Suncor 3-month TSX chart

Plunging commodity prices and market turmoil have prompted oil and gas giant Suncor Energy Inc. to make further cuts to its capital spending budget amid a drop in full-year earnings and a loss in its most recent quarter.

Calgary-based Suncor said Tuesday its 2008 earnings fell to $2.1 billion or $2.29 a share, down from $2.98 billion or $3.23 a share reported the previous year.

The company said earnings were dragged down by unrealized foreign exchange impacts, project startup costs and rate reductions on future income tax liabilities.

Cash flow from operations in 2008 was $4.5 billion, up from 2007 levels of $4 billion. Suncor said its operating costs and production levels were hurt by a fire at one of its key oil upgraders that caused a prolonged maintenance shutdown.

"We've had a challenging 2008 with unscheduled maintenance at our oilsands operations," Suncor chief executive Rick George said in a statement. "We've put considerable effort into maximizing the reliability of our assets with the target of achieving higher, more stable production rates in 2009 and beyond."

Challenges escalated in the fiscal fourth quarter of 2008 as the precipitous drop in commodity prices dragged Suncor into the red. The company reported a quarterly loss of $215 million or 24 cents a share, reversing year-earlier profits of $1 billion or $1.13 a share.

Market conditions have also prompted the company to make further cuts to its 2009 capital expenditures budget, halving its spending plans to $3 billion and allowing just $1 billion for growth projects. The move marks the second reduction in Suncor's spending outlook for the coming year. The company trimmed its budget by more than a third to $6 billion last October.

Construction on the Voyageur upgrader, a primary focus of Suncor's initial spending projections, has been temporarily shelved along with most other expansion projects, the company said.

"With market conditions limiting our growth capital spending in 2009, we will be tightly focused on getting full value from our existing assets," George said. "Safe, reliable, cost-effective and environmentally responsible performance will be the keys to weathering the current downturn and ensuring we are well positioned for a market recovery."

Suncor set its 2009 oilsands production outlook target at 300,000 barrels of oil equivalent per day. Oilsands production in 2008 slipped to 228,000 barrels per day from 235,000 produced in 2007.

The company's total upstream production for 2008 averaged 264,700 barrels per day down from a 2007 average of 271,400.