Suncor Energy Inc (SU.TO)

Missed on the last quarter because of 1) sued for $1.2 billion on a derivative contract and 2) main upgrader was down for a while. People should be focusing on the amount of free cash flow the company will be spinning off. Generating $2 billion of free cash flow both this year and next. Could be debt free in 2 years but expect they will probably meaningfully increase the dividend.

Canadian oil is locked in place and can’t get to world markets. Great company on an asset basis. He is lighter weighted than he was in energy and is not looking to put more money into the sector. If he was he would have to be a high-yielding one.

Stock pulled back because the earnings they just announced did not meet expectations. The primary thing they did though was to take a huge write-down in respect to their Voyager program. This shouldn’t have taken the market by surprise. Bulletproof balance sheet and some excellent prospects for future development production growth. Margins were probably a little thinner than people were hoping but lately, margins have been very robust.

(A Top Pick Dec 28/11. Up 22.41%.) Still likes. Growing its production well and delivering on profitability. Benefiting from the crack spreads.

A lot like CVE-T, being integrated and owning Petro Canada, they don’t have the same exposure to the price differential that CNQ-T would. The Pipeline is still a factor. Thinks it will underperform CNQ-T if the differential gets fixed.

(Top Pick Jan 2/12, Up 1.22%) Model $63.17, 84% positive differential. Owned for years and fits his definition of value. A core position for his portfolio.

If Keystone is approved, what effect could this have on this company? Would be positive for a lot of companies. There is a story around that capacity of the shipments to the refineries in the gulf are short by 1 million barrels a day. If heavy crude comes down from Canada, there is an opportunity to replace some of the Mexican and Venezuelan heavy oil. There is potential demand for 3-3.5 million barrels a day. There is also some demand coming for shipping oil from the West to the East, which will play well for this company. If he were going back into the oil sands, he would have a very hard look at this one.

It won’t spike up to 45 any time soon as in the early part of 2011. If you see 35, it is at the upper end of its trading range.

It is not going to take off. He has a muted outlook on oil itself. Because of problems in Canadian resource sector last year it didn’t do well but this year you can look for a better year. Brought more production on line. A good solid return but it won’t take off.

(A Top Pick Feb 13/12. Up 1.51%.) Sold his holdings in November but has gotten back in. His view on the Western Canadian select differential from WTI has blown out and this is now an enormous discount of about 45%. He sees the differential closing which will be a huge benefit to this company.

Thinks they will be increasing their 1.6% dividend in the next couple of months by about 50%. Would generate about $2 billion of free cash flow this year while growing production by 10%. Cheapest integrated name globally trading at about 5.5X cash flow with a 30 year reserve life. Protected from 2013 heavy oil differentials.

Looking interesting. Seasonal from end of January to May. SU benefits from this. You are starting to see initial signs of outperformance. It looks like one you want to stick with until end of May.

Oil, seasonably, is coming into a good phase right now. Chart is showing that we are starting to get near some near-term upside.

(A Top Pick Dec 19/11. Up 18.5%.) Stock would be doing a lot better if people were sure it could get its product to market. Still likes and is still buying.

This has always been sort of his 2^nd favourite to Canadian Natural Resources (CNQ-T). If you see a reversal by TransCanada Pipe (TRP-T) to oil from natural gas and they get some of the product to Montréal, you could see it move higher.