SUNCOR ENERGY INC. $36 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $54.0 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.2%; TSINetwork Rating: Average; www. suncor.com) gets 70% 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 recently sold most of its Western Canadian conventional natural gas properties for $1 billion.
The cash will help Suncor develop its Fort Hills oil sands project in Alberta. Suncor owns 40.8% of Fort Hills and will operate it. France’s Total S.A. owns 39.2%, and Teck (see box this page) holds the remaining 20.0%. Fort Hills’ reserves should last 50 years.
Suncor will contribute $5.5 billion of Fort Hills’ $13.5- billion cost. The project, which is scheduled to start up in the fourth quarter of 2017, should ultimately produce 180,000 barrels a day; Suncor’s share is 73,440.
To put that in context, Suncor’s average daily production rose 11.2% in the quarter ended September 30, 2013, to 595,000 barrels of oil equivalent (93% oil and 7% gas) from 535,300 a year earlier.
Thanks to the higher output and rising oil prices, Suncor earned $1.4 billion in the quarter, up 10.4% from $1.3 billion a year earlier. Earnings per share rose 13.1%, to $0.95 from $0.84, on fewer shares outstanding. Revenue gained 8.3%, to $10.4 billion from $9.6 billion. However, higher income taxes pushed down cash flow per share by 5.6%, to $1.69 from $1.79.
The stock trades at just 11.3 times Suncor’s forecast 2013 earnings of $3.19 a share, and at 5.6 times its likely cash flow of $6.45 a share. The $0.80 dividend yields 2.2%.
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