Suncor reviewing oilsands expansion
Suncor Energy Inc. says it's willing to push back the schedules of some of its oilsands expansion projects if it means it can ensure it's spending its money in the best way possible.
Canada's largest energy company, alongside joint-venture partner Total E&P Canada, is reviewing plans for the Fort Hills and Joslyn mines as well as the Voyageur oilsands upgrader.
It hopes to be able to make a decision on whether to go ahead with those projects around the middle of next year, but says it could take longer than previously planned.
"The indications are that some of these projects are moving backwards, not forwards — and I'm not worried about that," said CEO Steve Williams on a conference call Wednesday.
"I'm not worried about that review date potentially slipping, as long as we're seeing cost improvements and quality improvements, which lead then to better returns for shareholders."
Suncor inked the $1.75-billion deal with Total — a division of the French energy giant — in December 2010.
The three projects involved in that joint venture are being weighed on their individual merits, and could theoretically be scrapped if they're not found to be economically viable.
Williams said the review Suncor is undertaking wasn't spurred by any specific concerns over cost inflation or volatile commodity prices.
"We're looking at how we get the best economics for those projects," he said.
Williams became CEO of Suncor in May, when Rick George retired after more than two decades at the helm. Williams had been Suncor's chief operating officer prior to his promotion to the top job.
He said he's often asked whether Suncor will change direction under his leadership.
"Given the fact I joined Suncor over 10 years ago and I was one of the architects of our strategy, you shouldn't expect to see Suncor to take a sudden left-hand turn. Our strategy is well established and we'll be working hard to execute it effectively," he said.
There will, however, be some changes in priorities. Suncor won't be obsessed with hitting daily production of one million barrels by 2020, for example.
"Growth for the sake of growth doesn't interest me too much. What interests me is profitable growth," said Williams.
Suncor will also have a "rigorous scrutiny on capital discipline" to ensure it's spending within its means.
Williams said he doesn't see big capital programs as necessarily the best way to spur growth.
"I believe we can achieve significant growth simply by running our assets better," he said.
On Tuesday night, Suncor recorded lower profits during the second quarter and booked $694 million in charges related to a natural gas asset in war-torn Syria.
Net earnings amounted to $333 million, or 21 cents per share, compared to $562 million, or 36 cents per share, a year earlier.
Revenues were $9.7 billion, up from $9.3 billion.
In December, Suncor pulled its employees out of Syria in order to comply with sanctions aimed at isolating the regime of President Bashar Assad, condemned internationally for his government's bloody crackdown on pro-democracy protests.
The company has not recorded any production from the Middle Eastern country in 2012.
"The situation in Syria has not improved, and the company is not certain if or when it will be feasible to resume operations," Suncor said in a release.
"Based on an assessment of expected future net cash flows over a range of possible outcomes, the company recorded after-tax impairment charges and write-offs of $694 million against its assets in Syria in the second quarter of 2012."
After those adjustments, the carrying value of Suncor's net assets in Syria at the end of June was about $250 million.
Stripped of one-time items, Suncor's operating earnings were $1.26 billion, or 81 cents per share, compared to $980 million, or 62 cents per share, during the same period a year earlier.
That handily beat the 72 cents per share analysts polled by Thomson Reuters had on average been expecting.
Cash flow was $2.34 billion, or $1.51 per share, compared to $1.98 billion, or $1.26 per share, in the second quarter of 2011.
Suncor said the stronger operating earnings and cash flow were due to increased production volumes and better margins at its refineries, but were offset somewhat by lower oil prices.
Suncor's total production was 542,400 barrels of oil equivalent per day, compared to 460,000 barrels a year earlier.
The company tweaked its full-year production outlook to between 540,000 and 580,000 barrels per day from its previous forecast in April of between 530,000 and 580,000 barrels per day.