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Suncor's Output Affected by Flood

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Canada’s biggest energy firm Suncor Energy Inc. (SU - Free Report) has trimmed production temporarily from its oil sands operation in Fort McMurray, Alberta, which has been massively affected by floods.

The natural calamity has forced Canadian pipeline operator, Enbridge Inc. (ENB - Free Report) to shut two lines of the Enbridge pipeline system in the Fort McMurray region as a preventive measure. Consequently, Suncor had to decrease output as it is not possible for the company to carry crude oil away from the region.

In order to lessen the impact of decreased production, Suncor is now operating its existing storage capacity and oil sands pipeline. Suncor added that it is working with Enbridge in order to bring the Enbridge pipeline system back to operation. However, Suncor believes that this shutdown will not hamper it to achieve the guidance of annual production.

Calgary, Alberta-based Suncor is Canada’s premier integrated energy company. Suncor’s business can be divided into four segments: Oil Sands, Exploration and Production, Refining and Marketing, and Corporate, Energy Trading and Eliminations.

Suncor has significant oil sands and conventional production platform, huge long-lived oil-sands reserves and an impressive downstream portfolio. The company’s asset base includes substantial conventional reserves and production at offshore Eastern Canada and North Sea, which generate strong margins and should provide free cash flow to fund future oil sands expansion.

However, in our view, Suncor’s proven deep oil sands technology is still vulnerable to potential implementation delays.

Suncor currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.   

Meanwhile, one can look at InterOil Corporation and Ferrellgas Partners LP (FGP - Free Report) as good buying options. The energy firms – sporting a Zacks Rank #1 (Strong Buy) – have solid secular growth stories with the potential to rise significantly from the current levels.

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