SUNCOR ENERGY INC. $37 - Toronto symbol SU

SUNCOR ENERGY INC. $37 (Torontosymbol SU; Conservative Growth Portfolio,Resources sector; Shares outstanding:1.5 billion; Market cap: $55.5billion; Price-to-sales ratio: 1.5; Dividendyield: 3.1%; TSINetwork Rating:Average; www.suncor.com) is takingadvantage of low oil prices with its allstocktakeover offer for Canadian OilSands (Toronto symbol COS).

Canadian Oil Sands’ main asset isits 36.74% stake in the massiveSyncrude oil sands development nearFort McMurray, Alberta. It alsooperates the project. Suncor alreadyowns 12.0% of Syncrude, so thispurchase would give it effectivecontrol, with a 48.74% stake. Equipment failures and other problemshave hurt Syncrude’s productionin the past few years, and Suncorfeels its expertise running similarprojects will make Syncrude moreefficient and profitable. In the secondquarter of 2015, Suncor’s cash costsin the oil sands were $28.15 a barrel,compared to $54.45 at Syncrude. Under the bid, Canadian Oil Sandsinvestors would receive 0.25 of a Suncorshare for each share they own.If you include Canadian Oil Sands’debt, the deal is worth $6.7 billion. Canadian Oil Sands has rejected theoffer and has adopted a shareholderrights plan to give it more time tonegotiate a better deal, either withSuncor or another buyer. Even if Suncor has to raise its bid,its familiarity with Syncrude would helpcut the risk of a big takeover like this. Suncor is a buy.

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