Suncor Energy Inc. (SU) is an incorporated Canadian energy firm. The firm is employed in oil sands development and updating, traditional and offshore gas and oil generation, petroleum refining, and marketing of natural gas and crude oil. The business has some assets in Libya, and Syria and operates mainly in North America.
Suncor Energy (SUNCOR Stock) is trading at an important reduction on both absolute and comparative terms. According to my investigation, a reasonable cost is in the range of $42-$44/share. The goal cost was arrived at using DCF NAV for Suncor’s oil sands and upstream company, 4.2X EV/EBITDA for its refining and advertising, and 13X EV/EBITDA for renewable energy company. While the Canadian gas and oil business is fighting with all time low cost and high cost differentials Suncor is comparatively well placed to weather these concerns than its peers as a result of the following:
- Suncor is petroleum loaded: The creation of Suncor comprises 88% crude oil and its proven and probable reserves comprise 95% crude oil. This can be amongst the greatest on the market. The truth is, Suncor is anticipated to divest more as a result of prevailing low costs.
- Not hostage light differential: Suncor’s oil sands incorporated upgraders (Capacity: 355,000 barrels per day) enable it to capture heavy/light differential. Into SCO, which marketed at a premium, Suncor updated 92% of low-worth oil sands bitumen in FY 2011.
- Growing interest in SCO due to reducing gas demand: Growing diesel consumption and growing diesel demand to keep up SCO premium will grow demand as refining a barrel of SCO outputs more diesel. This tendency would also keep the premium that the SCO of Suncor gets vis-a-vis WTI.