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Energy giant Suncor misses estimates on earnings but boosts quarterly dividend

Energy giant Suncor misses estimates on earnings but boosts quarterly dividend

Canada's largest energy company Suncor Energy [TSX: SU] reported $10.65 billion in earnings, an increase of almost 10% from the previous year owed largely to production increases in their oil sands operation. Total production for the quarter averaged 518,400 barrels of oil equivalent (versus 500,100 boe/d last year). 

Operating earnings fell to $0.77/share, much lower than the $0.97/share analysts were expecting. The higher operating costs were attributed to:

  • a much higher than expected tax bill
  • higher exploration costs in Norway
  • lower production due to coker outages at Syncrude.

The company provided the following updates on their oil sands operations:

  • Production from the oil sands increased to 378,000 bpd, up from 276,600 bpd in Q2-2013. Higher production at Firebag was offset by a 25% production drop at Syncrude.
  • Operating costs dropped to $34.10 per barrel for their oil sands operation (down from $46.55/barrel last year).
  • Production at Firebag continues to ramp-up as planned. Another phase of debottlenecking is currently being planned at Firebag to improve infrastructure and boost production.
  • Engineering and procurement continues for the Fort Hills Oil Sands Mine. Detailed engineering was reported at 40% complete. Site work is on-going. The project remains on track for a Q4-2017 start-up with ramp up to 90% of design capacity (or 180,000 barrels/day) within 12 months.
  • First steam was achieved at the MacKay River debottleneck project. The new facility is expected to boost production by 20% to 38,000 barrels/day by the end of 2015. Suncor is also working towards an expansion of MacKay River which will see an additional 20,000 barrels/day capacity.
  • A new water treatment plant was commissioned at MacKay River. The project, which is a joint venture with GE and other oil sands operators, aims to reuse waste water and reduce fresh water consumption. 
  • The company took a one-time impairment charge of $718 billion for the deferral of their Joslyn Mine, a joint venture with Total E&P Canada.

Suncor cut capital spending by $1 billion (from $7.8 to $6.8 billion). The company may be required to pay an additional $1.2 billion in taxes to the CRA stemming from a review of 2007 royalty payments. The company boosted its dividend to $0.28 per share for the upcoming quarter.

Suncor is Canada's largest integrated oil company and has the largest oil sands reserves in the country. The company owns a 12% stake in Syncrude and a 40.8% interest in the Fort Hills Mine, both acquired from the purchase of PetroCanada in 2009.

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