Our latest Focus Stock is an integrated energy company strategically focused on developing Canada’s Athabasca oil sands, one of the world’s largest petroleum resource basins, informs Matthew Miller, editor of S&P The Outlook.

Suncor Energy (SU) carries S&P Global Market Intelligence’s highest investment recommendation of 5-STARS, or Strong Buy.

Although Suncor has other significant upstream assets (including offshore assets in Norway, United Kingdom, East Coast Canada, and onshore North American production), the oil sands business is the primary driver of shareholder value and the cornerstone of growth.

Our Strong Buy recommendation reflects Suncor’s strong integrated model of protecting cash flow and balance sheet strength during downturns, combined with significant leverage to an eventual recovery in oil prices (given Suncor’s top-tier reserve-life index and strong portfolio of low-decline assets).

We forecast large growth in free cash flow starting in 2017, as Suncor nears the end of capital spending for its Fort Hills project ($9.8 billion total project cost) and given Suncor’s continued improvements in upstream (oil sands) operating costs and down-stream (refinery) utilization rates.

We think Suncor’s financial strength and resilient business model have been on full display during the current crude oil bear market.

Suncor has a long and successful track record of counter-cyclical acquisitions by acquiring assets at the bottom of the cycle. The current oil bear market has given it the opportunity to add key strategic assets that we think are very accretive to its net asset value.

Risks to our recommendation include renewed weakness in crude prices, unplanned downtime at producing facilities, unexpected project delays, increased ability of US refineries to process light sweet crude oil (reducing the demand for Suncor’s heavier crude oil), and insufficient market access (pipeline or rail).

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By Matthew Miller, Editor of S&P The Outlook