Suncor Targets 10% Production Growth for 2018, Cuts Capex Forecast

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Researched by Industrial Info Resources (Sugar Land, Texas)--Canadian energy giant Suncor Energy Incorporated (NYSE:SU) (Calgary, Alberta) has reduced its 2018 capital-spending outlay by roughly $588 million. Industrial Info is tracking nearly $33 billion in active Suncor oil sands projects, including $9.5 billion that are under construction.

Suncor said in its revised guidance that it now plans to invest between $3.5 billion and $3.9 billion next year, with about a quarter of the amount directed toward upstream-growth projects in its oil sands and exploration and production businesses, company executives said. Suncor also is targeting average upstream output of 740,000 to 780,000 barrels of oil equivalent per day (boe/d)--a 10% year-over-year production increase.

"During an extended period of low oil prices, we've demonstrated that we can generate significant free cash flow and strong returns for shareholders while continuing to drive down our operating costs and delivering significant future growth by executing two major projects (Fort Hills and Hebron)," President and Chief Executive Officer Steve Williams said.

Suncor currently has in situ oil sands production capacity of about 230,000 barrels per day (BBL/d). By the end of this year, the producer expects to complete the first phases of its 190,000-BBL/d Fort Hills mine, which was 95% complete by the end of the third quarter. For more information, see Industrial Info's project report.

"With first oil at both Fort Hills and Hebron expected by year-end, we're bringing on new production at the same time as oil prices are rising to their highest level in several years," Williams said. The company expects cash operating costs for its Fort Hills project to steadily decline throughout the year, owing to a production increase to 90% of capacity.

Offshore, first oil is expected before the end of the year the $6 billion-plus Hebron Offshore Crude Oil Production Platform in the Labrador Sea. The platform, which was installed on location during the summer and is in its final phases of commissioning, is expected to produce 150,000 BBL/d of crude oil, with a possible future expansion to 180,000 BBL/d. The project is led by Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) and includes Suncor, Statoil ASA (NYSE:STO) (Stavanger, Norway) and Nalcor Energy (St. John's, Newfoundland and Labrador). For more information, see Industrial Info's project reports on Hebron's topsides, gravity-based structure and subsea development.

During the third quarter, Suncor completed a planned turnaround maintenance and upgrade program at its Firebag facility, where utilization exceeded 90%, and resolved some operational issues at its Syncrude facility. By bringing those operations back on line, Suncor's cash operating costs for oil sands came in at $21.60 per barrel--the lowest in more than a decade, Chief Financial Officer Alister Cowan said in an earnings-related conference call. See Industrial Info's October 30, 2017, article -- Suncor's Third-Quarter Profit Surges on Record Output, Higher Oil Prices.

Suncor also scored a new quarterly production record of 739,900 boe/d due primarily to the increased output at its oil sands operations. Third-quarter oil sands output jumped 8% to 469,300 boe/d, and Syncrude production totaled 159,100 boe/d.

Western Canadian crude supply accounts for the bulk of the country's oil supply and is forecast to increase from 3.9 million barrels of oil per day (MM BBL/d) in 2016 to 5.4 MM BBL/d in 2030--an estimated 1.5-MM BBL/d growth rate, according to the Canadian Association of Petroleum Producers (CAPP). Western Canada heavy oil sands supply provides 95% of the expected growth.

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