DBRS Comments on Suncor Announcement of Discontinuing Voyageur Project

DBRS notes today that Suncor Energy Inc. (Suncor or the Company, rated A (low), Stable) has decided not to proceed with the Voyageur upgrader project, citing challenging economics. This brings to an end the considerable uncertainty that has surrounded the future of the project, which had been deferred since late 2008. As a result, Suncor expects to incur a charge to cash flow from operations of approximately $180 million in Q1 2013 in order to write down the remaining value of the Voyageur assets.

In addition, Suncor has announced that it will acquire the remaining interest in the Voyageur joint venture (JV) partnership from its partner, Total E&P Canada Ltd (Total), for $515 million. This transaction does not affect the JV agreements surrounding the two other major projects with Total, Fort Hills and Joslyn.

DBRS views today’s announcement as credit neutral, as the total cash outlay of $515 million is expected to be funded from existing cash balances. DBRS notes that the Company will continue to maintain significant liquidity (DBRS estimates a pro-forma cash balance of $3.9 billion) upon closing of the transaction.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Oil and Gas Companies, which can be found on the DBRS website under Methodologies.