Money Oil Is Choppy: Should You Buy Suncor Energy Inc.?

04:10  20 may  2017
04:10  20 may  2017 Source:   The Motley Fool

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Oil continues to be a choppy , roller-coaster commodity. The price has slowly risen and then dipped hard before recovering again. However, one thing you will notice is that, for the most part, Suncor Energy Inc . (TSX:SU)(NYSE:SU) is relatively calm.

Suncor Energy Inc . (USA) (NYSE:SU) and Enbridge Inc . (USA) (NYSE:ENB) are two of Canada's top companies. For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy Recommendation on this recent Canadian IPO.

Oil continues to be a choppy, roller-coaster commodity. The price has slowly risen and then dipped hard before recovering again. However, one thing you will notice is that, for the most part, Suncor Energy Inc. (TSX:SU)(NYSE:SU) is relatively calm. It ebbs and flows, but it doesn’t have hard drops or rises like smaller companies do.

  Oil Is Choppy: Should You Buy Suncor Energy Inc.? © Provided by Fool

That’s because of how much scale Suncor has been able to amass over the past few years with low oil prices. Its management team recognized that +$100 oil was not feasible for the long term, so they planned for when oil prices would drop again. And when oil prices did drop, Suncor went on the attack, while other companies were reeling in pain.

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Action to Take: " Buy " Suncor Energy (NYSE: SU) (**). Suncor Energy Inc . is a company that should be a core holding for any long-term global investor who is Wikipedia: Bitumen. Suncor Energy Inc .: Oil Sands 2011 Outlook Summary. Investopedia: Canadian Oil Comapies set to outperform.

My favourite oil stock is Suncor Energy Inc . (TSX:SU)(NYSE:SU) for quite a few reasons. Here’s the reason I think you should buy and forget that you own Suncor : it has an incredibly strong balance sheet and is generating stronger margins on larger production.

Suncor expanded production. It bought Canadian Oil Sands for $6.9 billion, which gave it a massive boost to the Syncrude project. It then bought the 5% stake in the Syncrude project that the Canadian subsidiary of Murphy Oil Corporation owned for $937 million. These two deals boosted its ownership from 12% to 54%. The importance of this deal can’t be overstated –the project is estimated to have production capacity until the end of the century.

But Suncor didn’t stop there. It also expanded its stake in the Fort Hills project, boosting its ownership to 51%. Fort Hills has been a bit of a curse and an expensive project, but the expectation is that production will start by the end of the year — a big win.

In 2015, the company pumped 582,900 barrels of oil per day. At the end of 2016, it reported that it had boosted that to 738,500 barrels of oil per day. Clearly, its expansion in the Syncrude project helped. And by the end of 2017, production should be higher once Fort Hills begins production.

Canada's Suncor prepares oil sands growth as global majors exit

  Canada's Suncor prepares oil sands growth as global majors exit <p>Even as the world's largest energy companies exit Canada's high-cost oil sands the country's top producer Suncor Energy is lining up its next phase of growth in the world's third largest crude reserves.</p>SU

Suncor Energy Inc . (USA) (NYSE:SU) may see more headwinds arise. Should you follow Buffett This has allowed Suncor to stay head-and-shoulders above its peers during the rout in oil prices For only the 5th time in over 14 years, Motley Fool co-founder David Gardner just issued a Buy

Suncor Energy is a pioneer in that it is the second-largest operation exploiting the oil sands in keith shaddick | October 7, 2008. new at this, wondering if i should invest my severence money here. The Mighty Green Back » Blog Archive » A Good Stock To Buy : Suncor Energy Inc . says

Another way Suncor dealt with cratering oil prices was that it focused heavily on reducing its operating costs. When oil is at $100, there’s a lot of wiggle room on costs. But when oil tanks, companies need to be as efficient as possible. And Suncor is. It was spending $28 per barrel of oil pumped back in Q4 2015, which is not all that bad. However, Suncor focused on getting better. By Q4 2016, its cost per barrel pumped had dropped to $24.95. When you’re talking about 738,500 barrels a day, a $3 change is equal to $66,465,000.

Fundamentally, investing in Suncor is a bet on oil. Long term, I believe oil won’t be as necessary because of renewable energy sources and the rise in electric cars. However, it will take time for those sources to reach scale, so if you’re going to buy any oil company, Suncor is the one to buy.

36-Year Old CEO Bets Over $300 Million on 1 Stock

Iain Butler, Lead Adviser of Stock Advisor Canada, recommended this little tech darling to thousands of loyal members last March... and those that followed his advice are up 127.7% (they've already made 2X their money!).

Not to mention this tiny Eastern Ontario company has already been recommended by both Motley Fool co-founders, David and Tom Gardner, because of its amazing similarity to an "early stage" Amazon.

Find out why Tom Gardner was recently on BNN's Money Talk raving about this company, and how you can read all about it inside Stock Advisor Canada.Click here to unlock all the details about his Canadian rule breaker!

Fool contributor Jacob Donnelly has no position in any stocks mentioned.

Former federal minister rebels in Manitoba .
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