BUS 417: Group Presentation Mahmoud Houshmand Francis Santos Ian Graf

1
BUS 417 Group Presentation Mahmoud Houshmand
Francis Santos Ian Graf
The Canadian Oil and Gas Industry

• November 10, 2004

2
Presentation Overview

• Industry Analysis
• Industry Analysis and Regulation Ian
• Supply and Demand Mahmoud
• Oil Extraction and Refining Explained Francis
• Company Analysis and Recommendations
• Canadian Oil Sands Mahmoud
• Petro-Canada Ian
• Suncor Francis

3
Industry Analysis
4
Industry Analysis Agenda

• Industry Structure
• Products
• Regulation
• Supply and Demand
• Brief Overview of Oil Extraction and Refining

5
Industry Analysis

• Canadian industry produced 77.5 billion in
  revenues in 2003
• Canada is 3rd largest producer of natural gas in
  the world
• 9th largest producer of crude oil
• Canadian upstream sector is largest single
  private investor

6
Industry Analysis

• In 2003, the industry contributed approx. 16
  billion to government revenues
• Crude oil natural gas trade surplus responsible
  for 57 of the countrys 2003 merchandise trade
  balance
• Canada responsible for over 20 of North
  Americas crude oil and natural gas
• However, we only consume 10
• Industrys total 2003 employment impact was
  measured at 500,000

7
Industry Structure

• Industry consists mainly of miners drillers,
  refiners, and retailers
• Many businesses take an integrated approach and
  are involved in all aspects
• Business is done locally and south of the border
  utilize cross-border pipeline to distribute oil
• Countrys largest source of crude oil is the
  Canadian Oil Sands
• American VP Dick Cheney described Canadas oil
  sands as a, pillar of North American energy and
  economic security.

8
Industry Structure

• Mergers acquisitions are frequent
• Recent growth in royalty trusts (unit trusts)
• Highly regulated by Canadian government
• Affected by volatile oil prices, interest rate
  fluctuations, international events

9
Industry Structure

• Largest Canadian Oil Gas Companies (in
  alphabetical order)
• Albian Sands Energy Inc.
• Canadian Natural Resources Ltd.
• Canadian Oil Sands
• EnCana Corporation
• Husky Energy Inc.
• Imperial Oil Resources Ltd.
• Petro-Canada
• Shell Canada Ltd.
• Suncor Energy Inc.
• Syncrude Canada Ltd.

10
Products

• Crude oil
• Refined to create petroleum gas, gasoline,
  kerosene, lubricating oil, industrial fuel,
  residuals
• Natural gas
• Used commercially, residentially, in fuel cells,
  building block for methanol which has many
  industrial purposes
• Ethanol
• Normally made from fermentation process but is
  cheaper when processed from petroleum feedstock
• Green Energy Sources
• Wind energy

11
Regulation

• Four intertwining levels municipal, provincial,
  national, international
• Constitution Act 1982 gives jurisdiction to
  provinces over natural resources
• Natural Energy Board (Fed body) has control over
  movement of oil gas, taxation, and tariffs
• Department of energy collects royalties on behalf
  of the province
• Companies must adhere to applicable provincial
  environmental acts and involve the public in
  process
• Extraction limits
• OSC requires companies to declare their reserve
  levels every 90 days
• Controls to reduce emissions ? Kyoto Accord
• Sept 11th called for increasing security of
  pipelines

12
Crude Oil Supply

• World Crude Oil Production By Region

13
Crude Oil Demand
14
Crude Oil Exports

• Crude oil exports have been growing in North
  America

15
Canadian Crude Oil Supply

• Second largest crude oil reserves after Saudi
  Arabia
• Canadian oil sands contains 175 billion barrels
  of oil reserves
• 420,000 barrels of crude have been approved off
  Canadas east coast

16
Canadian Oil Production Consumption
17
Natural Gas Reserves
18
Natural Gas Supply
19
Natural Gas Demand
20
Refined Products
21
Crude Oil Prices
22
Price of Oil Futures One Year Chart
23
Oil Extraction

• Canadian Oil Sands
• 1. Mining
• Oil that is near the surface can extracted using
  traditional techniques
• 2. SAGD Steam Assisted Gravity Drainage
• Because of the rising prices of natural gas,
  crude producers are moving towards using bitumen
  or high sulphur fuels to generate steam.
• Natural Gas
• Wells are drilled and gas flows under its own
  pressure.

