Suncor Energy Inc (SU.TO)

This is the star of the industry. They push a million barrels a day. The company has generated a lot of excess cash flow and have been using it to buy back stock. They will generate $10 billion cash flow this year and will spend $5 to 5.5 billion. They’ve increased the dividend to $1.44 and are doing buybacks. They are bringing in over 4 billion discretionary cash this year. They’ve repaired their balance sheet. Debt is down to $13.3 billion at the end of December compared to $16.1 the year before. Their equity base is $45 billion. The one problem for them is their operating cost. They have a large stake in Syncrude, and its costs are about $20 higher per barrel than Suncor’s own costs.

The narrowing in heavy oil differentials is helping this. This is a great long term stable stock to hold. He expects the dividend could rise over the next few years. This is trading over 7 times cash flow, so it is a bit expensive. He might prefer CNQ-T as it trades at lower multiples.

SU-T vs. EMA-T. EMA-T has a higher dividend. He thinks there is more capital appreciation potential with SU-T, however.

It would be a good company to own and it is the first time in three years when he has said to buy an oil producer. Oil recently broke out.

Likes the Canadian energy sector, and Suncor is a leader. A low-cost producer with good future growth. Well-positioned. This sector is under-owned. Oil prices will perform a little better than many expect. Bullish on Canadian oil.

CNQ-T versus SU-T – They both rank well in his model. In a rising interest rate world, energy stocks do well. CNQ ranks slightly higher as share earnings will grow 100% in 2018 with a 16 times P/E. He does not own either stock.

In a rising interest rate world, energy stocks do well. CNQ ranks slightly higher as share earnings will grow 100% in 2018 with a 16 times P/E. He does not own either stock. (Analysts’ price target is $51.50 )

Would you purchase CNQ-T or SU-T? He thinks both are great companies, but they have a high beta to an oil price decline. Suncor would be a good buy in the mid-$30s. CNQ is producing almost 1 million barrels a day and are a great success. (Analysts’ price target is $51)

Not a fan of Canadian energy, though Suncor is one of the best names here and probably a buy here. Prefers playing energy through ZEO or XEG ETFs. ETFs are used for renting names, particularly cyclical stocks, and energy is highly cyclical.

VET-T vs. SU-T. He would more toward SU-T because it is longer term and you get a higher discount. His money has gone toward the drillers recently.

CNQ-T vs SU-T. Both companies suffer from wider heavy oil differentials. He really likes CNQ over Suncor because it is gushing with free cash flow (he estimates $2.3 billion this year). CNQ Horizon expansion added 70,000 bpd of production. He owns CNQ bonds and equity. (Analysts’ price target for CNQ-T is $52 )

In spite of lower energy prices, he is still modelling 4% Cash Flow per Share Growth and 8% Production Growth 2017-2019. This company has an awesome balance sheet. However, it is a little expensive, trading at 8.2% 2019 estimates, versus 7.1% the integrated peer average. If you like oil, this is a name you can buy on a pullback.

Not a big fan of commodity and cyclical spaces for energy, oil, gold, metals, minerals. The problem with most of these names, and Suncor specifically, is that it gives and takes away over and over again. He would prefer the ZEL-T ETF.

When it gets to book value just under $28 at present, it is a buy, historically. In 2017 the price of oil was up 7% and this one did very well. Nat gas went down 20%. Mother nature could close their value gap very quickly with a cold winter.

Has this as a core holding. Their margins have stayed pretty healthy on the refined products side. He likes this because it gives you more of a safe, less volatile way to play energy. Pays a great dividend. They should put up anywhere from 5% to 10% growth every year, depending on crude oil prices.