Suncor Energy (SU) Applies To CEAA For Cogeneration Units

Calgary, Alberta-based Suncor Energy Inc. (NYSE:SU) has recently applied to the Canadian Environmental Assessment Agency (CEAA) with the aim to replace its aging coke-fired boilers at its oil sands Base Plant with two cogeneration units. The purpose of the move is to reduce cost and carbon emissions from the facility. This will also enable the company to generate 700 megawatts (MW) of electricity to be sold to the provincial grid. Notably, the generated electricity will equal 7% of the present electricity demand in Alberta, Canada.

Additionally, the step taken by the integrated energy player will enable it to increase its presence in Alberta's electricity grid. This is also an important initiative on the company’s part against climate change. The two cogeneration units will in fact use steam instead of coal for operations. It will also help Alberta's transition toward low carbon intensity energy sources.

Other than oil sands Base Plant, the company also has cogeneration units at its Firebag, Fort Hills and MacKay River facilities, where it supplies low-carbon electricity to the provincial grid.

The company has plans to take the final call on constructing two cogeneration units by the fourth quarter of 2018 and start the process in 2019. Commissioning of the project is anticipated to begin from 2022.

About Suncor Energy

Suncor's operations include oil sands development and upgrade, conventional and offshore crude oil and gas production, petroleum refining and product marketing under the Petro-Canada brand. This apart, the company explores, acquires, develops, produces and markets crude oil and natural gas in Canada and internationally. Plus it transports and refines crude oil and markets petroleum as well as petrochemical products primarily in Canada. Suncor’s business can be divided into three main segments: Oil Sands, Exploration and Production (E&P) and Refining and Marketing.

Through its aggressive expense management, Suncor has been able to lower its cash costs amid the industry downturn. This has further helped the company take advantage of the rebound in oil prices. Moreover, Suncor's healthy financial profile allows it to pay an attractive dividend while pursuing an assertive share repurchase program.

However, Suncor’s major focus lies on crude-oil production from Alberta oil sands. This is a high-risk strategy considering the extra costs associated with extraction of oil from the oil sands compared with the production from conventional oil wells.

Price Performance

Suncor has gained 5% year to date against 11.6% decline of its industry.

Zacks Rank and Stocks to Consider

Suncor has a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and energy sector are ConocoPhillips (NYSE:COP) , Northern Oil and Gas, Inc. (NYSE:NOG) and Holly Energy Partners, L.P. (NYSE:HEP) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based ConocoPhillips is a major global exploration and production company. The company’s sales for 2017 are expected to increase 24.4% year over year. The company delivered an average positive earnings surprise of 152.3% in the last four quarters.

Minnetonka, MN -based Northern Oil and Gas is an independent energy company. The company’s sales for the fourth quarter of 2017 are expected to grow 51.9% year over year. The company pulled off an average beat of 175% in the last four quarters.

Dallas, TX-based Holly Energy is a production pipeline company. The company’s sales for 2017 are expected to climb 10.4% year over year. The company came up with a positive earnings surprise of 57.1% in the third quarter of 2017.

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