Canada's largest energy company Suncor Energy Inc. (SU,SU.TO), after the merger with its rival Petro-Canada, reported its quarterly results Friday, posting higher profit for the third-quarter. However, operating earnings dropped year-over-year, mainly due to lower prices and higher operational expenses in its oil sands segment.
On August 1, 2009, Suncor Energy completed its merger with Petro-Canada. Therefore, the three and nine months reflect results of the post-merger Suncor from August 1, 2009 together with results of legacy Suncor from January 1 through July 31, 2009. The comparative figures reflect solely the 2008 results of legacy Suncor.
The Calgary, Alberta-based company earned C$929 million for the recent quarter, compared to C$815 million last year. On a per share basis, earnings fell to C$0.74 from C$0.86 in the year-ago quarter.
Excluding items, operating earnings plunged to C$288 million or C$0.23 per share, from C$810 million or C$0.87 per share reported in the third quarter of 2008.
Cash flow from operations for the quarter totaled C$574 million, down from C$1.146 billion recorded in the three-month period of last year.
Suncor Energy noted that the decrease in operating earnings and cash flow was mainly due to lower price realizations, which it attributed to the considerably weaker benchmark commodity prices in the third- quarter, together with higher operating expenses at oil sands, as a result of increased production and sales volumes.
However, the results were offset in part, by increased upstream production resulting from the merger with Petro-Canada and improved operational performance in existing oil sands assets, the company noted.
Quarterly revenues declined to C$8.44 billion from C$8.51 billion in the corresponding period of last year.
Following the completion of the merger with Petro-Canada, Suncor's total upstream production during the final two months of the third quarter of 2009 averaged 630,600 barrels of oil equivalent or boe per day. Additional production resulting from the merger accounted for 289,400 boe per day. Upstream production from Suncor's legacy oil sands and natural gas operations averaged 339,900 boe per day in the latest quarter, versus 281,000 boe per day in the same quarter a year ago.
Excluding proportionate production share from the Syncrude joint venture, Oil Sands production rose to an average 305,300 barrels per day or bpd from 245,600 bpd, primarily due to improved operational reliability in the third quarter of 2009. Also, last year production was negatively impacted by unplanned maintenance shutdowns in upgrading and extraction assets, as well as wet weather that impacted mine production.
As a result of the merger, Suncor holds a 12% share in the Syncrude oil sands joint venture located close to Suncor's existing oil sands operations in Fort McMurray, Alberta. Syncrude operations contributed an average 37,400 bpd of sweet crude production for August and September, 2009.
After completion of the merger, production from Suncor's Natural Gas business during August and September 2009, averaged 772 million cubic feet equivalent or mmcfe per day. Additional production resulting from the merger totaled 563 mmcfe per day. Production from Suncor's legacy natural gas operations averaged 208 mmcfe per day in the third quarter of 2009, a decline from 213 mmcfe per day, largely due to shut-in production in the Elmworth area and the sale of certain non-core assets in the second quarter of 2009.
East Coast Canada production contributed an average 49,600 bpd during the final two months of the third quarter of 2009, while International segment produced average 108,600 bpd during the final two months of the third quarter of 2009. Productions for both the East Coast Canada and International segments were lower than capacity, primarily as a result of planned and unplanned maintenance and the tie-in of the North Amethyst extension at White Rose.
Cash operating costs for oil sands operations, excluding Syncrude, averaged C$32.25 per barrel in the third quarter of 2009, compared to C$34.00 per barrel during the third quarter of 2008.
For the nine month ended September 30, 2009, the company posted net earnings of C$689 million or C$0.64 per share, versus C$2.35 billion or C$2.48 per share in the prior-year period. Operating earnings amounted to C$646 million, sharply below C$2.471 billion reported last year. Year-to-date, revenue dropped to C$17.84 billion from C$21.69 billion in the comparable period.
Looking ahead to the fourth quarter, Suncor Energy projects international production in the range of 130,000 - 140,000 boe per day and east coast canada production of 60,000 - 65,000 bpd. Natural gas production is anticipated to range from 760 to 775 mmcf equivalent per day.
For 2009, the company now expects oil Sands production of 290,000 to 305,000 bpd, compared to prior outlook of 300,000 bpd.
As part of its strategic business alignment and subject to Board of Directors approval, Suncor said it plans to divest a number of non-core assets. The proposed divestments identified to date include certain natural gas assets in Western Canada and the United States Rockies, all Trinidad and Tobago assets and certain non-core North Sea assets, Suncor Energy noted.
SU closed Thursday's regular trading on NYSE at US$33.14. For the 52-week trading period, shares have been moving in the US$14.52 - US$39.62 range.
Meanwhile, SU.TO closed trade on TSX at C$35.37. Shares have been ranging between C$18.80 and C$40.79 in the 52-week period.
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