Is Imperial Oil Ltd. looking at Canadian Oil Sands Ltd’s Syncrude stake?

The Syncrude partnership is a joint venture between eight energy companies including Imperial Oil Ltd., the operator and 25% owner

Amid speculation that Canadian Oil Sands Ltd. might be taken out along with its 37% in the Syncrude oil sands project, the second-biggest stakeholder within the project is often cited because the mostly likely buyer.

Imperial Oil Ltd. owns 25% from the joint venture, with smaller positions being held through the likes of Suncor Energy Inc., Sinopec and Nexen. But at least one analyst doesn’t think the chances of Imperial pursuing such a deal are extremely high at all.

Greg Pardy, co-head of global energy research at RBC Capital Markets, pegs the chances at 10% or less, primarily because Imperial already controls a good amount of upstream oil sands development assets in the portfolio.

“Where Imperial sits, any acquisition it looks at must provide synergistic fit, scale, top quality reserves and resources, and an attractive price,” Mr. Pardy said in a research note. “In our minds, Canadian Oil Sands would ring the bell on scale, resource quality and potentially price, but synergistic fit is an open question that warrants deeper thought.”

The analyst noted that Imperial continues to be candid in stating that the degree of cultural change necessary at Syncrude to create sustained operating performance is turning out to be a bigger challenge than ever before anticipated.

Imperial entered into a management services agreement with Syncrude in 2006, however the integration of across-the-board guidelines from its parent company Exxon Mobil Corp. “continues to be somewhat elusive,” something he believes is reflected in Syncrude’s ownership structure, along with other factors.

Mr. Pardy also noted that purchasing Canadian Oil Sands’ interest would boost Imperial Oil’s stake to 61.7%, well lacking the 100% manage it has within the rest of its portfolio, including projects for example Cold Lake, Kearl and Aspen.

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