Transocean LTD (RIG), Halliburton Company (HAL): Smart Energy Firms Follow Growth Overseas

The Oil Sands

Suncor Energy Inc. (USA) (NYSE:SU) is not an obvious international oil company. The firm is a major operator in Canada’s oil sands. The oil sands suffer from a lack of midstream capacity, and many operators, including Suncor, have had to write down projects as realized crude prices have fallen.

A look at Suncor’s operations shows that only 4% of its production is tied to the U.S. based WTI prices, while 96% is exposed to global-based prices. This differential helps to ensure the company’s profitability by avoiding the oversupply of oil in the U.S. The company is able to achieve these numbers with a mix of upgraders and refineries. The proposed Northern Gateway Pipeline will carry 525,000 barrels of oil per day from the oil sands for export to the Asian markets and further increase Suncor Energy Inc. (USA) (NYSE:SU)’s access to the international market.

The company has little debt with a total debt to equity ratio of just 0.28. Compared to larger integrated firms like Exxon, Suncor’s EBIT margin of 13.2% and profit margin of 7.2% are respectable. The company is a good hidden way to escape the North American energy glut.

Conclusion

North America’s energy boom continues, even as domestic consumption falls. Profitable companies in the energy field need to have a plan to deal with a potential bust in the North American market. Transocean LTD (NYSE:RIG) is a good company to watch, but it is best to wait until it turns a profit before investing. Halliburton Company (NYSE:HAL) and Suncor are both good investments, but Halliburton is the better choice with its lower valuation.

The article Smart Energy Firms Follow Growth Overseas originally appeared on Fool.com and is written by Joshua Bondy.

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