Suncor Energy (SU) Arm To Purchase Notes Worth C$1.5B

Suncor Energy Ventures Holding Corporation – a wholly owned subsidiary of leading integrated energy player Suncor Energy Inc. (NYSE:SU) – declared that it has offered to purchase its notes, worth as high as C$1.5 billion. The plan reflects the company’s intention to lower its debt load – which is C$15 billion as per Bloomberg – and to enhance liquidity.

The to-be repurchased notes – carrying a significant elevated interest rate of 8.2% – are expected to mature between 2019 and 2042. This decision is as per Suncor Energy’s plan to maintain sufficient cash balance in its balance sheet especially in an era when oil – despite walking on the bullish path now – is way beyond the price it traded at during mid-2014. Along with increasing its cash balance, the company is dedicated in expanding operations and acquiring growth projects.

Calgary, Alberta-based Suncor Energy is Canada’s premier integrated energy company. Suncor's operations include oil sands development and upgrading, conventional and offshore crude oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. The company has surpassed the Zacks Consensus Estimate in two of the last four quarters with an average beat of 22.05%.

Our main concern is with crude prices remaining weak. Suncor Energy’s upstream division has been able to extract less value for its products and has curtailed its profit margins.

SUNCOR ENERGY Price

Currently, the company carries a Zacks Rank #4 (Sell), which implies that the stock will underperform the broader U.S. equity market over the next one to three months.

Some better-ranked players in the energy sector include Braskem S.A. (NYSE:BAK) , McDermott International Inc. (NYSE:MDR) and Boardwalk Pipeline Partners LP (NYSE:BWP) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).