S&P Upgrade from hold to buyHighlights
ä The STARS recommendation for SU has recently
been changed to 4 (buy) from 3 (hold) and the
12-month target price has recently been
changed to US $35.00 from US $25.00. The Highlights
section of this Stock Report will be updated accordingly.
Investment Rationale/Risk
ä The Investment Rationale/Risk section of this
Stock Report will be updated shortly. For the
latest News story on SU from MarketScope,
see below.
ä 03/23/09 12:23 pm ET ... UPDATE -S&P UPGRADES
OPINION ON SHARES OF SUNCOR
ENERGY TO BUY FROM HOLD (SU 25.44****):
We view positively the proposed merger between
SU and PetroCanada (PCZ US$30.44,
NR), which we estimate is attractively valued
near US$14B. We see enhanced growth potential
for SU. We note our belief that the sharp
drop in oil prices was a catalyst for the deal. On
our revised price forecasts, for SU alone, we
are raising our '09 EPS estimate by $0.25 to
$1.46, but trim '10's by $0.17 to $3.37. Based on a
blend of our DCF and relative market valuations,
we are raising our target price by $10 to $35, an
expected enterprise value of 10X our '09 EBIT-
DA estimate. /T.Vital
Qualitative Risk Assessment
LOW MEDIUM HIGH
Our risk assessment reflects the company's
business focus on the expansion and exploitation
of its significant oil sands reserves while
maintaining a small measure of product and
geographic diversification through its natural gas
and exploration and production activities.
Quantitative Evaluations
S&P Quality Ranking A+
D C BB
B+ AA
A+
Relative Strength Rank STRONG
87
LOWEST = 1 HIGHEST = 99
determined.
Corporate Information
S&P Analyst Research Notes and other Company News
March 23, 2009
12:23 pm ET ... UPDATE -S&P UPGRADES OPINION ON SHARES OF SUNCOR
ENERGY TO BUY FROM HOLD (SU 25.44****): We view positively the proposed
merger between SU and PetroCanada (PCZ US$30.44, NR), which we estimate is
attractively valued near US$14B. We see enhanced growth potential for SU. We
note our belief that the sharp drop in oil prices was a catalyst for the deal. On our
revised price forecasts, for SU alone, we are raising our '09 EPS estimate by $0.25
to $1.46, but trim '10's by $0.17 to $3.37. Based on a blend of our DCF and relative
market valuations, we are raising our target price by $10 to US $35, an expected
enterprise value of 10X our '09 EBITDA estimate. /T.Vital
March 23, 2009
10:37 am ET ... S&P KEEPS HOLD RECOMMENDATION ON SHARES OF SUNCOR
ENERGY INC (SU 25.98***): SU agrees to merge with Petro-Canada (PCZ
US$30.43, NR). Closure is slated for Q3, subject to necessary approvals. We view
the deal favorably, and note that it aims to trim annual costs by C$300M and
capex by C$1B, which should provide stronger base in which to carry out higher
cost mining operations in Alberta. The merged group expects to retain the name
'Suncor' and should become one of Canada's largest oils, with proved/probable
reserves of 7.5 Bboe. SU shareholders will hold about 60% of the new entity, PCZ
holders about 40%. We will provide details after conference call. /T.Vital
January 20, 2009