Crude from the Fort Hills oilsands mine "likely" will start flowing a year later than expected as Suncor Energy Inc. and its partner, France's Total S.A., work to drive down costs at their jointly held developments.
And the economics of their Voyageur upgrader, which would turn heavy oilsands crude into a product that's easier to refine, appear "challenged" as volumes of light oil from formations such as the Bakken continue to grow, Suncor CEO Steve Williams said on a conference call with analysts.
Suncor and Total formed a $1.75-billion joint venture in late 2010 encompassing the Fort Hills and Joslyn mines and the Voyageur upgrader.
This summer, Williams announced the two companies were undertaking a review of the projects. All three projects are being weighed on their individual merits, and could theoretically be scrapped if they're not found to be economically viable.
Williams says the focus will be on profitability and quality rather than on meeting stringent timelines. It's a view many in the oilsands have been adopting in recent years to avoid the major cost overruns the sector experienced before the recession caused expansions to come to a screeching halt.
"The joint ventures are in good health and we're working effectively with our partners to review the projects," Williams said.
"Each of the projects is separate and our review focus is on generating shareholder value with an emphasis on the cost and quality of the projects."
Williams said the review has not yet been completed "but early indications are that we've been able to add significant value to the mining projects."
"However, the production timeline for Fort Hills is likely to be delayed by about a year to 2017."
"At the same time, Voyageur economics appear challenged in light of the projected ramp up in tight oil production in the North American market," he added.
Late Wednesday, Suncor said it now expects to spend $6.65 billion this year, down from the $7.5 billion it predicted earlier.
Suncor owes the lower spending to its new Firebag Stage 4 oilsands project, which came in 10 per cent under budget, as well as slowing the pace of the Total joint-venture developments.
Suncor isn't the only oilpatch name to signal a more frugal approach these days. Talisman Energy Inc.'s new CEO, Hal Kvisle, said on a conference call earlier this week that 2013 spending will be about 25 per cent lower than this year, with much less of a focus on risky international exploration.
Late Wednesday, Suncor also announced third-quarter net earnings of $1.56 billion, or $1.01 per share, compared with $1.29 billion, or 82 cents per share, in the same 2011 period. The upswing was mainly due to exchange rate fluctuations.
Operating earnings, a better gauge of the company's underlying performance, fell to $1.3 billion, or 85 cents per share, compared with $1.79 billion, or $1.14 per share, a year earlier.
The earnings beat the average estimate of 78 cents per share, according to Thomson Reuters.
Suncor said the drop in operating earnings was due to higher share-based compensation expense, lower production volumes from offshore assets undergoing planned maintenance work and higher depreciation, depletion and amortization charges.
Revenues were $9.6 billion, down from $10.4 billion in the corresponding 2011 quarter.
Suncor is the largest operator in the oilsands, with huge mining operations north of Fort McMurray, a 12 per cent interest in the Syncrude Canada Ltd. mine, a 41 per cent stake in the yet to be developed Fort Hills mine and steam-driven operations at Firebag and Mackay River.
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.
Through its merger with Petro-Canada in 2009, Suncor inherited oil assets in Libya and Syria. As conflict broke out in Libya in February 2011, Suncor pulled its employees out of the North African country. Production has since been resuming there.
In December, Suncor pulled its employees out of Syria in order to comply with sanctions aimed at isolating the regime of President Bashar Assad. During the second quarter Suncor took a $694-million charge against its second-quarter results related to Syria, where violence continues to rage.
Suncor also has assets in the U.K. North Sea, off Canada's East Coast, four refineries and a chain of Petro-Canada-branded gas stations.