My calculator keeps laughing at meEvery time I try to punch in the numbers to figure out how much cash SU should be making at current oil prices, my calculator chuckles and asks me if I would like to buy some land in the Florida Everglades.
With WCS at US$68 per barrel: the math works like this:
$68 - $40 (b/e) = US$28/b x 250,000 bpd x 1.25 (exchange rate) x 360 days = Cdn$ 3 billion
With WTI at UUS$82 the math works like this:
$82 - $40 = US$42/b x 500,000 bpd x 1.25 x 360 = Cdn $9 billion
I don't know enough about the refining and marketing end of things to speak intelligently, so I will just plug in the numbers presented in the Q3 report and multiply by 4 to get Cdn $4 billion
When I look at a number like $16 billion and divide it by 1.45 billion shares, my calculator says $11 per share.
Surely my calculator is just playing games with me because how can a stock trade at 3.2x free cash flow.
If the company quit playing accounting games to minimize taxes (like all companies do), you would need to reduce the the $16 billion down to $12 billion after tax = $8 per share.
Surely, SU can't be trading at 4.4x real earnings as that would evaluate the company in the range of a small private company with a reasonable (5 year) history of earnings.
If Goldman Sachs is correct that commodities are only at the very beginning of a 10 year supercycle and that oil is heading for US$90 per barrel, perhaps SU shareholders might be ok.