24
Oil Refining

• Steps
• 1. Fractional Distillation
• 2. Conversion
• 3. Recombination
• 4. Treatment

25
Canadian Oil Sands
26
Canadian Oil Sands Agenda

• Company Background
• Core Business
• Business Strategy
• Hedging Strategy
• Financial Statement Analysis
• Stock Price Performance
• Recommendation

27
Background

• Canadian Oil Sands acts as a middleman between
  oil producers and pipeline operators.
• Takes possession of the oil and markets it to
  pipelines
• Generates income from a 35 interest in the
  Syncrude operation in the Alberta Oil Sands.
• Largest pure-play investment opportunity in Oil
  Sands.
• Organized as an Open-Ended Investment Trust.
• Currently has approximately 91.1 million units
  outstanding.
• Traded on TSX (Ticker COS.UN)
• Market Capitalization of approximately 5.8
  Billion
• Distributions in 2003 totaled 2.00 per unit

28
Core Business

• Income trusts are equity investments designed to
  deliver cash flows from operations to
  shareholders in a tax-efficient manner.
• Reduces double taxation of income.
• Core business is marketing oil from its 31 share
  of Syncrude oil.
• Pure-play oil company. Revenues derived solely
  from selling crude oil.

29
Business Strategy

• Expand Syncrude Production Capacity
• Expansion began in 2001.
• Expected to boost current production by 50 to
  approximately 350,000 barrels per day 124,000
  barrels per day net to Canadian Oil Sands Trust.
  based on its interest.
• Product quality will also be enhanced to Syncrude
  Sweet Premium (SSP).
• The total capital budget for the expansion is
  estimated at 7.8 billion, or approximately 2.8
  billion net to the Trust.
• It is expected to be in-service by mid 2006.

30
Corporate Value Drivers

• Increase production capacity from existing
  assets.
• Reduce operating costs of existing assets through
  economies of scale and by upgrading process
  technologies.
• Increase reserves (asset base) by pursuing new
  developments.

31
Reserves

• Very long-life reserves compared to industry
• average.
• Thus, disbursements in income trust are quite
  safe.

32
Factors That Affect Financials

• Ongoing volatility of CDN/US exchange rates
• Ongoing volatility of global and North American
  oil markets
• New introduction of crude oil supply to North
  America
• Ongoing variability in refining retail margins
• Unscheduled maintenance shutdowns
• Oils Sands Alberta Crown Royalties
• Suncor ability to compete for projects
• Extreme cold weather in 4Q

33
Hedging Strategy

• Value of revenues is dependent on
• Price of crude oil
• Exchange rate with USD
• Interest rate on debt
• Crude Oil Hedging
• Lost 82M in revenues in Q3 2004 (10.22 per
  barrel).
• YTD 2004 have incurred a 182M loss.

34
Hedging Strategy (continued)

• Crude Oil Hedging (continued)
• As the funding requirements for expansion
  diminish (and balance sheet becomes stronger due
  to Stage 3 revenues), they intend to reduce crude
  oil hedging
• Foreign Exchange Hedging
• Q3 2004 made 3M in foreign exchange hedging
  (0.39 per barrel).
• Interest Rate Hedging
• Impact cash flows based on amount of floating
  rate debt that is outstanding.

