All financial figures are unaudited and in Canadian dollars unless noted
otherwise. Certain financial measures referred to in this document are
not prescribed by Canadian generally accepted accounting principles
(GAAP). For a description of these measures, see Non-GAAP Financial
Measures in Suncor's 2009 second quarter Management's Discussion and
Analysis. This document makes reference to barrels of oil equivalent
(boe). A boe conversion ratio of six thousand cubic feet of natural gas:
one barrel of crude oil is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Accordingly, boe measures may be
misleading, particularly if used in isolation.CALGARY, July 22 /CNW/ - Suncor Energy Inc. today reported a second
quarter 2009 net loss of $51 million ($0.06 per common share), compared to net
earnings of $829 million ($0.89 per common share) in the second quarter of
2008. Excluding unrealized foreign exchange gain on the company's U.S. dollar
denominated long-term debt, mark-to-market accounting losses on commodity
derivatives, and costs related to start-up or deferral of growth projects,
second quarter 2009 earnings were $185 million ($0.20 per common share),
compared to $920 million ($0.99 per common share) in the second quarter of
2008. Cash flow used in operations was $342 million in the second quarter of
2009, compared to cash flow from operations of $1.405 billion in the second
quarter of 2008.
The decrease in earnings and cash flow was primarily due to lower price
realizations, as benchmark commodity prices were significantly weaker in the
second quarter of 2009 compared to the same period in 2008, and operating
expenses were higher at oil sands due to increased production and sales. These
were partially offset by the increased production in our oil sands business
segment, reduced natural gas royalty expense due to lower benchmark commodity
prices, and increased refined product sales in our downstream business
segment.
Net loss for the first six months of 2009 was $240 million, compared to
net earnings of $1.537 billion for the same period in 2008. Excluding
unrealized foreign exchange impacts on the company's U.S. dollar denominated
long-term debt, mark-to-market accounting losses on commodity derivatives, and
costs related to start-up or deferral of growth projects, earnings for the
first six months of 2009 were $410 million, compared to $1.725 billion in the
same period for 2008. Cash flow from operations for the first six months of
2009 was $137 million, compared to $2.566 billion in the first six months of
2008. The year-to-date decreases in earnings and cash flow from operations
were primarily due to the same factors that impacted second quarter results.
Suncor's total upstream production averaged 336,100 barrels of oil
equivalent (boe) per day during the second quarter of 2009, compared to
212,300 boe per day in the second quarter of 2008. Oil sands production
contributed an average 301,000 barrels per day (bpd) in the second quarter of
2009, compared to second quarter 2008 production of 174,600 bpd. The increased
production was primarily due to improved upgrader reliability in the second
quarter of 2009. In addition, in the comparative quarter of 2008 a planned
maintenance shutdown of one of our upgraders and a regulatory cap on our
Firebag in-situ operations impacted production. Natural gas production this
most recent quarter averaged 211 million cubic feet equivalent (mmcfe) per
day, compared to 226 mmcfe per day in the second quarter of 2008.
Oil sands cash operating costs averaged $31.30 per barrel in the second
quarter of 2009, compared to $50.85 per barrel during the second quarter of
2008. The decrease in cash operating costs per barrel was primarily due to
increased production and a decrease in natural gas input prices.
"During the second quarter, we saw the fruits of last year's labour,"
said Rick George, president and chief executive officer. "For the second
quarter in a row, we experienced very good reliability at oil sands, which is
clearly illustrated through our production results during the first half of
2009. As we look to the second half of the year, we are confident that we are
well-positioned to take advantage of any improvement in commodity prices with
more reliable operations."
Merger and growth update
On March 23, 2009, Suncor and Petro-Canada (TSX:PCA) (NYSE:PCZ) announced
that they have agreed to merge the two companies. The merger has received
shareholder, court and Competition Bureau approval and with all the conditions
necessary to complete the transaction satisfied, Suncor and Petro-Canada
intend to make the merger effective August 1, 2009. The combined entity will
operate corporately and trade under the Suncor name while maintaining the
strong brand presence and customer loyalty of Petro-Canada in refined
products.
