Suncor Energy Inc.SU

Morningstar Rating

Stock Research and Analysis

by Allen Good

After the merger with Petro-Canada, the new Suncor is much more akin to a fully integrated oil and gas company. However, we believe divestures will bring the company back closer to the oil sands pure play that existed before the merger.

The contrast in Suncor's and Petro-Canada's upstream assets was one of the driving forces behind the merger. Read more

Bulls Say

The addition of Petro-Canada's lower-cost conventional oil assets provides cash flow during down commodity cycles.

Suncor has access to a multibillion-barrel resources base that requires no exploration risk.

Suncor's integrated approach creates value through the upgrading and refining of raw bitumen into more-valuable end products.

Plans are to focus on oil sands production by divesting underperforming and risky production assets.

Geopolitical uncertainty elsewhere in the world may make the oil sands a more important and economically attractive source of oil. Read more

Bears Say

Renewed development in the Canadian oil sands could spark another bout of cost inflation and budget overruns.

The provincial government's new royalty regime will increasingly bite into Suncor's profitability at higher oil prices.

Suncor is more vulnerable to oil price weakness than conventional producers given the high fixed costs of oil sands production.

Oil sands producers are coming under increasing pressure over environmental concerns. Future regulatory changes to curb carbon emissions could hurt profits. Read more

Strategy

Suncor plans to utilize cash flow from its low-cost conventional oil assets to fund development of its oil sands properties. The company will likely divest natural gas assets acquired in the merger with Petro-Canada. Read more

Management

The newly merged company is led by Suncor's CEO prior to the merger, Rick George. George has been Suncor's CEO since 1991. The new management team is a mixture of Suncor and Petro-Canada senior executives. With George remaining CEO, Suncor's culture will likely dominate the merged companies. Read more

Profile

In August 2009, oil sands pioneer Suncor Energy merged with Petro-Canada to form an integrated oil and gas company. The newly formed company will primarily focus on oil sands production and development while retaining some conventional oil and natural gas assets. Read more

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