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ConocoPhillips (COP) to Buy Remaining Stake in Surmont Facility

ConocoPhillips COP exercised its rights to acquire the remaining interest in the Surmont oil facility for $3 billion, thereby gaining complete ownership of the Alberta operation.

The acquisition involves a $3-billion price tag and $325 million in contingent payments. The transaction, expected to complete in the second half of 2023, will be funded with cash, and short and medium-term financing or a combination of both.

Surmont, located in northeastern Alberta, is the fourth-largest oil-sand well site in Canada. The facility produced about 135,000 barrels of oil per day in April. Oil is produced at Surmont by injecting steam into underground wells to push the region’s heavy bitumen to the surface.

Canada’s Alberta oil sands hold some of the world’s largest crude reserves, which are appealing to oil and gas producers looking to boost production. The acquisition enables ConocoPhillips to operate the assets at a rate of its choosing instead of coordinating with partners.

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Gaining control of Surmont’s low-cost production will help ConocoPhillips reach its goal of returning $11 billion in cash to shareholders this year. The acquisition will add about $600 million of free cash flow per year in 2024. It will provide diversity to ConocoPhillips’ portfolio, which is mainly focused on U.S. shale right now.

Headquartered in Houston, TX, ConocoPhillips is primarily involved in the exploration and production of oil and natural gas. Through 2022, the upstream energy player produced 1,738 thousand barrels of oil equivalent (BOE) per day, comprising more than 51.7% oil.

ConocoPhillips currently carries a Zack Rank #3 (Hold). Some better-ranked players in the energy space are Murphy USA Inc. MUSA, Sunoco LP SUN and Enterprise Products Partners LP EPD, each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA announced first-quarter 2023 earnings per share of $4.80, which beat the Zacks Consensus Estimate of $4.06. The outperformance can be attributed to higher volumes and retail fuel contribution.

MUSA is committed to returning excess cash to its shareholders through continued share buyback programs. As part of this initiative, the motor fuel retailer recently approved a repurchase authorization of up to $1.5 billion following the completion of the existing $1-billion mandate. The move underscores MUSA’s sound financial position and commitment to rewarding its shareholders.

Sunoco reported first-quarter 2023 earnings of $1.41 per unit, beating the Zacks Consensus Estimate of $1.21. Better-than-expected quarterly earnings were primarily driven by higher contributions from the Fuel Distribution and Marketing segment.

For 2023, SUN revised its adjusted EBITDA guidance upward to $865-$915 million from the previously mentioned $850-$900 million.

Enterprise Products reported first-quarter 2023 adjusted earnings per limited partner unit of 64 cents, which beat the Zacks Consensus Estimate of 62 cents. This was primarily due to higher contributions from the Natural Gas Pipelines & Services business.

In the first quarter, Enterprise Products generated an adjusted free cash flow of $1,347 million against a negative free cash flow of $1,618 million in the year-ago quarter. EPD recorded a distributable cash flow of $863 million in the same time frame.

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ConocoPhillips (COP) : Free Stock Analysis Report

Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report

Sunoco LP (SUN) : Free Stock Analysis Report

Murphy USA Inc. (MUSA) : Free Stock Analysis Report

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