Suncor's Third-Quarter Profit Surges on Record Output, Higher Oil Prices

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Researched by Industrial Info Resources (Sugar Land, Texas)-The third quarter was likely a welcome return to normal for Canadian energy giant Suncor Energy Incorporated (NYSE:SU) (Calgary, Alberta), as it achieved better-than-expected earnings and brought several of its oil sands facilities back on line. Industrial Info is tracking more than $36 billion in active projects involving Suncor, including about $2.1 billion that are under construction.

Suncor's third-quarter overall sales stood at nearly $1.3 billion, compared with $392 million in third-quarter 2016. Profits were reported to be $867 million, versus $346 million in the prior-year quarter.

"On balance, it all added up to our best quarterly financial results since the first quarter of 2014, when WTI (West Texas Intermediate crude) was over $100 (Canadian) a barrel," Chief Financial Officer Alister Cowan said in an earnings-related conference call.

The company completed a planned maintenance turnaround and upgrade program at its Firebag facility, where utilization exceeded 90%, and resolved some operational issues at its Syncrude facility. By returning those operations online, Suncor's cash operating costs for oil sands came in at $21.60 per barrel--the lowest in more than a decade, Cowan said.

Suncor also scored a new quarterly production record of 739,900 barrels of oil equivalent per day (boe/d) due primarily to the increased output at its oil sands operations. Oil sands production jumped 8% to 469,300 boe/d, and Syncrude production totaled 159,100 boe/d.

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 company 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.

Suncor continues to advance its plan for multiple new in-situ oil sands projects. Earlier this month, the company filed the regulatory application for Meadow Creek West, a single-phase 40,000-BBL/d project, which utilizes steam-assisted gravity drainage (SAGD) technology, located south of Fort McMurray, Alberta. For more information, see Industrial Info's project report.

The neighboring Meadow Creek East project, a proposed 80,000-BBL/d facility, received regulatory approval in March. If Suncor sanctions the project, which is a joint venture with Nexen Energy ULC (NYSE:NXY) (Calgary, Alberta), first oil could be achieved as early as 2023, the company said. For more information, see Industrial Info's project reports on the first phase, second phase and third phase.

The Meadow Creek projects will see Suncor deploy its in-situ replication strategy, designed to significantly reduce costs, Chief Executive Officer Steve Williams said in September. "Replication will be a central focus of the next phase of oil sands growth, with 10 locations identified, which is expected to add approximately 360,000 BBL/d in production."

Before the downturn in oil prices, Suncor's next in-situ growth project appeared to be a 20,000-BBL/d expansion at MacKay River, which currently produces about 23,000 BBL/d, but the project was deferred in early 2015.

"Our base case of $50-$55 WTI would see us invest in debottlenecking and pre-engineering for in-situ replication, and at $65 WTI we'd advance that development on replication." Williams said.

Suncor also is expected to apply for regulatory approval for a new SAGD project north of Fort McMurray by the end of the year. If approved, the Lewis project would produce up to 160,000 BBL/d. For more information, see Industrial Info's project reports on the first phase and second phase.

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