SUNCOR ENERGY INC. $30(Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.4 billion; Market cap: $42.0 billion; Price-to-sales ratio: 1.5; Dividend yield: 3.9%; TSINetwork Rating: Average; www. suncor.com) is Canada’s largest oil producer. It also operates four refineries and 1,500 Petro-Canada gas stations, which supply 63% of its revenue.
The company produced an average of 577,800 barrels of oil equivalent a day in 2015, up 8.0% from 534,900 barrels in 2014. Suncor’s oil sands projects accounted for 80% of its output.
However, Suncor lost $2.0 billion, or $1.38 a share, mainly because it wrote down the value of its reserves in response to the oil-price drop. It also wrote down its operations in Libya and some of its offshore projects. But without unusual items, Suncor earned $1.01 a share. In 2014, it earned $4.6 billion, or $3.15 a share.
Cash flow per share declined 23.9%, to $4.71 from $6.19, while revenue fell 26.7%, to $29.7 billion from $40.5 billion.
Suncor now expects to spend $6.0 billion to $6.5 billion on upgrades and exploration in 2016, down from its earlier forecast of $6.7 billion to $7.3 billion.
The company also expects to complete its all-stock acquisition of Canadian Oil Sands (Toronto symbol COS) in the next few weeks. This firm owns 36.74% of the Syncrude oil sands project. The takeover would give Suncor 48.74% of Syncrude and let it improve the project’s efficiency and profits. Including Canadian Oil Sands’ $2.4-billion debt, the entire deal is worth $6.6 billion.
The stock trades at 5.3 times its likely 2016 cash flow of $5.70 a share. The $1.16 dividend seems secure, and yields 3.9%.
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