Suncor Energy (SU): When do you Buy?

Suncor Energy Inc. (NYSE:SU) is the world's second-largest oil-sands mining company and its shares are down 30% since late May.  The Masters have gone on and on about the DUG, but the lower SU goes the more tempting it becomes to buy shares.  But when will the pain end for Suncor shareholders?

Its great watching oil prices fall, it helps everything, but lately, low oil prices haven't done jack for stocks, or anything else for that matter. 

Oil is headed back to $30.  Oil will settle at $100.  Oil will start heading back up again, stop at $150.

Whatever.

Oil is still King.

The world demand is still there, it hasn't gone away, and the talking heads that say its going back to $30 are either smoking crack or caught up in getting attention for their own ambitions.

Back in April just before shares of Suncor started to tank and oil traded around $115 a barrel, Suncor CEO Rick George said a few comments about the price of oil.

He said oil at $115 is not sustainable over the long term, but the oil industry needs at least $75 a barrel to bring on increasingly tougher-to-find reserve.

"To keep those new supplies coming on, which are going to be smaller and smaller, you're going to need a good oil price. I just don't think you're going to need $115," George told reporters after Suncor's annual meeting.

He said the current floor for the industry to operate could be in the $75-$80 a barrel range.

A big concern with investing in Suncor is at what point does the price of oil tear into their profits?

Mastery Sponsor

Fellow Masters, if the CEO is on record for talking about oil falling to $75, what do you really have to worry?  Better yet, just watch SU for a while and if it falls even further, more power to you.

Here's the recent analyst take:

Something else to consider, Suncor trades for just 8.5x 2009 earnings. Bear in mind it consistently trades at a premium due to its enormous reserves that could last 100 years vs. 20-30 for other oil majors.

Not convinced?

Don't be, stay long on the UltraShort Oil & Gas ProShares  (Public, AMEX:DUG), but when the time comes, and it will, Suncor will return to greatness, right along with the rising cost of oil thanks to world demand.

Disclaimer: No positions in any of the securities mentioned in this publication.