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Gold/Mining/Energy : Big Dog's Boom Boom Room

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To: Dennis Roth who wrote (112243)	10/27/2008 7:18:53 PM
From: Dennis Roth	1 Recommendation of 206181

Suncor Energy (SU.TO) Voyageur - Looks Fundable at US$50.00 WTI; Lowering Estimates B. Dutton · Responding to global economic conditions, Suncor's Board of Directors has approved a C$6 billion capex budget for 2009, C$3-$4 billion lower than previously contemplated. The company's aim is to live within its means during the current period of market uncertainty. We believe this level of capex will provide Suncor with increased financial flexibility which should reduce execution and financial risk, while still providing for growth. The plan maintains spending and construction timelines for Firebag stages 3 &4, but scales back the timing of the planned 200,000 b/d Voyageur upgrader by about 1 year. · Suncor's recent share price performance suggests investors are worried about the company's ability to fund its C$20.6 billion Voyageur oil sands expansion project. Our analysis indicates this concern is potentially overdone, as we estimate that Suncor could continue to fully fund the project with current unused credit facilities and internally generated cash flow even if WTI averages US$50.00/bbl during the entire 2009-2012 timeframe. · We have revised our 2008 and 2009 EPS/CFPS forecasts to reflect Suncor's updated capex guidance as well as operational updates for Q308 and the Credit Suisse revised NYMEX US$7.25/MMBtu gas price for Q408 (was US$8.00/MMBtu). Thus our 2008 estimates go from C$3.65/C$6.25 to C$3.55/C$6.13 while 2009 go from C$4.28/C$6.77 to C$4.16/C$6.55. · Suncor's shares now look to be discounting a flat US$60 WTI oil price. Given our thesis that oil demand will return in the medium term and intersect with falling non-OPEC supply, we believe there is significant upside to the current share price which is amplified by the company's high leverage to crude prices and sensitivity to discount rates. Outperform CP: C$26.20 TP: C$50 CAP: C$12.1b

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