Suncor Energy: Top Choice in Oil

03/01/2017 7:00 am EST


Stephen Leeb

Founder and Research Chairman, Leeb Group

Suncor Energy (SU) is a nonconventional oil producer, the first company to mine Canada’s rich petroleum basin, the Athabasca oil sands, explains Stephen Leeb in The Complete Investor.

Most of these oil sands are deeply embedded, and Suncor has mastered the techniques of drilling and injecting steam to extract the bitumen, which it then sends via pipeline to its upgrading facility.

The company also operates and exploration and production unit manages onshore assets in Libya, Syria, and North America along with offshore assets in the North Sea and off Canada’s east coast.

Its refining and marketing segment develops, transports, refines, and markets crude oil and natural gas in Canada and globally.

For 2017, the company plans to continue raising production while cutting costs. It has completed its C$937 million acquisition of an additional 5 percent interest in Syncrude, boosting its stake to 53.7 percent.

The deal should enhance Suncor’s production capacity by 17,500 barrels per day of high-quality light sweet synthetic crude.

Meanwhile, Suncor will continue to trim costs, planning to cut capital spending by around C$800 million in 2017.

Assuming oil prices remain in the $50-$55 range (U.S. dollars), the company should meet its forecast of around C$3 billion in free cash flow, a big bump up from 2016’s negative C$1.15 billion.

In sum, Suncor is a company that is managing costs, making strategic acquisitions, and increasing production, in a world in which OPEC’s recent commitment to cutting production should prop up oil prices.

Suncor is well positioned to grow faster than just about any of the world’s major oil producers.

And if the unexpected happens and oil prices drop, the company should still do well because of its diversified operations. For a stake in oil, we view Suncor as a top choice.

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