SUNCOR ENERGY INC. $32(Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $48.0 billion; Price-to-sales ratio: 1.2; Dividend yield: 1.6%; TSINetwork Rating: Average; www.suncor.com) became Canada’s largest integrated oil company in 2009, when it merged with Petro- Canada.
Suncor gets 60% of its production from its Alberta oil sands projects. The rest comes from conventional oil and natural gas properties. Suncor also operates four refineries and 1,500 Petro- Canada gas stations.
The company aims to increase its oil sands production by 10% per year to 2020. However, it may slow its expansion because rising North American shale oil production is weighing on prices. As well, labour shortages and a lack of pipeline capacity are creating further uncertainty.
Suncor spent $2.8 billion on capital projects in the first half of 2012. That’s down 14.9% from $3.3 billion a year earlier. Suncor will probably spend $7.5 billion for all of 2012.
Meanwhile, Suncor earned $1.3 billion in the three months ended June 30, 2012. That’s up 28.4% from $980 million a year earlier. Earnings per share rose 30.6%, to $0.81 from $0.62, on fewer shares outstanding.
These figures exclude several unusual items, such as a $694-million writedown of Suncor’s 50% stake in a natural gas plant in Syria (the country’s state-owned oil company owns the other 50%). The Syrian civil war forced Suncor and its partner to close this plant in late 2011.
Cash flow per share rose 19.8%, to $1.51 from $1.26. Revenue rose 4.2%, to $9.7 billion from $9.3 billion.
The company’s production rose 17.9% in the quarter, to 542,400 barrels of oil equivalent a day from 460,000 a year earlier. For all of 2012, Suncor expects to produce an average of 540,000 to 580,000 barrels a day.
Suncor’s balance sheet remains strong. It’s long-term debt of $10.0 billion is a moderate 21% of its market cap. The company holds cash of $5.2 billion, or $3.34 a share.
The stock trades at a low 10.6 times Suncor’s likely 2012 earnings of $3.03 a share, and at 5.4 times its projected cash flow of $5.90 a share. The $0.52 dividend yields 1.6%.
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