SU: Suncor Energy, Inc. Message Board

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

SU 39.63

-0.5%

Nov 3 9:30 AM EST

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From: Dennis Roth	1/23/2008 8:53:45 AM
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Suncor Energy Inc. (SU): Long term outlook unchanged after another noisy quarter - Goldman Sachs - 01/23/08 What's changed Suncor reported mixed 4Q 2007 results and 2008 guidance. Adjusted EPS of US$1.31 was below our $1.48 estimate, while operating cash flow of $1.1 bn was slightly ahead of our $1.0 bn estimate. Net production of 260 MBOE/d was above our estimate of 252 MBOE/d, while oil sands unit costs and realized prices were weaker than expected. Downstream operating income was -$36 mn vs our estimate of +$38 mn. Suncor’s 2008 guidance calls for gross oil sands production of 275-300 Mb/d, reflecting a slower than expected rampup to the 350 Mb/d target rate for the company’s latest expansion. Our 08/09/10 EPS is $6.02/$7.60/$6.69 from $7.08/$7.90/$7.02. Implications Suncor’s relative performance in a generally high oil price environment has been hurt by lower-than-expected production and higher-than-expected costs, which manifested itself again in 2008 guidance. Our long-term bullish outlook on the shares is unchanged, and we view recent weakness as a buying opportunity We believe production will rise to 350 Mb/d by yearend, and Suncor’s cash operating cost guidance of C$25 – C$27 per barrel is in line with our expectations adjusted for a somewhat slower rampup. We believe near-term investor focus will center on Suncor’s announcement of costs for its 2012 Voyageur expansion, which management expects to release in 1Q 2008. We expect Suncor’s cost estimate to be close to the range of current industry “consensus” of C$100,000-C$120,000 per bpd of capacity. Valuation We are lowering our 12 month DCF based target price for Suncor shares from US$130 to $125 due to a lower assumed value of the R&M business. We see 46% upside from current levels versus 34% for large-cap E&Ps. We continue to rate Suncor Buy relative to an Attractive coverage view. Key risks Commodity price volatility, cost inflation, and tax/royalty changes.

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