Suncor Energy - $SU - Earnings Analysis: Record upstream production and refining throughput demonstrate operational excellence.

Business Model

Suncor Energy is an integrated energy company with operations spanning oil sands development, production, and upgrading; offshore oil production; petroleum refining; and retail and wholesale distribution networks.

Revenue Sources

• Revenues are generated from the sale of upgraded synthetic crude oil, non-upgraded bitumen, refined petroleum products, and byproducts.

Revenue Distribution by Channel

• Refined product sales are achieved through approximately 1,585 Petro-Canada retail sites and approximately 325 wholesale cardlock locations.

Income Statement Analysis

• Net earnings decreased due to lower refined product realizations, increased royalties due to higher heavy crude price realizations, and increased depreciation, depletion and amortization (DD&A) expense, partially offset by higher sales volumes.
• Adjusted funds from operations decreased primarily influenced by the same factors impacting adjusted operating earnings, as well as a larger tax benefit relating to the acquisition of TotalEnergies EP Canada Ltd. in the prior year quarter compared to the current quarter.

Balance Sheet Analysis

• The company achieved its $8 billion net debt target in Q3 2024 and is now returning 100% of excess funds to shareholders.

Cash Flow Analysis

• Cash flow provided by operating activities increased due to strong operational performance.

Capital Allocation

Suncor is committed to returning 100% of excess funds to shareholders via share repurchases, with a commitment to a reliable, growing dividend targeting 3-5% annual growth. The company is also focused on ensuring financial resilience, targeting 1.0x Net Debt to AFFO at US$50 WTI.

Management Commentary

Suncor’s fourth quarter was about finishing an exceptional year strong and building momentum for 2025.

Performance records were set across the company in both the quarter and for the full year, including records in upstream production, refining throughput, refined product sales and asset utilization.

Total operating, selling and general expenses down more than $300 million versus 2023 despite significantly higher volumes.

Overall Sentiment: Positive, with a focus on delivering high-performance results and creating superior shareholder value.

Recommendation

Rating: Buy

Reason for Rating: Suncor's strong operational performance, commitment to shareholder returns, and disciplined capital allocation make it an attractive investment.

Disclaimer: This report is for informational purposes only and not investment advice. The analysis is based on limited information and subject to change. Investing in securities involves risks, including potential loss of principal. Past performance doesn't guarantee future results. Always conduct your own research, understand the risks, and consult a financial professional before making investment decisions.

Generated on: 2/8/2025, 1:08:19 PM