Chapter 1: Overview of Corporate Financial Reporting

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SUMMARY

Suncor, an oil and natural gas company from Alberta, is planning to sell their natural gas properties to downsize their assets. Since natural gas companies have been facing low prices and unwelcoming capital markets, Suncor is going to be focusing on their oil sand projects instead. The company hopes to complete the sale of their natural gas properties by the end of 2010, keeping their natural gas development projects while cutting off its mainstream exploration assets. Suncor’s vice-president of investor relations, John Rogers, said the company will be undergoing a significant reduction in the number of properties and the amount of production that is coming out of the natural gas division because the company is not happy with the returns from their natural gas assets.

CONNECTION

In chapter one, we are introduced to 3 Business Activities. These were Financing Activities, Investing Activities, and Operating Activities. Suncor’s decision to sell their natural gas properties and assets fell under both the “Investing Activities” and “Operating Activities”. For the first category, Investing Activities, the sale of natural gas properties could be a disinvestment rather than an investment because the company is selling its assets. But this can also be considered as an investment because from a long term perspective the company could further prosper by focusing mainly on their oil projects. As listed in the chapter, typical investing activities include sale of property, plant, and equipment which is what Suncor is currently undergoing. In the second category “Operating Activities”, Suncor’s plan to sell their natural gas properties means that they will not be developing, producing, and marketing their natural gas products.

REFLECTION

Suncor made a good decision to stop investing in their natural gas properties because currently in the market there is a low demand for this resource. It is wise that they are keeping their natural gas development projects running in case the value of this resource increases in the future. This can give smaller companies who are interested in investing in natural gas a good buying opportunity as many other companies such as Cenovus Energy Inc, Petro-Bakken Energy Ltd are selling their natural gas assets as well. It is logical that Suncor is investing more of their money into the oil sands instead of natural gas since natural gas is currently becoming an over abundant resource and the market is more in demand for oil.