Suncor Energy Inc. (TSX:SU)(NYSE:SU) just has too much money laying around. As of the end of the second quarter, the company had nearly $5 billion in cash and equivalents just sitting on its balance sheet. That cash is starting to burn a hole in the company’s pocket, especially since CEO Steve Williams believes that the oil prices collapse could create opportunities to acquire assets in a fire sale. That opportunity has the company itching to go shopping.

Cash is piling up

In addition to having a pile of cash on the balance sheet, Suncor is also generating a boatload of cash each quarter. Last quarter it produced $2.1 billion in cash, which wasn’t all that far off from the $2.4 billion it produced in the year-ago quarter when the oil price was much higher. That cash flow is more than enough to cover Suncor’s capex and dividend, leaving it with excess cash flow that the company now plans to use to buy back stock.

Given that Suncor is generating excess cash, it sees the cash on its balance sheet as being overkill, which is why Suncor’s CEO recently said “we have too much cash on our balance sheet.” That is actually quite a statement as most North American oil companies have too much debt on their balance sheet, which is increasing worries that they won’t survive the downturn. Those worries have pushed stock prices lower, which is opening the door for Suncor to pounce.

Where Suncor might go shopping

The following chart shows how Canadian Oil Sands’s (TSX:COS) stock price has been crushed over the past year.


The reason for that shellacking is due to the fact that Canadian Oil Sands has a bit too much debt. That has worried credit rating agencies, with Moody’s recently downgrading its credit rating to just one notch above junk. That’s partially because it is generating negative free cash flow, forcing it to pile on more debt.

The company is looking for ways to fix its worrisome balance sheet. A recent report by the Wall Street Journal suggested that Canadian Oil Sands was looking to sell some of its future production for an upfront payment.

Given its financial worries, the company could be forced to put itself up for sale if oil prices remain weak. That could open up the door for a company like Suncor Energy to swoop in and buy the company. What’s intriguing about Canadian Oil Sands in particular is the fact that it holds a 37% stake in Syncrude, where Suncor Energy is also a partner, so Suncor could boost its stake in that key asset by acquiring a partner at a fire-sale price.

That’s but one example of the type of company Suncor Energy might look at acquiring should the opportunity present itself. It has plenty of options in addition to acquiring a rival as it could look at acquiring specific assets or simply boost its stake in assets where it is a partner by buying out the partner’s stake.

Investor takeaway

Suncor Energy is in a nice spot right now as it has a low debt level and lots of cash on its balance sheet. The company is starting to get excited about using that cash to take advantage of fire-sale prices that are developing due to the deep drop in oil prices. Given how much the downturn has hurt peers like Canadian Oil Sands, Suncor Energy should have its pick of acquisition candidates should oil prices continue to remain weak.

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Fool contributor Matt DiLallo has no position in any stocks mentioned.