BMO Stock Pitch Nov 12 2011

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Pitching Suncor Energy at Rotman Stock Pitch Competition 2011

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BMO Stock Pitch Nov 12 2011

  1. 1. Stock Pitch Competition 2011 Pramod Jindal Beam UkarapongNovember 12 2011
  2. 2. OverviewSuncor Energy Inc. (NYSE:SU, TSX:SU)• Integrated energy company• Over 40 years of Oil Sands experience• Canada & International: crude oil and natural gas• Canada: crude oil, petroleum, and petrochemical products• Business units: • Oil Sands • Natural Gas • International and Offshore • Refining and Marketing
  3. 3. Key Statistics• Price $31.44• 52 week low $23.97• 52 week high $47.27• Average daily volume 6.07M• Shares outstanding 1.57B• Market cap $49.50B As of November 9, 2011
  4. 4. Long Thesis: Suncor Energy Inc.• Undervalued; Price target: $43• Strong correlation with SPTSEN Index – SPTSEN expected to reach 347.6355 by Q2’ 2012• Strategic acquisitions – Production level expected to reach 1 mboe/d by 2020• Opportunities – World population (~6 billion) expected to be ~7.6 billion by 2020 – Libyan stability• Management Team – Visionary: foresee hidden fortune (first to exploit Oil Sands) • Continued expansion of renewable energy projects • Target Oil Sands cash costs ~$30 range – Exceed production target despit5e maintenance/shut down
  5. 5. Industry Outlook• Revenue determined by Brent Oil Price (expected to increase to $122)Source: Bloomberg
  6. 6. SU Stock Performance• Strongly correlated with SPTSEN IndexSource: Bloomberg
  7. 7. Investment Highlights• Current: – Firebag Stage 3: operational and production continuing to ramp up – Firebag Stage 4: expansion in offing- to be operational by Q1’ 2013 – Terra Nova maintenance due completion – Technology and innovation • Tailings Reduction Operations (TROTM)• Recent: – Partnership with Total E&P • Fort Hills and Joslyn oil sands • Restart Voyageur Upgrader (200,000 bpd by 2016)• Past(2009): – Petro Canada merger • Imminent re-entry in Libya
  8. 8. Financial Highlights• Focus on debt reduction Q3 2011 Q3 2010• Declared 11cents dividend, Nov 7 2011 Revenue $1.28 B $1.22 B – Consistent with 10% increase (82₵/share) (78₵/share) announced in May 2011 CFO $2.72 B $1.63 B• 2009: Positive ripples from Petro Canada acquisition – Annual savings of CAD$1.8B• Stability of future cash flow – “American consumption of oil and gas expected to increase almost 50% by 2025” (CEO Richard George) – Canadian oil sands production expected to increase at 6% (CAGR) to 3.3m bbl/d by 2025 (Datamonitor)
  9. 9. Comparables P/NAV EV/DACF EV/CFPS 2011 2011E 2012E 2013E 2011E 2012E 2013ECenovus Energy 119% 8.7 7.7 7.3 8.1 7.2 6.8Husky Energy 97% 4.4 4.6 4.5 4.2 4.5 4.6Imperial Oil 97% 9 8.4 7.2 8.8 7.8 6.7Average 97% 7 6.3 6.3 6.6 6 5.6Suncor 75% 5.8 4.7 4.2 5.2 4.5 4.2
  10. 10. Risk Profile• Unexpected downtime and maintenance• International – Syrian sanctions & Libyan uncertainties – European debt crises and slowdown in China• EU’s proposed regulation (The Globe and Mail Nov 3, 2011)• Keystone XL• Environmental issue• Foreign exchange rate exposureSource: Bank of America
  11. 11. Recommendation• Long Suncor• Target price: $43
  12. 12. Q&A

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