When times are great, small, speculative companies are sometimes a great way to make insane amounts of money. It’s not hard for a company with a $500 million market cap to quickly double or triple for speculative reasons. However, when times are rough, it helps to refocus and invest in quality companies. In the oil sector, that company is Suncor Energy Inc.  (TSX:SU)(NYSE:SU).

Suncor is one of the most diversified energy companies in Canada. Not only does it get oil out of the ground, but it refines it as well, allowing it to generate revenue on both sides of the equation. It’s actually the refinery business that has helped Suncor remain strong despite plummeting oil prices. Its network has the capacity to refine 500,000 barrels a day, and last year it earned $2.2 billion.

Unlike the small speculative companies that used leverage to fund their operations and make acquisitions, Suncor only has about 34% of its market cap in debt. While that’s $15 billion, I believe Suncor can more than handle it.

Part of the reason it can afford this debt is because it is one of the lowest-cost producers in Canada. In 2013 its total oil sands cash operating cost was $37.00 a barrel. A year later, it had reduced that to $33.80. And by 2015, that cost was down to $27.85. Fundamentally, it is spending less per barrel it takes out of the ground, and as the price of oil increases, its margins will follow.

But the real reason why I like Suncor is because it is the biggest. And when you’re the biggest, you can buy up the best assets from smaller companies and, more importantly, companies that are struggling. Those same speculative companies that can double or triple often have bought lots of assets, but can’t afford the debt payments. Suncor can. And Suncor has its eyes on all sorts of assets.

It bought control of Canadian Oil Sands, which helped boost its stake in Syncrude from 12% to 49%. On Wednesday, it was reported that it had bought a further 5% stake in Syncrude for US$937 million, effectively giving it control of the project. Suncor expects to be able to grow production in a profitable way by more than 40% year over year. By 2019, it wants to hit its target of 800,000 barrels per day.

I doubt that it’s going to stop there … Some of the largest mergers of oil companies have taken place during times of weak oil prices. Therefore, if the price stays depressed, I expect other oil companies to continue suffering, thus increasing the types of assets Suncor can buy. I expect that it will likely buy a larger share of its Fort Hills oil sands project over the coming months, especially with its partners in need of cash.

All in all, Suncor is the best way to invest in oil. You won’t double or triple your money. But because Suncor is well run and its management is so experienced, I expect this company to be able to keep its costs down and acquire competitors, so when oil prices return to strength, the returns will be incredibly lucrative for investors.

And while you wait, you can enjoy the 3.2% yield which pays $0.29 per quarter. The time may come one day when you can buy more speculative energy companies, but that is not today.

Two energy plays for your watch list

Check out our special FREE report "2 Canadian Energy Stocks on the Cusp of a Powerful Long-Term Trend". In this report, you'll find that Canada is rich in other energy sources that are poised to take off. Click here now to get the full story.


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Jacob Donnelly has no position in any stocks mentioned.