SUNCOR ENERGY INC. $36 - Toronto symbol SU

SUNCOR ENERGY INC. $36 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $54.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 2.6%; TSINetwork Rating: Average; www. suncor.com) produced 558,100 barrels of oil equivalent (99% oil and 1% natural gas) a day in the three months ended December 31, 2013. That’s up 0.3% from 556,500 barrels a year earlier. Oil sands production rose 17.9%, to a record 446,500 barrels a day, because Suncor started up a new phase of its Firebag project. That helped offset lower conventional output following the company’s recent sale of a big part of its Western Canadian gas properties. The higher production helped push up Suncor’s revenue by 7.4%, to $10.2 billion from $9.5 billion. However, its average realized price for oil sands bitumen fell 5.2%, and a lack of pipeline capacity is forcing the company to ship more crude by rail. As a result, its earnings fell 1.5%, to $973 million from $988 million. Due to fewer shares outstanding, per-share earnings crept up to $0.66 from $0.65. Gains on oil-trading contracts increased the company’s cash flow per share by 8.2%, to $1.58 from $1.46. Suncor is now shipping more of its crude to refineries on the U.S. Gulf Coast, which should boost its selling prices in 2014. In addition, its Montreal refinery is now using cheaper oil from the U.S., which will expand its profit margins. The company also raised its dividend by 15.0%. The new annual rate of $0.92 yields 2.6%. Suncor trades at just 10.1 times its likely 2014 earnings of $3.55 a share, and 5.1 times its projected cash flow of $7.00 a share. Suncor is a buy.

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