During the second quarter of 2009, work continued on the Firebag sulphur
plant and the Steepbank extraction plant. The sulphur plant is expected to
support sulphur emissions reductions for existing and planned in-situ
development, and the extraction plant is expected to provide improved
reliability and productivity for the company's oil sands assets. The project
cost for the Steepbank extraction plant is expected to exceed the previous
cost estimate ($850 million +/-10%) with a final estimated cost of $980
million (+5%) as a result of labour shortages and the resulting productivity
challenges, as well as premiums incurred to maintain the project schedule.
Both of these projects are scheduled for completion in the third quarter of
2009. For an update on our significant capital projects currently in progress
see page 11 of Suncor's second quarter report to shareholders.
As previously announced, we deferred the company's growth projects in our
revised 2009 capital budget. We do not anticipate any changes to our growth
project plans until after the close of the proposed merger with Petro-Canada.
At that time, all capital projects from both predecessor companies will be
reviewed with capital investment directed toward projects with the strongest
near-term cash flow potential, highest anticipated return on capital and
lowest risk.
Outlook
Suncor's outlook provides management's targets for 2009 in certain key
areas of the company's business. Outlook forecasts are subject to change.Six Month Actuals
Ended June 30, 2009 2009 Full Year Outlook
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Oil Sands
Production (bpd)(1) 289 000 300 000 (+5%/-10%)
Sales
Diesel 9% 10%
Sweet 39% 38%
Sour 48% 49%
Bitumen 4% 3%
Realization on crude
sales basket(2) WTI @ Cushing less WTI @ Cushing less
Cdn$4.99 per barrel Cdn$4.50 to Cdn$5.50 per
barrel
Cash operating
costs(3) $32.50 per barrel $33.00 to $38.00 per barrel
-------------------------------------------------------------------------
Natural Gas
Production(4)
(mmcf equivalent
per day) 215 210 (+5%/-5%)
Natural gas 91% 92%
Liquids 9% 8%
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Includes 22,000 bpd in the first six months of 2009 processed by
Suncor for Petro-Canada for which Suncor receives a processing fee.
Volumes received under this arrangement are not included as purchases
for financial statement presentation.
(2) Excludes the impact of hedging activities.
(3) Cash operating cost estimates are based on the following assumptions:
(i) production volumes and sales mix as described in the table above;
and (ii) a natural gas price of $4.50 per gigajoule ($4.75 per mcf)
at AECO. This goal also includes costs incurred for third-party
bitumen processing but does not include costs related to deferral of
growth projects. Based on second quarter results and expectations for
the balance of the year, the natural gas price assumption has been
reduced from the previous $7.10 per gigajoule at AECO. This change in
assumption had no material impact on our cash operating costs per
barrel outlook for 2009. Cash operating costs per barrel is not
prescribed by Canadian generally accepted accounting principles
(GAAP). This non-GAAP financial measure does not have any
standardized meaning and therefore is unlikely to be comparable to
similar measures presented by other companies. Suncor includes this
non-GAAP financial measure because investors may use this information
to analyze operating performance. This information should not be
considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. See Non-GAAP Financial
Measures on page 15 of Suncor's second quarter report to
shareholders.
(4) Production target includes natural gas liquids (NGL) and crude oil
converted into mmcf equivalent at a ratio of one barrel of NGL/crude
oil: six thousand cubic feet of natural gas. This conversion ratio is
based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the
wellhead. This mmcf equivalent may be misleading, particularly if
used in isolation.The 2009 outlook is based on Suncor's current estimates, projections and
assumptions for the 2009 fiscal year and is subject to change. Assumptions are
based on management's experience and perception of historical trends, current
conditions, anticipated future developments and other factors believed to be
relevant. Assumptions of the 2009 outlook include implementing reliability and
operational efficiency initiatives that are expected to minimize unplanned
maintenance in 2009.
