S.) a barrel.

"The initial thought is, 'Hey, let's cut costs, let's worry about what our objectives are internally.' But the next step after that is, 'Okay, what are we going to do about keeping production growing?'" said David Neuhauser, managing director at investment firm Livermore Partners.

"And that's when you have to become the aggressor when you have the balance sheet to do so."

Global benchmark Brent oil averaged about $51 a barrel in the quarter and Western Canada Select oil sands crude fetched an average of roughly $33 – the lowest in more than six years, according to Suncor.

Analysts have said the sustained drop in commodity prices has made oil sands acquisitions more attractive relative to building brand new projects from scratch.

Story continues below advertisement

Canadian Oil Sands' board has urged investors to spurn Suncor's offer, accusing it of exploiting inside information about the Syncrude Canada Ltd. operation to make an opportunistic bid at the bottom of the market.

The largest owner of the Syncrude plant posted a loss of $174-million (Canadian) in the third quarter. Its cash flow was nearly three-quarters lower as the selling price for Syncrude's synthetic oil fell by 41 per cent from a year earlier.

The company reiterated its rejection of Suncor's bid, saying that it "substantially undervalues" its operations and prospects.

"Canadian Oil Sands is demonstrating its ability to weather this period of low oil prices and even a modest improvement in oil prices will generate robust expansion of cash flow," CEO Ryan Kubik said in a statement.

On Thursday, Suncor's Mr. Williams questioned that claim. He touted stronger performance at the company's oil sands upgrading operations this year compared to Syncrude and said the company was better equipped to handle a prolonged stretch of weak crude prices.

"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.

Story continues below advertisement

Indeed, Cenovus Energy Inc. CEO Brian Ferguson said in an interview that the company is now bracing for low oil prices through 2017.

Staff layoffs in the second half of this year total 700, the company said Thursday, up from a July expectation of 300 to 400. It now expects annual cost savings of $400-million.

The company reported a 55-per-cent drop in cash flow and an operating loss, but it finished the quarter with $4.4-billion in cash. Mr. Ferguson declined to say whether the company was examining specific asset sales or acquisitions, only that it is his job to look for ways to boost value for shareholders.

Some analysts have suggested it could be a likely takeover candidate as industry conditions have deteriorated. On Thursday, however, Suncor's Mr. Williams quashed speculation it was eyeing its rival, saying Cenovus's reserves offered Suncor little value.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies