Suncor Sells off Natural Gas Assets

06-Jan-2010 | Reggie | Canadian Investing Commodities Oil & Gas

In an effort to cut themselves free of all their natural gas assets, Suncor announced a deal that would see them sell off their Colorado properties for nearly half a billion dollars.  Last year, Suncor made an announcement that they would attempt to sell between $2 billion and $4 billion in natural gas assets over the next year.  The selling price was a 30% discount to what natural gas assets sold for last year, but Suncor was happy to be rid of the assets anyway.

This seems to be a recurring theme as investors largely seem to be avoiding buying natural gas oriented companies despite the price appreciating fairly significantly from its low.  We recently saw the 1 month anniversary since the oil side of Encana was split off into Cenovus.  The transaction was overwhelmingly supported by shareholders who are hoping to see significant appreciation in stock value over coming months.  Other companies such as Bellatrix, mentioned in the previous blog, are attempting to shift their production away from a Gas concentration to more Oil.  Currently at a 70/30 gas to oil split, Bellatrix is hoping to have their production down to a 50/50 split by next year.

Deals such as these should truly be scene as a sign that natural gas prices are destined to struggle for the foreseeable future.  These are companies that are used to the cyclical nature usually associated with selling commodities.  They have plans and strategies in place that they use to cope with the peaks and troughs.  Seeing these companies make major shifts to their operations, or even change their whole corporate structure is a sign that the current decline in gas prices is more than the usual cycle.

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