35
Consolidated Balance Sheet
36
Balance Sheet Analysis

• The trust increased its capital assets by 2.5
  billion during 2003 (stage 3 expansion).
• Capital assets are recorded at cost and include
  the costs of acquiring the working interest and
  subsequent additions to property, plant, and
  equipment.
• In February 2003, the trust gained 732 million
  in new equity to finance a significant portion of
  the 10 percent working interest in Syncrude from
  EnCanca. In July 2003, an additional 220
  million was raised.
• The long term debt increased by 810 million.

37
Consolidated Statement of Earnings
38
Income Statement Analysis

• Revenues higher due to increased oil prices.
• Operating expense increased by 200 million
  mainly because of an unplanned coker turnaround
  and expended maintenance work.
• Coker Vessels in which bitumen, the
  molasses-like substance that comprises up to 18
  of oil sand, is cracked into its fractions and
  from which coke is withdrawn to start the process
  of converting bitumen to upgraded crude oil.
• Coker maintenance resulted in a 24 cent increase
  in operating cost per barrel in 2003.
• The trust lost 135 million as a result of
  hedging.

39
Stock-based Compensation

• Before Q3 of 2003, Canadian Oil Sands recorded no
  compensation costs for unit options granted to
  its employees and directors.
• The Canadian Institute of Chartered Accountants
  modified the rules for stock-based compensation
  program.
• During the third quarter of 2003, Canadian Oil
  Sands adopted the fair-value method of accounting
  for stock based compensation.
• Compensation costs of 0.6 million have been
  included as Administration expenses in the
  companys net income.

40
Statement of Cash Flow
41
Cash Flow Statement Analysis

• Free cash flow amount to 2 billion dollars for
  2003, due to the acquisition of Syncrude working
  interest.
• On February 28, 2003, Canadian Oil Sands closed
  the acquisition With EnCana Corporation to
  purchase an indirect 10 percent working interest
  in Suncrude for approximately 1.05 billion cash
• On July 10, 2003, Canadian Oil Sands purchased
  EnCanas remaining 3.75 percent interest in
  Syncrude for 430 million cash
• The acquisition is treated as a purchase of asset
  under GAAP
• Cash flow from operating activities decreased due
  to a 147 million foreign exchange loss on
  long-term debt

42
Financial Strength Ratios
43
Stock Price Summary

• Traded on TSX
• Symbol COS.UN
• Current Price 55.79 CDN
• 91.1 million units outstanding
• Market Capitalization of approximately 5.1
  Billion

44
Stock Price Performance One Year Chart
45
Stock Price Performance Five Year Chart
46
Stock Price Performance Vs. Oil Gas Index One
Year Chart
47
Recommendation

• BUY

48
Petro-Canada
49
Petro-Canada Agenda

• Company Background
• Management Team and Executive Compensation
• Core Business Units
• Business Strategy
• Corporate Value Drivers
• Reserves
• Hedging Strategy
• Financial Statement Analysis
• Stock Price Performance
• Recommendation

50
Company Background

• Petro-Canada was established in 1975 as a Crown
  Corporation
• Privatized in 1991 final government stake sold
  in September 2004
• One of Canadas largest integrated oil and gas
  companies
• Produces 464,500 barrels of oil equivalent per
  day (2003)
• Earnings from operations (2003) 1.6 Billion
• More than 4,500 employees across Canada and
  internationally
• Publicly traded on TSX (PCA) and NYSE (PCZ)
• Stock price of 63.60 (Friday close)
• 262,100,000 shares outstanding
• Net capitalization exceeding 16 Billion
• Headquartered in Calgary, Alberta

All dollar figures in CDN dollars
51
Management Team

• Ron A. Brenneman, President CEO.
• CEO since 2000. Over 30 years of experience in
  the oil industry. Past CEO of Esso Benelux and
  past president of Imperial Oil.
• Harry Roberts, Senior VP CFO.
• 15 years experience with Petro-Canada and 15
  years experience working in the financial
  industry.
• Kathleen E. Sendall, Senior VP for North American
  Gas.
• Over 25 years experience with Petro-Canada.
• Gordon Carrick, VP for East Coast Oil.
• Over 25 years experience in the oil industry 23
  with Petro-Canada.
• Brant Sangster, Senior VP for Oil Sands.
• Over 35 years experience in the oil industry
  over 20 with Petro-Canada.

