Canadian energy giant Suncor posts a strong third quarter for 2014
Canadian energy giant Suncor reported better than expected profits and cash flow for the third quarter of 2014. The company reported net earnings of $919 million or $0.63 per share, a decrease from the $1.7 billion reported for the same time last year. Suncor's overall production for all business units in Q3 averaged 517,000 barrels of oil equivalent per day. Overall production was about 5% lower than analysts were expecting. The company blamed unplanned maintenance and a power outage in non-oil sands operations for the small miss.
Suncor's production from the oil sands last quarter was 411,700 barrels per day (bpd), up from 396,400 bpd for Q3 of 2013. Suncor produces a variety of crude oil streams, predominantly sour synthetic crude, but also a significant volume of sweet crude oil, diesel and non-upgraded bitumen. About one-third of the company's oil sands production was sold as upgraded product; the remainder went to market as diluted bitumen.
Suncor's oil sands division spent $975 million in capital expenditures over the last quarter, representing more than half of their total overall budget of $1.8 billion. The company provided the following update on its oil sands operations:
BASE PLANT MINING OPERATIONS
Production from the Suncor Base Mine averaged 296,900 bpd, up from 281,200 bpd for the same period last year. Production numbers were slightly below expectations due to unplanned outages in the mining, extraction and upgrading facilities. Work is on-going at the Base Mine for tailings reduction initiatives.
FIREBAG IN-SITU FACILITY
Initiatives are on-going at Firebag to improve operating efficiencies and debottleneck the process, as the plant continues to work towards its nameplate capacity of 180,000 bpd. The in-situ facility produced an average of 170,900 bpd in Q3, down slightly from 172,400 bpd in the previous quarter.
MACKAY RIVER IN-SITU FACILITY
MacKay River Debottleneck achieved first oil in the last quarter; the project is aimed at improving operating efficiencies and should improve production by 20% by the end of 2015. The facility produced 28,200 bpd in Q3 and continues to work towards its nameplate capacity of 38,000 bpd. Suncor also continues to work towards sanction of the MacKay River Expansion Project, which will add another 20,000 bpd to the SAGD facility.
FORT HILLS OIL SANDS MINE
Detailed Engineering was reported at 55% complete for Fort Hills. On-going site activities include the pouring of concrete foundations, erection of Primary Extraction Separation Cells, construction of the camp lodge and commissioning of a water treatment facility. Fort Hills is scheduled to start-up late 2017. Once fully operational, the new oil sands mine will add an additional 73,000 bpd to Suncor's balance sheet. The project is a joint venture with Total E&P and Teck Resources.
Suncor's portion of Syncrude's production increased to 29.400 bpd, up from 24,300 bpd in the previous quarter. Operating costs at Syncrude were reported at $44.40 per barrel, down from $50.95 for the same period last year. Capital expenditures for the Syncrude operation were mostly related to the Mature Fine Tailings Centrifuge Plant and ramp-up of the Mildred Lake Relocated Mine. Suncor maintains a 12% working interest in the Syncrude Mine, which is currently operated by ExxonMobil.
Overall operating costs for Suncor's oil sands operations (excluding Syncrude) averaged $31.10 per barrel including energy costs, down from $34.10 per barrel in the previous quarter. Operating costs for the in-situ bitumen was $15.25 per barrel in Q3. The company realized an average product sale price of $89.38 per barrel for their oil sands product in Q3, compared to $98.42 per barrel for the same period last year. The lower price was attributed to the weaker Canadian dollar and a decrease in electricity revenue for excess power sold the Alberta power grid.
Suncor Energy stock (TSX:SU) currently yields a 3% dividend. The company repurchased $523 million of its own shares in the last quarter.