Suncor posts strong Q4 earnings, hikes cost of Fort Hills oilsands mine by $1.4B
Credits higher oil prices and better production for fourth quarter profit
Suncor Energy is blaming delays caused by last spring's devastating Fort McMurray wildfire, along with construction changes to boost capacity, for a $1.4-billion to $1.9-billion increase in the estimated cost of its Fort Hills oilsands mining project.
The company says the project, which was 76 per cent complete as of Dec. 31, is now expected to cost $16.5 billion to $17 billion, up from the previous estimate of $15.1 billion.
It says that the cost per barrel, however, will remain at about $84,000 per flowing barrel of bitumen because nameplate capacity has been increased to 194,000 barrels per day from 180,000.
Suncor says its share of Fort Hills' remaining project capital is between $1.6 billion and $1.8 billion and most of that will be spent this year, with production expected to gradually ramp up through 2018.
The project is owned 50.8 per cent by Suncor, 29.2 per cent by Total SA and 20 per cent by Teck Resources Ltd. In a statement, Teck said it will record an after-tax impairment charge of $164 million in its fourth-quarter results because of the higher cost.
Higher oil prices, better production
Suncor reported late Wednesday net earnings of $531 million or 32 cents per share in the fourth quarter of 2016 on higher oil prices and better production, compared with a net loss of $2 billion or $1.38 per share in the same period of 2015.
The earlier net loss included $1.6 billion of non-cash impairment charges and an unrealized after-tax foreign exchange loss of $382 million on the revaluation of US dollar denominated debt.
Suncor reported record production of 738,500 barrels of oil equivalent per day in the fourth quarter, compared with 582,900 in the fourth quarter of 2015, due mainly to a larger share of the Syncrude oilsands mining consortium and record Syncrude operating results.
"Our cost reduction efforts have resulted in significant savings in the year, well exceeding the targets we set out in early 2016, and the improvement in Syncrude's reliability in consecutive periods has been impressive," said CEO Steve Williams in a statement.
"We have achieved a step change in operating efficiency this year, which has resulted in cash operating costs per barrel at our oilsands operations being consistently below $25, excluding the impact of the forest fires."
Suncor raised its quarterly dividend by three cents to 32 cents per share.
Unlikely U.S. will impose border tax, CEO says
Williams says he thinks it's unlikely that the United States will bring in a border adjustment tax as has been suggested by some Republican lawmakers.
He says trade with Canada doesn't appear to be a major concern for U.S. President Donald Trump, adding that there are policies south of the border such as corporate tax reductions that can benefit Suncor.
Williams also says the appointment of former ExxonMobil CEO Rex Tillerson as secretary of state is encouraging as he is familiar with the oilsands industry and recognizes that Canadian oil and gas is vital to the American economy.
Williams' views on the possibility of a border adjustment tax are counter to those of financial analysts who say declining values in Canadian energy stocks since the beginning of the year reflect investor concerns that the industry will be hit hard by such a levy.
The U.S. is Canada's largest market for oil and gas.
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