Analyst Actions: Credit Suisse Lowers Canadian Oil Sands Estimates, Target Price

Imperial Warns Growth Plans Will Be Delayed. "With reliability of current production remaining an ongoing issue at Syncrude, and with a multi-year mine train maintenance program having only just begun, Imperial Oil (25% owner) has stated it is of the view that current expansion plans will be put on hold until at least 2020. Given that Imperial manages Syncrude's operations, on the behalf of all the partners, we believe the growth plans will now be delayed. Current plans are to increase SCO production to ~400 kb/d versus current design capacity of 350 kb/d, plus an additional 150 kb/d of bitumen."

Q411 Outlook Cut on Unplanned Maintenance. "On November 15th, COS announced that due to additional work scope to complete previously noted maintenance on a hydrogen unit, 2011 production was now expected to be 105-107 mmbbls (vs prior 107-111 guidance). Following a second press release of another upgrader outage on November 22nd, we have lowered both our 2011 Syncrude production forecast from 109 to 105 mmbbls (i.e., 23 mmbbls or 250 kb/d for Q411) and our operating EPS forecasts from C$2.34 to C$2.20 for 2011, including from C$0.46 to C$0.32 for Q411."

Lower 2012 and 2013 Outlooks. "Given ongoing reliability issues, we have lowered our Syncrude production forecast from 325 to 305 kb/d for 2012 and from 350 to 315 kb/d for 2013. Thus we have reduced our operating EPS forecasts from C$2.40 to C$2.21 for 2012 and from C$4.02 to C$3.25 for 2013. Our 2011 EPS estimate is also lowered to C$2.20 from C$2.34. While 2012 guidance will be announced in early December, we have also increased our capex outlook from C$1.1 to C$1.3 billion for 2012."

Target Price Reduced. "Our revised C$28.00 target (was C$30.00) remains based on 7.5x 2012E EBIDAX of C$1,865 million and is set at a discount to our C$30.00 NAVPS (was C$32.00). Given the uncertainty surrounding 2012 guidance and production reliability we maintain our Neutral rating."

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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