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Suncor bounces back to black after an ugly Q2

Suncor bounces back to black after an ugly Q2

Suncor Energy posted much better than expected third quarter results on higher production, lower operating costs, strong output from Syncrude and record refinery throughput.

Q3 BY THE NUMBERS

  • Cash flow from operations was reported at $2.03 billion, up from $1.88 billion in Q3/2015.
  • Operating earnings fell to $346 million, down from $410 million in Q3/2015.
  • Net earnings rose to $392 million.
  • Total upstream production rose to 728,100 boe/day in the third quarter, up from 566,100 boe/day in Q3/2015. The gains were mostly attributed to increased ownership of the Syncrude operation.

COURTESY SUNCOR ENERGY 2016 INVESTOR PRESENTATION

OIL SANDS PRODUCTION HOLDS STREADY

  • Excluding Syncrude, oil sands production rose to 433,700 bbl/day, up slightly from 430,300 bbl/day in Q3/2015.
  • Operating costs fell to $22.15/bbl, down 18% from the previous year/quarter. The decline was attributed to lower natural gas prices and higher production rates. 
  • For the full year 2016, operating costs are expected to land somewhere between $25.50 and $27.50/bbl.

FORT HILLS REMAINS IN TRACK

  • The Fort Hills Project was reported 70% complete by the end of the third quarter.
  • Key activities in Q3 included completion of the utilities modules, significant progress on the secondary extraction area and procurement of key mining and extraction equipment. The company has also begun clearing overburden at its mining operation.
  • All off-site modules have been completed and delivered to site.
  • A lower Canadian dollar has increased cost pressures for the mega-mine but the company thinks it can hold its original budget of $84,000 per flowing barrel of bitumen. Fort Hills remains on schedule for a late 2017 start-up.

SYNCRUDE RESULTS

  • Syncrude's production rose to 342,000 bbl/day (183,800 bbl/day net to Suncor). 
  • Syncrude's upgrader reliability rose to 98%, versus 67% for the prior year/quarter, which was negatively impacted by an upgrader fire.
  • The full year production forecast for Syncrude was bumped up by over 10%, now expected to be in the range of 223,000 to 242,000 bbl/day (120,000 to 130,000 bbl/day net to Suncor).
  • Operating costs at Syncrude fell to $27.65/bbl, the lowest in at least a decade, down from $41.65 for the same quarter last year. 
  • Full year operating costs were lowered to a range of $37 to $39/bbl.
 

COURTESY SUNCOR ENERGY 2016 INVESTOR PRESENTATION

 

REFINING BUSINESS

Refinery throughout improved to a record 465,600 bbl/day, up from 444,800 bbl/day in the prior year/quarter. Operating expenses declined to $4.55/bbl despite lower crack spreads.

FULL YEAR GUIDANCE

  • Capital expenditures for the full year was revised lower from a range of $6.0 to $6.5 billion to $5.8 to $6.0 billion.
  • Full year 2016 price assumption for Brent was revised higher from US$40 to US$44/bbl, West Texas Intermediate was revised higher from US$39 to US$43/bbl while Western Canadian Select was revised higher from US$26 to US$29/bbl.

CEO Steve Williams says his company "continues to find ways to reduce costs" and will continue to divest of non-core assets. Suncor is also progressing on the sale of its Petro-Canada lubricants business and will be looking to sell parts of its renewables business in the next 12 months, specifically wind assets worth an estimated $275 million. However, the CEO says he sees the "window of opportunity shutting" for future acquisitions.

ALL FIGURES IN CANADIAN DOLLARS UNLESS OTHERWISE STATED • PHOTOS & GRAPHICS COUTESY SUNCOR ENERGY
Husky doubles-down on thermal as losses mount for the year

Husky doubles-down on thermal as losses mount for the year

The National Energy Board forecasts a 72% rise in oil sands output by 2040

The National Energy Board forecasts a 72% rise in oil sands output by 2040

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