SUNCOR ENERGY INC. $35 - Toronto symbol SU

SUNCOR ENERGY INC. $35 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.6 billion; Market cap: $56.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.3%; TSINetwork Rating: Average; www.suncor.com) became Canada’s largest integrated oil company in 2009, when it merged with Petro-Canada. It gets 60% of its production from its oil sands projects in Alberta; the remaining 40% is conventional oil and natural gas. Suncor also operates four refineries and 1,500 gas stations under the Petro-Canada banner.

Thanks to a 27.5% jump in its average realized oil price, Suncor’s earnings rose 12.4% in 2011, to $4.3 billion from $3.8 billion in 2010.

Earnings per share rose 9.9%, to $2.67 from $2.43, on more shares outstanding. If you exclude unusual items, such as gains and losses on asset sales, earnings per share would have jumped 115.0%, to $3.59 from $1.67. Cash flow per share rose 46.0%, to $6.16 from $4.22.

Suncor’s revenue rose 22.0% in 2011, to $39.8 billion from $32.6 billion, on higher oil prices and a 6.6% jump in oil sands production, to 339,300 barrels a day from 318,200 in 2010.

However, the company’s overall daily output fell 11.2%, to 546,000 barrels from 615,100 barrels. That’s largely because the civil war in Libya forced Suncor to shut down its operations in that country. The closure cut the company’s conventional oil and natural gas production by 30.4%.

Suncor and its joint venture partner have now restarted production at three of the five oil fields they operate in Libya. These fields are now producing about 30,000 barrels a day. Suncor hopes its Libyan operations will return to full production sometime in 2012.

The stock trades at 10.7 times the $3.26 a share that Suncor will likely earn in 2012. It also trades at 5.1 times the company’s likely 2012 cash flow of $6.90 a share.

Suncor is a buy.

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