52
Management Team (continued)

• Peter S. Kallos, Executive VP for International.
• Over 20 years experience in the oil industry.
  Joined Petro-Canada in 2003.
• Boris Jackman, Executive VP for Downstream.
• Over 10 years experience with Petro-Canada.
• Common thread amongst senior management is their
  extensive experience with the company.
• Philip Fishers Four Dimensions - The People
  Factor
• Attention must be paid to attracting competent
  managers at lower levels and to training them for
  larger responsibilities. Succession should
  largely be from the available talent pool. (p.
  379)

53
Executive Compensation

• Base salary
• Competitive pay based on comparator group of
  companies.
• Annual performance incentives
• Based on degree of achievement of specific
  predetermined corporate, business unit, and
  individual objectives.
• Executives may choose to receive all or part of
  incentive in stock.
• Stock options
• Annual awards of stock options link compensation
  to creation of shareholder value.
• During the fourth quarter of 2003, the Company
  elected to begin prospectively expensing,
  effective January 1, 2003, the value of stock
  options pursuant to transitional accounting
  provisions. As a result, the fair value of stock
  options granted during 2003 is being charged to
  earnings over the vesting period with a
  corresponding increase in contributed surplus.
  The effect of this change for the year ended
  December 31, 2003 was a decrease in net earnings
  of 9 million.

54
Executive Compensation (continued)
55
Executive Compensation (continued)
56
Core Businesses Units

• North American Gas
• Explores for, produces, and markets natural gas.
• Exploration operations in Western Canada
  (Alberta, Northeastern BC).
• Produces 132,300 BOE per day (28 of company
  total)
• East Coast Oil
• Explores for, produces, and markets oil from
  offshore Newfoundland (Terra Nova, Hibernia).
• Produces 86,100 BOE per day (19)
• Oil Sands
• Heavily involved in Albertas oil sands.
• 100 interest in the MacKay River operation and
  12 interest in Syncrude operation.
• Produces 36,100 BOE per day (8)

57
Core Businesses Units (continued)

• International
• Explores for, produces, and markets oil and
  natural gas from Northwest Europe, North
  Africa/Near East, and Northern Latin America.
• Produces 210,000 BOE per day (45)
• Downstream Operations
• Refining
• Converts crude oil into refined products (gas,
  diesel, lubricants).
• Controls 17 of Canadas refining capacity.
• Marketing
• Markets petroleum products and services
  nationwide in Petro-Canada service stations.
• Second largest marketer of refined petroleum in
  Canada (17 market share).

58
Contribution of Business Units (Production -
BOE/d)
59
Contribution of Business Units (Earnings)
In 2003 the Oil Sands business earned a loss of
50M (3)
60
Business Strategy

• North American Gas Strategic Goals
• Maximize profitability in Western Canadian
  properties by increasing exploration and drilling
  in core areas.
• Future Action Focus exploration and drilling in
  core areas.
• Pursue high-potential exploration plays such as
  the Mackenzie Delta, Alaska, and offshore Nova
  Scotia.
• Future Action Continue to evaluate Mackenzie
  Delta and Alaska properties in preparation for
  future pipeline construction.
• Pursue market expansion into liquefied natural
  gas (LNG)
• Future Action Commence construction on LNG
  facility in Cacouna, PQ agreement to import LNG
  from Russia

61
Business Strategy (continued)

• East Coast Oil Strategic Goals
• Expand oil production base in offshore
  Newfoundland.
• Future Action Continue evaluating growth
  opportunities in Terra Nova and Hibernia.
• Pursue high-potential exploration plays
• Future Action Continue White Rose development,
  targeting start-up in early 2006.