Factors that could potentially impact Suncor's operations and financial
performance in 2009 include:- Bitumen supply. Ore grade quality, unplanned mine equipment and
extraction plant maintenance, tailings storage and in-situ reservoir
performance could impact 2009 production targets. Production could
also be impacted by the availability of third-party bitumen.
- Performance of recently commissioned upgrading facilities. Production
rates while new equipment is being lined out are difficult to predict
and can be impacted by unplanned maintenance.
- Unplanned maintenance. Production estimates could be impacted if
unplanned work is required at any of our mining, production,
upgrading, refining or pipeline assets.
- Crude oil hedges. Suncor has hedging agreements for approximately
60% of targeted production in 2009 and for 50,000 bpd in 2010. See
Commodity and Treasury Hedging Activities on page 12 of Suncor's
second quarter report to shareholders.For additional information on risk factors that could cause actual
results to differ, please see page 19 of Suncor's 2008 annual report.
Notice - Forward-Looking Information
This document contains certain forward-looking statements and other
information that are based on Suncor's current expectations, estimates,
projections and assumptions that were made by the company in light of its
experience and its perception of historical trends.
All statements and other information that address expectations or
projections about the future, including statements about Suncor's strategy for
growth, expected and future expenditures, commodity prices, costs, schedules,
production volumes, operating and financial results and expected impact of
future commitments, are forward-looking statements. Some of the
forward-looking statements may be identified by words like "expects,"
"anticipates," "estimates," "plans," "scheduled," "intends," "believes,"
"projects," "indicates," "could," "focus," "vision," "goal," "outlook,"
"proposed," "target," "objective," and similar expressions. These statements
are not guarantees of future performance and involve a number of risks and
uncertainties, some that are similar to other oil and gas companies and some
that are unique to Suncor. Suncor's actual results may differ materially from
those expressed or implied by its forward-looking statements and readers are
cautioned not to place undue reliance on them.
Suncor's outlook includes a production range of +5%/-10% based on our
current expectations, estimates, projections and assumptions. Uncertainties in
the estimating process and the impact of future events may cause actual
results to differ, in some cases materially, from our estimates. Assumptions
are based on management's experience and perception of historical trends,
current conditions, anticipated future developments and other factors believed
to be relevant. For a description of assumptions and risk factors specifically
related to the 2009 outlook, see page 3 of our second quarter 2009 report to
Shareholders.
The risks, uncertainties and other factors that could influence actual
results include but are not limited to, market instability affecting Suncor's
ability to borrow in the capital debt markets at acceptable rates;
availability of third-party bitumen; success of hedging strategies,
maintaining a desirable debt to cash flow ratio; changes in the general
economic, market and business conditions; fluctuations in supply and demand
for Suncor's products; commodity prices, interest rates and currency exchange
rates; Suncor's ability to respond to changing markets and to receive timely
regulatory approvals; the successful and timely implementation of capital
projects including growth projects and regulatory projects (for example, the
emissions reduction modifications at our Firebag in-situ development); the
accuracy of cost estimates, some of which are provided at the conceptual or
other preliminary stage of projects and prior to commencement or conception of
the detailed engineering needed to reduce the margin of error and increase the
level of accuracy; the integrity and reliability of Suncor's capital assets;
the cumulative impact of other resource development; the cost of compliance
with current and future environmental laws; the accuracy of Suncor's reserve,
resource and future production estimates and its success at exploration and
development drilling and related activities; the maintenance of satisfactory
relationships with unions, employee associations and joint venture partners;
competitive actions of other companies, including increased competition from
other oil and gas companies or from companies that provide alternative sources
of energy; labour and material shortages; uncertainties resulting from
potential delays or changes in plans with respect to projects or capital
expenditures; actions by governmental authorities including the imposition of
taxes or changes to fees and royalties, changes in environmental and other
regulations (for example, the Government of Alberta's review of the unintended
consequences of the proposed Crown royalty regime, the Government of Canada's
current review of greenhouse gas emission regulations); the ability and
willingness of parties with whom we have material relationships to perform
their obligations to us; and the occurrence of unexpected events such as
fires, blowouts, freeze-ups, equipment failures and other similar events
affecting Suncor or other parties whose operations or assets directly or
indirectly affect Suncor. The foregoing important factors are not exhaustive.
