Suncor Energy Inc. T.SU

Valuation of SU

[Experienced]

Many posters here talk about how SU is undervalued and how the pros seem to have it wrong.

The question then becomes - are they wrong or not?

Recently we have received real life clue with the purchase of Total's gas stations in Germany and The Netherlands. Couche Tard bought approximately 2200 gas stations for about 4 billion CAD.  When SU had put out feelers for the sale of 1600 PC stations people were talking about 5-10 billion.  SU didn't get any offers near that range and so they kept the gas stations.

Sooo....SU market cap is around 60 billion and if PC is only worth say 3 billion based on the Total sale then that's a lot of valuation that needs to be made up by the refineries and the oil deposits.  When you then look at the price SU paid for Fort Hills from Teck and Total and the associated asset writedowns by SU, it is no wonder that the pros have difficulty in placing a significantly higher valuation for SU.

The other interesting thing about the Total sale to Couche Tard (and don't forget that Total had already exited from the gas station market in Italy) is that in their PR they said they were selling because they were forecasting a decline in gasoline sales and the value in the gas stations was morphing to retail  consumer sales centres which is the strength of a Couche Tard not an energy company.  This forecast by a European energy giant weighs heavily on how The Street values SU like it or not.

And what is Total doing as a business strategy?

Among other things it is focussing more attention to natural gas, LNG and the associated infrastructure and moving away from oil.  

What is SU doing?

Doubling down on oil production.

The reaction by the pros?

The current high FCF is great but we aren't going to pay even normal valuations for it let alone a premium valuation.

[Oldnagger]

The proper way to evaluate any resource based enterprise is by discounted future cash flows at a discount rate that is commensurate with the risk assumed. Anything else is just worthless blathering IMO !!

[Experienced]

I agree that the current valuation is related to discounted FUTURE cashflows.  That is the classical MBA finance way to do it. That said, the question then becomes, how do you measure the future cashflows.  With all due respect my friend, my post is not useless blather as you suggest, it reflects on how the pros are assessing what those future cashflows are.  Clearly, the sale of

[Oldnagger]

I make my own estimates based on life experience and my own assessments of how the future will roll out. Needless to say , for anyone who follows me , I am an eternal optimist who is betting against the endless armies of negativism.  My own opinions , right or wrong have been forged on the anvil of survival. The last time I got a salary check was in 1989. Every company that I invest in is

[integrity11]

I love reading your posts Oldnagger. They are always well thought out and very rational. We of course of course unfortunately have a small team of battery boys who will always do their best to run down any company with oil production and specifically SU. Fortunately the vast majority of posters/readers totally ignore the main Battery Boy, but enjoys posts such as Oldnagger and many others on this

[mrbb]

look like some here was boasting about their MBA pedigree. Glad i didn't waste my life in a MBA unlike some of my eager coworkers.  Yes, it does look good on their resume, and some old school company like to see them from applicants.  Wisdom? LOL.  Elon Musk purposely weed out any applicant with a MBA.  Some of the well know billionaires don't have a MBA, or even

[Oldnagger]

My significant other at the time became the first woman to graduate as an MBA at our University. Not  an insignificant achievement for someone who's undergraduate degree was in the Arts. I learned a lot from her going well beyond the strict confines of case studies. Never sell anyone short , everone has the power to impress and amaze us , even Elon !!

[mrbb]

sorry, MBA doesn't own the NPV calculaton method.  In the meantime I will base my decisions on the evidence presented by people who are ponying up billions of dollars to buy these assets not some theoretical number based on wishful thinking. so you gave your reason why couche-tard bought total's gas station because total energy wants out of gasoline sale business. Then what's

[mrbb]

 Contin'ed Experienced "In the meantime I will base my decisions on the evidence presented by people who are ponying up billions of dollars to buy these assets not some theoretical number based on wishful thinking." So Mr Experienced, you know anyone else ponying up more billions for assets than Larry Fink?  Keep them coming Mr. salesman