62
Business Strategy (continued)

• Oil Sands Strategic Goals
• Continue developing reserves as market condition
  evolve.
• Expand Syncrude operations.
• Future Action Continue third phase of Syncrude
  expansion.
• Expand and upgrade refining capabilities.
• Future Action Commence improvement of Edmonton
  refinery from conventional crude oil refinery to
  bitumen refinery.
• International Strategic Goals
• Continue developing existing International
  reserves.
• Future Action Continue exploration in the
  U.K./Netherlands North Sea.
• Target new theatres of operations.
• Future Action Where attractive, bid on Middle
  East developments.
• Downstream Operations Strategic Goals
• Focus on generating superior returns by
  leveraging brand strength

63
Corporate Value Drivers

• Increase production capacity from existing
  assets.
• Reduce operating costs of existing assets through
  economies of scale and by upgrading process
  technologies.
• Increase reserves (asset base) by pursuing new
  developments.

64
Reserves

• Evaluating natural resource companies must
• take into account their ability to
  replenish
• their assets.
• Petro-Canada boasts 1.220 Billion BOE in
• proven reserves.
• At current production this will last 7 years.

65
Factors that Affect Financials

• Ongoing volatility of CDN/US exchange rates
• Ongoing volatility of global and North American
  oil markets
• New introduction of crude oil supply to North
  America
• Ongoing variability in refining retail margins
• Unscheduled maintenance shutdowns
• Oil Sands Alberta Crown Royalties
• Ability to compete for projects
• Extreme cold weather in 4Q
• Cannot produce in very cold temperature

66
Hedging Strategy

• Commodity Prices
• Significant risk exposure to price of crude oil
  and natural gas.
• Petro-Canada typically does not hedge this
  exposure.
• Foreign Exchange
• Petro-Canadas expense and revenue streams are
  highly affected by the CDN/USD exchange rate
• Partially offset because of integrated business
  however, earnings are negatively affected by the
  strengthening CDN dollar.
• Petro-Canada does not hedge this currency
  exposure.

67
Balance Sheet
68
Balance Sheet (continued)

• Assets
• Increase in cash on hand by 400M sign that
  company is not rushing into imprudent
  investments.
• Property, plant, and equipment form more than
  two-thirds of asset value.
• Very capital intensive.
• Goodwill increased due to the acquisition of
  International oil and gas produced Veba Oil Gas
  GmbH.

69
Balance Sheet (continued)

• Liabilities
• Current portion of long-term debt decreased by
  350 million
• Overall long-term debt decreased by 500 million
• Cancelled loans outstanding to provide
  acquisition credit for Veba Oil Gas GmbH.
• Also, this is a sign that the company is plowing
  exceptional earnings into actively recalling
  debt.

70
Balance Sheet (continued)

• Equity
• Increased by 2 Billion in 2003 almost all
  attributable to increase in retained earnings
• Retained earnings increased by 1.5 Billion
  dollars per quarter.
• Since dividends increased as well (from 0.10 to
  0.15 per share), we know that the increase in
  retained earnings is due to higher profits

71
Income Statement
72
Income Statement (continued)

• Revenue
• Dramatic increase in revenues from 2002 to 2003.
• Expanded operations
• Higher oil prices
• YTD 2004 revenues are 10,880M.
• Expenses
• Crude oil purchases (sell their own crude oil,
  buyback crude oil for refining closer to
  distribution points).
• Exploration expense decreased slightly
  year-over-year.
• Earnings
• Increase in net earnings and EPS is a function of
  high oil prices in conjunction with the fact that
  Petro-Canada does not hedge commodity prices.

