Here's What Caused Suncor Energy (SU) to Sell Its UK Business
Suncor Energy SU, a Canada-based energy company, has signed a share purchase agreement with Equinor UK — a subsidiary of the Norwegian multinational energy company Equinor EQNR — for the sale of its UK Exploration & Production business. The industry is curious and speculating the reasons behind this move.
There are many possible factors at play. One reason is that Suncor Energy has been looking to streamline its operations and focus on its core assets. The company recently made several divestitures, including the sale of its Petro-Canada lubricants division, and it is possible that the UK business was deemed non-core. By selling its UK business, Suncor can free up resources to invest in its other assets, such as oil sands operations in Canada.
Another reason for the sale may be related to market conditions. The UK oil and gas industry has been facing significant headwinds in the recent years, including low oil prices, geopolitical uncertainty and increased regulatory pressure. These factors have made it difficult for companies to maintain profitability in the region. Suncor Energy may have concluded that it is better to exit the market altogether. By selling its UK business, Suncor can mitigate its risks and refocus on markets that offer more favorable conditions for growth and profitability.
The sale is also likely to generate financial value for Suncor and its shareholders by focusing on its main businesses, such as oil sands operations in Canada. This move can also help Suncor generate better financial returns in the long term.
Overall, the sale of Suncor's UK Exploration & Production business to Equinor UK Limited marks a significant development in the UK energy sector. While the reasons for the sale may be varied, it is clear that both Suncor and Equinor stand to benefit from the transaction. Suncor will be able to focus on its core assets and reduce exposure to challenging market conditions. Equinor, on the other hand, will gain access to a portfolio of valuable oil and gas assets in a region where it is actively seeking to grow its operations. It will be interesting to see how the deal plays out in the coming months and years, and what impact it has on the wider UK energy sector.
Suncor Energy, founded in 1917 and based in Alberta, Canada, is a leading globally competitive integrated energy company. It owns some of the largest oil sands in the world and operates in oil sands development, crude oil and gas production, petroleum refining and product marketing.
Zacks Rank and Key Picks
Currently, Suncor Energy carries a Zacks Rank #3 (Hold). Investors interested in the energy sector might also look at some better-ranked stocks like NGL Energy Partners (NGL), sporting a Zacks Rank #1 (Strong Buy), and Energy Transfer ET, holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NGL Energy Partners: NGL Energy Partners is worth approximately $509.53 million. Its shares have increased 48.8% in the past year.
NGL Energy Partners LP is a limited partnership company that operates a vertically-integrated propane business with three segments — retail propane, wholesale supply and marketing, and midstream.
Energy Transfer LP: Energy Transfer LP is valued at around $40.85 billion. ET delivered an average earnings surprise of 11.43% for the last four quarters, and its current dividend yield is 9.48%.
Energy Transfer LP currently has a forward P/E ratio of 9.17. In comparison, its industry has an average forward P/E of 9.40, which means Energy Transfer LP is trading at a discount to the group.
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