Here's Why Suncor Should Move Higher
One such company is Suncor Energy. The company has been cutting-costs efficiently and its progress is evident in its latest quarterly report. Suncor Energy shared Q3 EPS of $0.28, $0.10 better than the consensus estimate of $0.18.
Free Cash Flow
Suncor Energy delivered robust operational and financial results successively in the Q3FY15.
Suncor also delivered record low-cost in-situ production. The company not only has various significant achievements in this quarter, but also it has already completed its entire objective for 2015. Over the prior year, oil prices are down roughly 60%. As a result, many oil companies are simply trying to stay afloat. However, Suncor comes in the list of top class oil companies that are thriving in the current situation as they are generating free cash flow while managing to improve their production.
Recently, oil prices have dropped to less than $42 per barrel. In spite of weak oil market, Suncor’s refineries profited from frail crude prices and produced C$5.5 billion in cash flow. The company has still accomplished to generate C$875 million in free cash flow, excluding C$2 billion and C$2.7 billion for maintenance and to fund future growth respectively.
While most of the oil companies are trying to save themselves from drowning in the sea of weak oil price market, Suncor is producing so much free cash flow that it actually increased its dividend.
The two reasons that accounts for the company’s strong results are very clear. First, Suncor’s integrated business model that actually grant a boost to cash flow, including its marketing and refining segment thrusting in 42% of its cash flow last quarter, which is 20% more as compared to last year’s same quarter.
Secondly, the company has reduced its costs to its bottom level this year, comprising its oil sands operating costs falling to levels not perceived from a long time. These all factors together put Suncor in a leading category.
Given Suncor’s robust performance amid weak crude oil environment, I am convinced that that company is well positioned to benefit from an increase in prices. Although oil prices will not reach last-year’s high anytime soon, Suncor shares will move higher even if oil prices touch $60 per barrel. Hence, I think investors should add Suncor to their portfolio to benefit from an expected recovery from crude oil.
Published on Dec 1, 2015By Vinay Singh