SU: Suncor Energy, Inc. Message Board

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Gold/Mining/Energy : SU: Suncor Energy, Inc.

SU 39.47

-0.4%

Nov 4 3:59 PM EST

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From: Dennis Roth	7/27/2007 9:48:11 AM
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Remains preferred oil sands investment - Goldman Sachs - July 27, 2007 What's changed Suncor reported generally strong 2Q 2007 operating and financial results, especially from the refining business. Adjusted EPS of US$0.98 was above our estimate of $0.89 and the First Call consensus estimate of $0.93. Management reiterated its existing guidance of 255 - 265 Mb/d of gross oil sands production for FY 2007, and oil sands cash operating costs of C$23.50 - C$24.50 per barrel. Implications Suncor shares remain our preferred long-term oil sands investment, and there is no change to our view or Buy rating following 2Q results. We view Suncor's significant leverage to long-dated oil prices favorably. As expected, Suncor experienced volatility in production and unit costs in its oil sands business in 2Q 2007 due to turnarounds related to the company's ongoing expansion to 350 Mb/d of capacity. With the balance of this turnaround activity expected to be completed in 3Q 2007, we believe the fourth quarter of this year will be a key period for Suncor to establish where investors should expect its oil sands operating costs to be on a more normalized basis. Suncor believes it can average production volumes of 280 Mb/d in 2008 while achieving cash costs of C$22 per barrel. Perhaps more importantly, 4Q 2007 is also when we expect Suncor to provide budget and timing details on the Voyageur expansion, expected to bring oil sands production capacity to 500-550 Mb/d by 2011-2012. Valuation We see 11% upside for Suncor shares to our $100 12-month target price, based on DCF and cash flow analyses. We continue to rate Suncor Buy, relative to a Neutral coverage view. Key risks Key risk to our target price include commodity price volatility, oil sands cost inflation, and regulatory/government pronouncements.

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