Back to top

Analyst Blog

Zacks Equity Research

Suncor: EPS Beats, Volumes Hurt

SU CNQ

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Canada’s biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. (SU - Analyst Report) reported mixed fourth quarter and full year 2011 results, reflecting higher average upstream price realizations, partially offset by operational disturbances at various facilities.   

Earnings per share, excluding certain items, came in at 91 Canadian cents (89 cents US) in the fourth quarter, surpassing the Zacks Consensus Estimate of 88 cents and 52 Canadian cents earned in the prior-year quarter.

For full-year 2011, the company earned C$3.58 ($3.49) per share compared with C$1.67 in the prior year. The reported results also breezed past our earnings projection of $3.40.

In the reported quarter, total revenue of C$10.13 billion ($9.81 billion) escalated 8.5% from the year-ago level but lagged our expectation by 19.2%.

Full-year revenue leaped 22.0% year over year to C$39.70 billion. However, the result lagged our forecast of $42.80 billion.

Quarterly operating earnings of C$1.42 billion were up significantly from C$808 million a year ago, while cash flow from operations went up from C$2.13 billion in the fourth quarter of 2010 to C$2.65 billion in the reported quarter.

Production

Upstream production during the quarter averaged 576,500 barrels of oil equivalent per day (BOE/d), down from the fourth quarter 2010 level of 625,600 BOE/d, mainly on the disposition of non-core assets throughout 2010 and 2011, operational problems at Syncrude and reduced volumes from Libya.

Excluding proportionate production share from the Syncrude joint venture, oil sands volumes were 326,500 barrels per day (Bbl/d), up marginally from 325,900 Bbl/d. The current quarter results were aided by higher bitumen output from Firebag.

Following the Petro-Canada acquisition last year, Suncor holds a 12% stake in the Syncrude oil sands joint venture (located near Suncor's existing oil sands operations in Alberta). Syncrude operations registered a 20.1% year-over-year decline in production to 30,300 Bbl/d in the quarter, due to maintenance activities at a hydrogen unit.

Suncor’s newly formed Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) produced 219,700 BOE/d, as against 261,800 BOE/d in the prior-year quarter. The sale of non-core assets and low production from Libya resulted in the year-over-year decline.

Product Sales

The company’s Refining and Marketing segment generated total refined product sales of 81,600 cubic meters per day, down 8.5% year over year. The drop was due to lower throughput at the Edmonton refinery plus weak demand for heating oil in Eastern Canada arising from warmer weather.

Balance Sheet & Capital Expenditure

As of December 31, 2011, Suncor had cash and cash equivalents of C$3.80 billion and total long-term debt (including current portions) of C$10.0 billion. The debt-to-capitalization ratio was approximately 20.6%. The company incurred C$1.8 billion in capital expenditure in the quarter.

Our Recommendation

We are maintaining a long-term Neutral recommendation on Suncor.

In our opinion, Suncor is one of the best positioned companies in the energy space given its access to abundant resources, rich operating experience and technical know-how. With a large portfolio of growth opportunities, unique asset base and high return potential in the long run, the company has a competitive edge over its peers.

However, we remain worried about Suncor’s high debt level and significant capital expenditure requirements. We also believe that operational and project execution risks will keep the stock under pressure in the coming months.

Another prominent Canadian energy firm Canadian Natural Resources (CNQ - Analyst Report) will report its fourth quarter results on March 8, 2012.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%