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As a long-term holder of Suncor (NYSE:SU), I believe in buy-and-homework philosophy. Even though I prefer to hold stocks "for a long-pull rise," as J. Paul Getty suggested, I monitor all my holdings for developments that either enhance or weaken my investment thesis.

The most recent quarterly report by Suncor leaves my investment thesis fully intact.

Positive developments:

  • Record oil sands quarterly production of 409,600 barrels per day (bbls/d), including more than 300,000 bbls/d of synthetic crude oil (SCO). This compares well with 342,800 bbls/d in the prior year quarter. Suncor expects to grow production in oil sands to approximately 500,000 bbls/d by the end of 2018, an almost 20% increase from the most recent record rate. Should oil prices remain stable (which, of course, is not a given), oil sands production growth will be the primary driver of profits in this segment of Suncor's operations.
  • A 15% increase to the company's quarterly dividend to $0.23 per common share about nine months after it increased the dividend by 54% in 2013. I was hoping for a larger increase to $0.24 per common share, but I am still happy with a 15% bump, especially since...
  • Since 2011, the company bought back over 7% of its shares, establishing track record of shareholder friendliness. In the fourth quarter of 2013, Suncor repurchased and cancelled $550 million worth of Suncor shares. Suncor's Board of Directors also approved additional share repurchases of up to $1 billion (good for about 2% of Suncor's market cap). This increases the total amount available for repurchase to $1.7 billion. There is more than $5 billion in cash and equivalents remaining on the balance sheet; the company can use these funds to opportunistically repurchase shares. Additionally, I expect the pace of share repurchases to accelerate in the next couple of years as the company grows its free cash flow. Suncor has been ramping up its shareholder remuneration:

(click to enlarge)

  • Several exploration and production (non-oil-sands) projects are expected to come online during 2014-1017. Suncor is directing its efforts towards the Golden Eagle project in the North Sea, the Hebron project, Hibernia and White Rose fields in East Coast Canada (in which it holds significant stakes) and a few others. These are fairly large projects and should contribute noticeably to overall production figures and mitigate the unstable situation in Libya and Syria.
  • Takeaway capacity continues to grow. From the Q4 2013 report:

Following the completion of a rail offloading facility in Montreal in the quarter, Suncor commenced rail shipments to its Montreal refinery, enabling Suncor to take advantage of the price differentials between inland and Brent crudes. Shipments of greater than 30,000 bbls/d are expected by the end of the first quarter of 2014. Subsequent to the quarter, Suncor started shipping heavy crude on the Keystone South pipeline, providing the company with more than 50,000 bbls/d of heavy crude shipping capacity to the U.S. Gulf Coast, a profitable outlet for the growing bitumen production at Firebag.

  • Also regarding takeaway capacity: if Trans Mountain Pipeline expansion is approved, further increase in takeaway capacity will help Suncor's ability to capture the advantageous Brent pricing.

Now for the headwinds:

  • Suncor's exploration and production assets in Libya and Syria are essentially non-operational due to political instability. It seems the situation cannot get much worse, but it is uncertain when it will get better.
  • Lower refinery utilization. This was related to some planned and unplanned maintenance; it is difficult to predict whether this will get better or not.
  • Oil prices remain fairly high, and should they trend lower, Suncor's profitability will suffer. I take a long-term view on this and believe that there is a finite amount of oil in the ground, and an even smaller amount of "easy" oil remaining.
  • While the takeaway capacity remains somewhat tight, oil sands price realizations have been at a hefty discount to WTI:

(click to enlarge)

Conclusion: Despite some temporary headwinds, I think that the long term growth story remains fully intact for Suncor. Growing production, increasing dividend and continued share repurchases create solid downside protection for the stock, with significant upside implied by growing takeaway capacity and potentially shrinking future discounts to WTI.

Disclosure: I am long SU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.