Canada’s biggest energy firm and the largest oil sands outfit Suncor Energy Inc. (SU) unveiled its 2012 guidance. In particular, the company outlined plans to increase oil sands production 12% by next year, while boosting capital expenditures by about C$800 million.
The Calgary, Alberta-based energy explorer guided towards a total production of 530,000–580,000 barrels of oil equivalent per day (BOE/d) for 2012, up from the expected output of 530,000–560,000 BOE/d in 2011.
However, the company mentioned that the production outlook for next year excludes any contribution from Libya, where operations are currently suspended due to continued political and civil unrest. Suncor is eyeing 2012 oil sands volumes to average between 325,000–355,000 BOE/d, up from the current year’s projected range of 300,000–310,000 BOE/d.
The company has pegged its 2012 capital budget at C$7.5 billion, up nearly 12% from the C$6.7 billion it expects to invest by the end of 2011. Of the total, C$3.6 billion will go towards growth projects worldwide, with the major portion (C$2.2 billion) allocated for oil sands businesses.
Suncor, which competes with other Canadian behemoths like EnCana Corp. (ECA), Canadian Natural Resources Ltd. (CNQ), etc., currently retains a Zacks #3 Rank, translating into a short-term Hold rating. We also maintain our long-term Neutral recommendation on the stock.
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.
CDN NTRL RSRCS (CNQ): Free Stock Analysis Report
ENCANA CORP (ECA): Free Stock Analysis Report
SUNCOR ENERGY (SU): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment