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Suncor Energy Poised for Growth on Impressive Asset Base

We issued an updated research report on Canada's biggest energy firm and the largest oil sands outfit Suncor Energy Inc.SU on Oct 9, 2015.

The integrated energy major has performed well on the earnings front in the past four quarters and has an average positive surprise of 13.2%. The company also has stakes in a number of promising projects that should drive growth. These positives are reflected in Suncor Energy's current Zacks Rank #2 (Buy), which implies that the stock is likely to outperform the broader market over the next one to three months.

Suncor Energy's asset base includes substantial conventional reserves and production at offshore Eastern Canada and the North Sea. These assets generate strong margins and should provide free cash flow to fund future oil sands expansions. Moreover, following the Petro-Canada acquisition, Suncor has become one of the largest oil sands owners in the world. The company has gained new oil sands properties to supplement its existing operations. These assets promise years of production growth.

Last month, the company entered into an agreement with the Canadian arm of TOTAL S.A. TOT to buy an additional 10% stake in the Fort Hills oil sands project from the latter. This deal bodes well for Suncor Energy as it is expected to lower the firm's per barrel cost as well as improve returns from the project.

Suncor Energy was also recently in news because of its hostile bid for Canadian Oil Sands Limited. Though the latter snubbed Suncor's plans with a defense strategy, Suncor is confident of striking a deal. The deal, if successful, will increase Suncor Energy's stake in the Syncrude project to about 49%, thereby making it the largest stakeholder. This should be another growth driver for the firm. The Syncrude project, a joint venture between seven companies, is the leading producer of synthetic crude oil from the oil sands.

The company has not been shy of divesting assets either, particularly those that do not fit its long-term growth plan. The proceeds from these sales is expected be used for more profitable projects.

Other Stocks to Consider

Other favorably-placed stocks from the energy sector are NuStar Energy L.P. NS and Sprague Resources LP SRLP . Both these stocks sport a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NUSTAR ENERGY (NS): Free Stock Analysis Report

TOTAL FINA SA (TOT): Free Stock Analysis Report

SUNCOR ENERGY (SU): Free Stock Analysis Report

SPRAGUE RESRCS (SRLP): Free Stock Analysis Report

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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.


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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