73
Statement of Cash Flows
74
Statement of Cash Flows (continued)

• Property, Plant, and Equipment
• Spent 500M on PPE during 2003 large increase
  in International investment

75
Statement of Cash Flows (continued)

• Free Cash Flow CFO CFI
• YTD 2004 FCF negative due to acquisition of Prima
  Energy Corporation (644M).
• 2002 FCF negative due to acquisition of Veba Oil
  Gas GmbH (spent 2.2 Billion)
• Growth of acquisition helped fuel high cash flow
  in 2003

76
Financial Strength Ratios
77
Stock Price Summary

• Stock Price (Friday Close)
• 63.60 CDN (TSX)
• 53.10 USD (NYSE)
• TSX Data for Friday, November 5th
• Last Traded 63.60
• Net Change -0.74 (-1.15)
• Volume 1,858,222
• 52 Week High 70.40
• 52 Week Low 54.50

78
Stock Price Summary (continued)
79
Stock Price Performance One Year Chart
Based on TSX Data (CDN dollars)
80
Stock Price Performance Five Year Chart
Based on TSX Data (CDN dollars)
81
Stock Price Performance Vs. Oil Gas Index One
Year Chart
Based on NYSE Data (PCZ and Oil Gas Index)
82
Stock Price Performance Vs. SP 500 One Year
Chart
Based on NYSE Data (PCZ and SP 500)
83
Recommendation

• BUY

84
Suncor Energy
85
SunCor Agenda

• Company Background
• Management Team
• Core Business Segments
• Business Strategy
• Corporate Value Drivers
• Reserves
• Hedging Strategy
• Financial Statement Analysis
• Stock Price Performance
• Recommendation

86
Company Background

• Suncor Energy is an integrated energy company.
• Formed in 1979 as a result of an amalgamation of
  several operations.
• Focused on developing the Athabasca Oil Sands
  one of the worlds largest petroleum resource
  basins.
• 2004 YTD earnings are 337 million.
• Produces 264,900 barrels of oil per day
• 4,000 employees
• Listed on both the TSX and NYSE (Ticker SU).
• 39.88 CDN per share (Tues close)
• 453,420,617 shares outstanding
• Net capitalization exceeding 18 Billion CDN
• Headquartered in Calgary, Alberta.

87
Management Team

• Richard L. George, President and CEO
• 23 years experience at Suncor 13 years as CEO.
• J. Kenneth Alley, Sr. VP and CFO
• 19 years experience at Suncor.
• Steven W. Williams, Exec. VP, Oil Sands
• Over 20 years of international energy industry
  experience.
• David W. Byler, Exec. VP, Natural Gas Renewable
  Energy
• 24 years experience at Suncor.
• Thomas L. Ryley, Exec. VP, Energy Marketing and
  Refining
• 20 years experience at Suncor.
• M. (Mike) Ashar, Exec. VP, Refining and Marketing
  USA
• 16 years experience at Suncor. Previous
  experience with Petro-Canada.

88
Management Compensation
89
Core Business Segments

• Oil Sands
• Operating in Canadas Athabasca Oil Sands,
  Alberta
• Oil is part of bitumen can be extracted by
  mining and by in-situ (onsite)
• Surface mines produce majority of crude oil but
  in-situ processes are expanding
• Natural Gas
• Extracted through pressurized wells
• 
  
  
• Energy Marketing Refining (Canada)
• Refine bitumen feedstock and natural gas and
  market it to customers in Ontario, Quebec,
  Northeastern USA
• Sunoco chain of service stations in Ontario
• Refinery based in Sarnia, Ontario

90
Core Business Segments (continued)

• Energy Marketing Refining (USA)
• In August 2003, Suncor acquired a Denver refinery
  and 43 Phillips 66 service stations.
• Expansion gives Suncor greater ability to move
  oil products to American markets.
• Renewable Energy
• Two projects in Canada

