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Suncor Energy sees higher production and lower costs in 2017

Suncor Energy sees higher production and lower costs in 2017

Suncor Energy released its 2017 corporate guidance this week, forecasting brighter days ahead for the country's largest integrated oil company.


CAPITAL SPENDING

Capital spending is expected to be between $4.8 and $5.2 billion, approximately $1 billion lower than 2016.

About 40% of that capex will be allocated towards the wrap-up of the Fort Hills Oil Sands Mine and Hebron platform offshore Newfoundland. The remaining 60% will be sustaining capital, primarily spent on maintenance of its existing oil sands facilities.


PRODUCTION

The company expects to produce 680,000 to 720,000 boe/day next year, split approximately as follows:

  • Suncor's base plant operations (including mining and SAGD): 420,000 - 450,000 bbl/day
  • Syncrude: 150,000 to 165,000 bbl/day (net to Suncor)

The guidance is a 13% improvement from the current year. 2016 production was seriously impacted by the Wood Buffalo wildfires, which took both Suncor and Syncrude offline for over a month.


OIL SANDS OPERATING COSTS

Operating costs at Suncor's base oil sands operations are expected to average $24 to 27 per barrel next year, revised upwards by $1 due to higher natural gas prices. In contrast, current year operating costs are expected to average $25.50 to $27.50 per barrel. Suncor's base oil sands operations produce about two-thirds light crude (upgraded bitumen) and about one-third heavy diluted bitumen (primarily from its in-situ facilities).

Syncrude's operating costs for next year are expected to average $32 to $35 per barrel of upgraded synthetic crude. Operating costs for the current year are expected to fall between $37 and $39 a barrel.

 
 
 

OIL PRICE EXPECTATIONS

The company is assuming oil prices will rise through 2017. Their expectations for average oil prices are as follows (USD/bbl):

  • Brent: $53
  • West Texas Intermediate (WTI): $52
  • Western Canadian Select (WCS): $38


SHARE PERFORMANCE

Suncor stock (TSX:SU) hit a 52 week high this week, despite news that Warren Buffett's Birkshire Hathaway dumped their 30 million shares in the company in the third quarter of this year. 

ALL FIGURES IN CANADIAN FUNDS UNLESS OTHERWISE STATED • ALL GRAPHICS COURTESY SUNCOR ENERGY 2016 INVESTOR PRESENTATION
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