The forward-looking statements and information relating to the proposed
transaction between Suncor and Petro-Canada are based on certain key
expectations and assumptions made by us, including expectations and
assumptions concerning: the accuracy of reserve and resource estimates;
customer demand for the merged company's products; commodity prices and
interest and foreign exchange rates; planned synergies, capital efficiencies
and cost-savings; applicable royalty rates and tax laws; future production
rates; the sufficiency of budgeted capital expenditures in carrying out
planned activities; the availability and cost of labour and services; and the
receipt, in a timely manner, of regulatory and other third party approvals in
respect of the proposed merger. In addition, forward-looking statements and
information concerning the anticipated completion of the proposed transaction
and the anticipated timing for completion of the transaction are provided in
reliance on certain assumptions that we believe are reasonable at this time,
including; the timing of receipt of the necessary regulatory and other third
party approvals; and the time necessary to satisfy the conditions to the
closing of the transaction. These dates may change for a number of reasons,
including the inability to secure necessary regulatory, court or other third
party approvals in the time assumed or the need for additional time to satisfy
the conditions to the completion of the transaction. As a result of the
foregoing, readers should not place undue reliance on the forward-looking
statements and information concerning these times. Although we believe that
the expectations and assumptions on which such forward-looking statements and
information are based are reasonable, undue reliance should not be placed on
the forward-looking statements and information because we can give no
assurance that they will prove to be correct.
Since forward-looking statements and information relating to the proposed
transaction address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of factors and
risks. There are risks also inherent in the nature of the proposed
transaction, including: failure to realize anticipated synergies or cost
savings; risks regarding the integration of the two entities; incorrect
assessments of the values of the other entity; and failure to obtain any
required regulatory and other third party approvals (or to do so in a timely
manner). The foregoing important factors are not exhaustive.
Many of these risk factors are discussed in further detail throughout
Suncor's second quarter 2009 Management's Discussion and Analysis and in the
company's Annual Information Form/Form 40-F on file with Canadian securities
commissions at www.sedar.com and the United States Securities and Exchange
Commission (SEC) at www.sec.gov. Readers are also referred to the risk factors
described in other documents that Suncor files from time to time with
securities regulatory authorities. Copies of these documents are available
upon request without charge from the company.
Suncor Energy Inc. is an integrated energy company headquartered in
Calgary, Alberta. Suncor's oil sands business, located near Fort McMurray,
Alberta, extracts and upgrades oil sands and markets refinery feedstock and
diesel fuel, while operations throughout western Canada produce natural gas.
Suncor also operates a refining and marketing business which includes
refining, retail, pipeline and distribution operations in Ontario, Canada and
in Colorado and Wyoming in the United States. Suncor's common shares (symbol:
SU) are listed on the Toronto and New York stock exchanges.
Suncor Energy (U.S.A.) Inc. is an authorized licensee of the Shell(R) and
Phillips 66(R) brand and marks in the state of Colorado. Sunoco in Canada is
separate and unrelated to Sunoco in the United States, which is owned by
Sunoco, Inc. of Philadelphia.
A full copy of Suncor's second quarter report to shareholders and the
financial statements and notes (unaudited) can be obtained at
www.suncor.com/financialreporting or by calling 1-800-558-9071 toll-free in
North America.
To listen to the conference call discussing Suncor's second quarter
results, visit www.suncor.com/webcasts.
For further information: about Suncor Energy Inc. please visit our web
site at www.suncor.com; Investor inquiries: John Rogers, (403) 269-8670; Media
inquiries: Shawn Davis, (403) 920-8379
