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“Suncor shares have underperformed peers and crude oil prices in 2020 following the 55 per cent cut to its dividend and third quarter operating challenges in its oilsands business,” BMO Capital Markets analyst Randy Ollenberger said in an Oct. 1 research note.
Ollenberger said he believed the shares offer “under appreciated value” and could recover as the company’s refining business improves.
The company has integrated operations with refineries in Alberta, Ontario, Quebec and Colorado.
Refineries have been hit hard during the coronavirus outbreak as commuters have stayed home and air travel has been severely curtailed since March.
In addition, Suncor is one of the higher cost oilsands mining companies and the cuts announced Friday should help bring the company’s operating costs per barrel into line, said New York-based Eight Capital analyst Phil Skolnick.
“How permanent are those cuts? If oil were to come back to $55 or $50, and we’re out of the pandemic, then how much of those come back?” Skolnick said, adding that the market and investors are looking for permanent cost reductions.
He said it’s not clear yet how a 15 per cent staff reduction would drive down break-even operating costs.
RBC Capital Market analysts expectSuncor to re-establish momentum onseveral fronts in the quarters ahead, and maintained its outperformrecommendation on the company stock with a one-year price target of $25 pershare.
“Suncor has no plans to leap into renewables on a grandscale,’ RBC analyst Greg Pardy said in a note, after hosting a virtual roadshow with Suncor CEO Little for European investors. “Rather, the company is likely to emerge as a niche player, targeting ESG (environmental, social and governance) investments, which generate at least mid-teen returns. These are likelyto include biofuels, hydrogen, C02sequestration, and select wind projects.”
