Pitching Suncor Energy at Rotman Stock Pitch Competition 2011

1. Stock Pitch Competition 2011
Pramod Jindal
Beam Ukarapong
November 12 2011

2. Overview
Suncor Energy Inc. (NYSE:SU, TSX:SU)
• Integrated energy company
• Over 40 years of Oil Sands experience
• Canada & International: crude oil and natural gas
• Canada: crude oil, petroleum, and petrochemical products
• Business units:
• Oil Sands
• Natural Gas
• International and Offshore
• Refining and Marketing

3. Key Statistics
• Price $31.44
• 52 week low $23.97
• 52 week high $47.27
• Average daily volume 6.07M
• Shares outstanding 1.57B
• Market cap $49.50B
As of November 9, 2011

4. Long Thesis: Suncor Energy Inc.
• Undervalued; Price target: $43
• Strong correlation with SPTSEN Index
– SPTSEN expected to reach 347.6355 by Q2’ 2012
• Strategic acquisitions
– Production level expected to reach 1 mboe/d by 2020
• Opportunities
– World population (~6 billion) expected to be ~7.6 billion by 2020
– Libyan stability
• Management Team
– Visionary: foresee hidden fortune (first to exploit Oil Sands)
• Continued expansion of renewable energy projects
• Target Oil Sands cash costs ~$30 range
– Exceed production target despit5e maintenance/shut down

5. Industry Outlook
• Revenue determined by Brent Oil Price (expected to increase to $122)
Source: Bloomberg

6. SU Stock Performance
• Strongly correlated with SPTSEN Index
Source: Bloomberg

7. Investment Highlights
• Current:
– Firebag Stage 3: operational and production continuing to ramp up
– Firebag Stage 4: expansion in offing- to be operational by Q1’ 2013
– Terra Nova maintenance due completion
– Technology and innovation
• Tailings Reduction Operations (TROTM)
• Recent:
– Partnership with Total E&P
• Fort Hills and Joslyn oil sands
• Restart Voyageur Upgrader (200,000 bpd by 2016)
• Past(2009):
– Petro Canada merger
• Imminent re-entry in Libya

8. Financial Highlights
• Focus on debt reduction
Q3 2011 Q3 2010
• Declared 11cents dividend, Nov 7 2011
Revenue $1.28 B $1.22 B
– Consistent with 10% increase (82₵/share) (78₵/share)
announced in May 2011
CFO $2.72 B $1.63 B
• 2009: Positive ripples from
Petro Canada acquisition
– Annual savings of CAD$1.8B
• Stability of future cash flow
– “American consumption of oil and gas expected to increase almost 50%
by 2025” (CEO Richard George)
– Canadian oil sands production expected to increase at 6% (CAGR) to
3.3m bbl/d by 2025 (Datamonitor)

9. Comparables
P/NAV EV/DACF EV/CFPS
2011 2011E 2012E 2013E 2011E 2012E 2013E
Cenovus Energy 119% 8.7 7.7 7.3 8.1 7.2 6.8
Husky Energy 97% 4.4 4.6 4.5 4.2 4.5 4.6
Imperial Oil 97% 9 8.4 7.2 8.8 7.8 6.7
Average 97% 7 6.3 6.3 6.6 6 5.6
Suncor 75% 5.8 4.7 4.2 5.2 4.5 4.2

10. Risk Profile
• Unexpected downtime and maintenance
• International
– Syrian sanctions & Libyan uncertainties
– European debt crises and slowdown in China
• EU’s proposed regulation (The Globe and Mail Nov 3, 2011)
• Keystone XL
• Environmental issue
• Foreign exchange rate exposure
Source: Bank of America

11. Recommendation
• Long Suncor
• Target price: $43

12. Q&A