- Suncor Energy (SU +0.1%) is upgraded to Buy from Neutral at Citi, which sees 7%/year production growth during 2015-20 generating an average free cash flow yield of ~8% vs. a yield forecast of ~5.6% for global oil majors.
- The firm notes that SU has enhanced returns on its existing $25B of capital-in-place oil sands assets over the past 18-24 months, and is streamlining its operations to lower sustaining capital spending and operating expenses while producing more from its existing project.
- SU has cut 2014 capex by ~$1B, but the firm estimates further cuts to annual spending of $500M-$1B through 2020 which should generate another 20%-25% in free cash flow, allowing the company to achieve its return on capital employed goal of 15%.
- Citi now has Buy ratings on all four major integrated oil producers in Canada, which also includes Cenovus Energy (NYSE:CVE), Husky Energy (OTCPK:HUSKF) and Imperial Oil (NYSEMKT:IMO).