Tuesday, November 29, 2011

Suncor (SU) 2011 Review

Suncor Energy (SU) explores, acquires, develops, produces and markets crude oil and natural gas from (Canadian) oil sands, refines crude oil and markets petroleum and petroleum products.

SU has grown profits at a 19%+ rate over the past ten years, while raising its dividend at a 14% rate. The company’s varied dramatically ranging from 4% to 24%. SU experienced a fall off in profits during the recent economic down turn but should see future growth as a result of :

(1) the benefits from its merger with Petro-Canada. The combined entity will possess the largest oil sands resource, the strongest downstream asset base, the most solid exploration and production in Canada plus improved organizational skills and a superior balance between up stream and down stream operations,

(2) the company’s asset base also include significant conventional reserves in offshore Eastern Canada and the North Sea,

(3) improving operating efficiencies and cost savings initiatives.


(1) exposure to fluctuations in oil and gas prices,

(2) exploitation of its deep oil sands reserves are subject to continuing improvement in developing technologies,

(3) it is subject to environmental concerns,

(4) its high debt level pose the risk of restraining its ability to maintain a high capital expenditure schedule.

Suncor is rated A by Value Line, has a 21% debt to equity ratio and its stock pays a 1.4% yield.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2001
SU 1.4% 11% 15% 8
IND 3.6 6 32 NA
Debt/Equity ROE EPS Down Since 2001 Net Margin Value Line Rating
SU 21% 11% 2 12% A
IND 14 17 NA 7 NA


Note: SU stock made good initial progress off its March 2009 low, surpassing the down trend off its May 2008 high (red line) and the November 2008 trading high (green line). However, in the 2008/2009 decline, SU broke below a long term up trend dating from 1994 and has never recovered that up trend (straight blue line). It is currently in an intermediate term trading range (purple lines). The wiggly blue line is on balance volume. The Aggressive Growth Portfolio owns a full position in SU; but that results from trading sales earlier this year at $38 and $46, followed by buy backs at $26 and $31.