91
Contribution of Business Units (Earnings)
92
Business Strategy

• Athabasca Oil Sands
• Next major goal is a targeted production capacity
  of 260,000 bpd by late 2005
• Focus on efficient operations and management to
  maintain low crude oil production costs
• Suncor continually will pursue new technology
  that will reduce operating costs and
  environmental impact
• - Expanding oil sands operation is a priority
• - Planned 2007 expansion of Steepbank Mine, Fort
  McMurray, Alberta
• - Expansion of the second upgrader along with a
  third one on 2010
• - Maintain oil sands cash operating costs at an
  annual average of 10.75 to 11.75 per barrel

93
Business Strategy (continued)

• Natural Gas
• Suncor has found a solution to deal with high
  natural gas prices
• Strategy is to exceed natural gas purchases for
  internal consumption
• Functions as a price hedge
• Energy Marketing Refining (Canada)
• Project Genesis Sarnia refinery is investing in
  equipment to produce lower sulphur diesel
• Helps to increase companys ability to
  manufacture environmentally friendlier products
  to meet demand
• Energy Marketing Refining (USA)
• Looking to further integrate products and
  services within the US, branching out from
  Denver, Colorado.

94
Business Strategy (continued)
95
Corporate Value Drivers

• Increase production capacity from existing
  assets.
• Reduce operating costs of existing assets through
  economies of scale and by upgrading process
  technologies.
• Increase reserves (asset base) by pursuing new
  developments.
• Be a first-mover in new energy technologies such
  as wind.

96
Reserves

• Company has an estimated 12 billion barrels of
  crude on hand that can be refined to produce
  approximately 10 billion barrels of oil.
• At current production this will last 10 years.

97
Factors That Affect Financials

• Ongoing volatility of CDN/US exchange rates
• Ongoing volatility of global and North American
  oil markets
• New introduction of crude oil supply to North
  America
• Ongoing variability in refining retail margins
• Unscheduled maintenance shutdowns
• Oils Sands Alberta Crown Royalties
• Ability to compete for projects
• Extreme cold weather in 4Q

98
Hedging Strategy

• Commodity Hedging Activities
• Company utilizes commodity based forwards,
  futures, swaps and options.
• Board authorized the hedging of 35 of crude oil
  volume in 2004 and up to 30 for 2005-2007.
• In 2003, hedging reduced net earnings by 155
  million.
• As of Q1, 2004, the BoD suspended the crude oil
  hedging program and no new contracts were entered
  in Q2 or Q3.
• Financial Hedging Activities
• Employs interest rate and cross-currency swaps
• Interest rate swaps involve the exchange of
  floating rate and fixed rate interest payments
• Cross-currency swaps involve the exchange of CDN
  dollar interest payments and US dollar interest
  payments, and an exchange of the principal
  amounts at the maturity date of the underlying
  security.

99
Hedging Strategy
100
Income Statement
101
Income Statement (continued)
102
Balance Sheet
103
Balance Sheet (continued)

• 1 Billion increase in PPE during 2003 due to
  acquisitions

104
Balance Sheet (continued)

• Retained earnings went up by 1 billion and
  dividends have remained fairly stable
• We can infer that Suncor is pumping most of their
  money back into the company

105
Statement of Cashflows
106
Statement of Cash Flows (continued)

• Free Cash Flow CFO CFI
• 2003 FCF fell from 2002 due to investment in new
  refinery and new retail stations business
• 2001 FCF negative due to a large restructuring of
  natural gas business
• YTD 2004 FCF was not as drastically improved by
  high oil prices because Suncor invested a large
  amount in upgrading and expanding their
  extraction and refining operations as well as
  opening a new wind power facility

107
Financial Strength Ratios
108
Income Statement YTD
109
Balance Sheet YTD
110
Statement of Cashflows YTD
111
Stock Price Summary (continued)
112
Stock Price Performance One Year Chart (TSX)
113
Stock Price Performance Five Year Chart (TSX)
114
Recommendation

• BUY

115
Summary
116
Summary

• BUY

• BUY

• BUY

117
Questions
?