Suncor Energy: Oil Sands for an Oil-Hungry World

Meanwhile, Q4 2009 oil sands cash operating costs declined to $37.84 per barrel, down from $40.50 in Q4 2008. In 2010, oil sands operating costs should average about $34.31 to $38.21, aided by lower operating costs from the PetroCanada merger.

Suncor's strong asset base, cash position, and debt retirement add to the positive story. The key operational variable, moving forward, for SU? Obviously, the price of oil: an average price well above $60 makes long-term planning for higher-cost oil sands production much easier than an average price below $50. So far in 2010, the oil price trend is running in Suncor's favor, with prices remaining above $70. (They traded at/near $80 in late March.

The First Call FY2019/FY2011 EPS estimates for SU are $1.87 to $2.80.

Technically, Suncor's stock broke below the key, 50-day moving average in early 2010, but the calculation here is that the uptrend to prevail. Hence, view the pull-back as a good time scoop-up shares.

2010 Outlook: I view Suncor a long-term play, but if investors are looking to sell SU within the year, it's probably best to take your profits after it rises to $38-39, if it fails to clear $40.

Stock Analysis: I consider Suncor Energy to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 50% position in SU now; then buy another 25% in one month, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 75% of my SU position before April 2010 and I'd put a sell/stop loss at $18.

Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.