Energy producer Suncor Energy (SU) recently took a look at the future for energy markets in 2022. What the company posits as coming down the pike likely won’t be a surprise.
If Suncor’s projections carry on as planned, then it’s likely to be a good year for energy companies and oil producers. For those of us buying gas and heating our homes, not so much.
Still, it’s hard not to see the writing on the wall about the future of energy prices. It’s also hard not to be bullish on Suncor Energy as a result. (See Analysts’ Top Stocks on TipRanks)
Suncor Energy’s year has been one of gain, loss, and fairly rapid recovery. January led off with one such gain, followed by a fairly rapid loss. February, however, kicked off a six-week run-up that gave the company its highest price for the year at the time. March was somewhat less kind, and April was a fairly flat month.
Yet, May would provide the impetus for the first of two major peaks in the year. In June, the company would hit new highs for the year before summer doldrums kicked in and sent the stock sharply lower. In mid-August, though, the company started another run-up to ultimately see some of its high points for the year. Currently, we’re actually near the company’s best point for all of 2021.
Most recently, the company offered an outlook for 2022 that was bright for itself but also for much of the energy industry. Suncor noted that it was planning to boost its capital spending as well as its production for the year.
Essentially, the company looks for crude oil and gas prices to maintain their recoveries from the lows seen back during the pandemic. Those were good times for drivers, or would have been if anyone could actually go anywhere.
Already, evidence of that recovery is visible. The days when oil prices were temporarily negative and barrels were stacked up outside ports are long gone, though they weren’t all that long ago.
Oil prices back over $70 a barrel means oil producers like Suncor are eager to pull what they can. Reports noted that the company was looking at upstream production up around 5% from levels seen in 2021.
Additionally, look for record sales of synthetic crude oil and refinery output on par with pre-pandemic levels. For its part, Suncor looks to spend $4.7 billion total, just under the $5 billion ceiling issued previously.
Wall Street’s Take
Turning to Wall Street, Suncor Energy has a Strong Buy consensus rating. That’s based on 11 Buys and two Holds assigned in the past three months. The average Suncor Energy price target of $31.69 implies 31.9% upside potential.
Analyst price targets range from a low of $21.85 per share to a high of $43 per share.
Backing Energy Is a Smart Play in General
The last couple of years have made it abundantly clear the role energy plays in our lives. From unexpected winter blackouts in Texas to the wildly erratic gas prices of 2020-21, energy’s value to our society has seldom been so clear. Therefore, it’s not a great leap of logic to suggest that investing in energy is a solid path to likewise solid returns.
However, not all energy companies are created equal. Suncor Energy is putting up a good show here. It’s making investments in its future with improved capital spending. In fact, it’s looking to spend just a little less than its original maximum spend called for. That’s good news; the company will be well-positioned to take advantage of any changes in the market.
It’s not all good news, certainly. Reports out of Colorado note that company refineries in the area will be subject to much more stringent permitting than they were previously. More specifically, the company will be subject to tighter restrictions related to water quality. Greater transparency into the company’s operations will also be required.
Best of all, at least for income investors, is that Suncor Energy offers a very solid dividend. It’s had a bit of a rocky past, but it’s since recovered. Back in June 2020, the company pared back dividends roughly in half.
That wasn’t a surprise given oil prices in 2020, which reached an unheard-of low of -$37.63 per barrel. Naturally, oil prices have since recovered, and with them Suncor’s dividend.
Concluding Views
Suncor Energy stock is trading currently at some of the highest prices seen in 2021. Given that these prices are still well under the $30 mark, that makes Suncor an excellent alternative in the energy sector. With a secure dividend that ran through 2020, albeit at a reduced level, Suncor makes for a solid energy stock.
Better yet, Suncor is also looking to the future, and the future is looking bright. Suncor’s planned spending makes that much crystal clear. A solid sector is good news enough. Suncor’s plans to take advantage of the improvements only help matters.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
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