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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: pppp who wrote (112177)10/20/2008 11:45:48 AM
From: Dennis Roth  Read Replies (1) of 206181
 
Suncor Energy (SU.TO) - Well Positioned for Stormy Weather, Lowering Estimates and Target Price to C$50 (from C$78) B. Dutton

· Credit Suisse has reduced its near and medium term WTI price forecast to reflect a lower demand outlook. Global oil demand growth is now forecast at just over 400 KBD (was over 600 KBD) for 2009. In conjunction, we have revised our near-term EPS/CFPS estimates for Suncor. Our 2008E estimates go from C$4.02/C$6.48 to C$3.65/C$6.25 and 2009E go from C$5.88/C$8.32 to C$4.28/C$6.77.

· Suncor's recent share price performance suggests investors are keenly concerned over the company's funding capability for its C$20.6 billion Voyageur oil sands expansion project. Our analysis suggests these concerns are overdone, even if the WTI oil price were to average US$75 during the 2009-2012 timeframe. We forecast Suncor would need to draw upon existing cash and only ~C$0.9 billion of the available C$3.4 billion credit facility during the 2009-2010 timeframe in order to fund the Voyageur expansion at Oil Sands at our current forecast rate of spend. Alternatively, we believe Suncor would only require C$325 million of new short-term borrowing capacity over and above existing cash and credit facilities in 2011E, should WTI average US$75 in the 2009-2010 timeframe. We doubt such additional credit would be difficult to obtain as Suncor could generate ~C$2.9 billion of FCF in 2012E with WTI still at US$75.

· Weighing the risks of the current macro economic environment and the company's prospects, we have lowered our EV target multiple from 10.0X to 8.5X 2009E EBIDAX of C$6,410 million to derive our 12-month target price of C$50 (was C$78). At the current share price of C$26.22, the stock seems to be discounting flat US$60 WTI at a 10% discount rate or US$65 WTI at 12%.

Outperform CP: C$26.22 TP: C$50 CAP: C$12.1b
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