Suncor paves comeback path after ceding crown to Canadian Natural
BNN Bloomberg
“Unenthused” is how Travis Wood describes his confidence in the capacity of Suncor Energy Inc. to fix things when they break.
“Unenthused” is how Travis Wood describes his confidence in the capacity of Suncor Energy Inc. to fix things when they break.
After Suncor disclosed three incidents at its northern Alberta operations last month - one of which resulted in someone being killed - the National Bank Financial analyst said “major changes will be required to right the ship in regard to the company’s operational and safety culture.” And investors could be forgiven for sharing Wood’s ennui.
Over a six-month period in 2020, Suncor slashed its quarterly dividend 55 per cent in response to the pandemic-spawned market crash and was dethroned by Canadian Natural Resources Ltd. as Canada’s most valuable energy company.
Canadian Natural managed to avoid cutting its own dividend throughout COVID-19; and despite Suncor eventually returning its payout to pre-pandemic levels last October, the company’s market cap still lags its rival’s by a wide margin. As of Friday morning, Suncor’s value was pegged at a little more than $53 billion; Canadian Natural’s was about $81 billion.
Yet by holding the line on further dividend hikes this week and even trimming $300 million from its capital spending plans for the rest of this year, Suncor is showing a level of restraint that could set the stage for the company to reclaim its throne.
“There is a natural tendency for the market to look to the biggest cap company and I think people have been a little bit surprised at how quickly the market cap of Canadian Natural has grown,” said Mike Tims, vice-chairman of Matco Investments, via telephone. Tims, who previously spent three decades at Calgary’s boutique oil and gas-focused investment bank Peters & Co. before retiring as chairman, said Matco currently holds shares of Canadian Natural but not Suncor.
