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Suncor Energy Inc. Message Board

  • blackoutbuzz blackoutbuzz Jul 31, 2014 10:40 AM Flag

    TD keeps a BUY on SU with target $52

    They still see promise in this ugly duckling. Even comparing it to the SU of old

    @@@@@Suncor Energy Inc. (SU-T, SU-N) C$45.79 Unexpected Divi Hike, Cuts '14 Capex 13% - The Re-rate Continues Event: Suncor Energy Inc. (SU-T) last night released its Q2 results. While we were anticipating a relatively quiet mid-summer release, SU surprised on a couple of different fronts including: 1) a 22% hike to the quarterly dividend (note that it increased the dividend twice in 2013 — a 54% and 15% hike, respectively), and 2) a $1 bln or 13% reduction to its capital budget for 2014. We believe that these developments combined likely overshadow the miss on production and cash flow (Exhibit 1). Although oil sands mining volumes fell sequentially (10 mbbls/d of lost production, given planned coker maintenance, unplanned maintenance activities in upgrading and extraction and a third-party pipeline outage), key measures of performance such as cash operating costs continue to improve. SU also continues to deliver on a number of market access initiatives, including an increase in rail shipments to its Montreal refinery (36 mbbls/d in Q2 vs. 20 mbbls/d in Q1). TD Investment Conclusion: SU remains our top pick among the integrated names. Although SU shares have had a strong start to the year (up 21% versus its peers at 9%), we believe that there is potential for further outperformance. 1) SU today looks a lot more like the original SU with 2014 forecasted oil sands production accounting for ~79% of total production. This is not too far off the ~86% oil sands weighting prior to acquiring Petro-Canada — we note that its oil sands weighting fell to ~50%, right after the transaction closed. 2) Although SU de-rated relative to its integrated peers in the years following the Petro-Canada acquisition, the multiple gap has only closed a little since then. Given a current profile that looks a lot more like the original profile and improvements to upgrader reliability and the cost structure

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