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 2008 third 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, Oct. 29 /CNW/ - Suncor Energy Inc. today announced third quarter
2008 net earnings of $815 million ($0.87 per common share), compared to
$627 million ($0.68 per common share) for the third quarter of 2007. Excluding
unrealized foreign exchange impacts on the company's U.S. dollar denominated
long-term debt, and project start-up costs, earnings for the third quarter of
2008 were $971 million ($1.04 per common share), compared to $538 million
($0.58 per common share) in the third quarter of 2007.
The increase in earnings was primarily due to improved price realizations
for our oil sands products. This was partially offset by an increase in
operating expenses, product purchases and Crown royalties in our oil sands
Net earnings for the first nine months of 2008 were $2.352 billion,
compared to $1.941 billion for the same period in 2007. Excluding unrealized
foreign exchange impacts on the company's U.S. dollar denominated long-term
debt, the impact of income tax rate reductions on opening future income tax
liabilities, and project start-up costs, earnings for the first nine months of
2008 were $2.580 billion, compared to $1.712 billion in the same period for
Cash flow from operations in the third quarter of 2008 was
$1.346 billion, compared to $957 million in the same period of 2007. Cash flow
from operations for the first nine months of 2008 was $3.912 billion, compared
to $2.809 billion in the first nine months of 2007.
The increase in earnings over the first nine months of 2008, and the
increase in cash flow from operations for the three and nine month periods
ended September 30, 2008, are due primarily to the same factors that impacted
third quarter earnings.
Suncor's total upstream production averaged 281,000 barrels of oil
equivalent (boe) per day in the third quarter of 2008, compared to 274,300 boe
per day in the third quarter of 2007. In Suncor's natural gas business,
production was 213 million cubic feet equivalent (mmcfe) per day compared to
third quarter 2007 production of 211 mmcfe per day. Oil sands production
contributed 245,600 barrels per day (bpd) in the third quarter of 2008
compared to 239,100 bpd in the third quarter of 2007.
Oil sands cash operating costs in the third quarter of 2008 averaged
$34.00 per barrel, compared to $25.10 per barrel during the third quarter of
2007. The increase in cash operating costs per barrel was due to higher
operating expenses and increased natural gas input costs.
Production volumes were lower than planned in the third quarter and as a
result, Suncor has adjusted its production outlook to an annual average of
235,000 bpd with a corresponding increase in cash operating costs to a target
of $36.50 per barrel.
"We've had a challenging quarter with unplanned maintenance, including
issues at our hydrogen facilities that impacted our product mix," said Rick
George, president and chief executive officer.
Production volumes in the quarter were impacted by unplanned maintenance
activities in our upgrading and extraction assets. In addition, an unplanned
shutdown of facilities that supply hydrogen reduced production of higher-value
sweet (low sulphur) synthetic crude oil and diesel. Repairs to the facilities
are complete and production of sweet products is increasing.
"With these issues behind us, we continue to target production of
approximately 300,000 barrels per day by the end of the year as we work to
realize the full value of our expanded oil sands production facilities," said
Commissioning of Suncor's $2.3 billion expansion to one of two oil sands
upgraders is nearing completion and production volumes are expected to
continue ramping up in 2009 toward design capacity of 350,000 bpd.
Bitumen feedstock from Suncor's Firebag in-situ operations is also
expected to increase following the lifting in July of a production cap imposed
by provincial regulators. Wells that had been shut in have begun steaming and
small amounts of incremental production are expected to come on line in the
fourth quarter of 2008.
Operations and growth update
On October 23, Suncor announced an update to the schedule of its
$20.6 billion Voyageur growth strategy, including reporting plans for 2009
capital spending of $6 billion.
"In light of current financial market conditions, we've modified our
capital plans for 2009, reducing targeted spending by more than a third," said
George. "Our aim is to ensure we are living within our means during a time of
market uncertainty, while also making the strategic spending decisions that
will allow us to continue on our growth path."
The company's growth outlook maintains spending and construction
timelines for the third and fourth stages of Firebag in-situ operations.
Completion of Firebag Stages 3 and 4 (in 2009 and 2010, respectively) is
expected to provide increases in bitumen production and future cash flow.
In the near-term, Suncor expects to scale down spending and the pace of
construction on the company's planned Voyageur upgrader, delaying targeted
completion by approximately one year to the end of 2012. Stages 5 and 6 of
Firebag in-situ operations are expected to proceed but, as they are at
relatively early phases of development, spending and scheduling plans remain
flexible to respond to market conditions.
Of the total Voyageur capital budget of $20.6 billion, Suncor had spent
approximately $5.3 billion at the end of the third quarter.
"We remain committed to an integrated expansion strategy and targeted oil
sands production of 550,000 barrels per day," said George. "However, we've
always had options available to us in terms of how the expansion is rolled out
- and we believe in the current economic environment it's prudent to exercise
The company's 2009 capital spending plan is expected to be financed
through undrawn credit facilities and cash flow from operations. As Suncor
invests for future growth, prudent debt management remains a priority. Net
debt levels increased to $5.3 billion in the third quarter of 2008 from
$3.2 billion at year-end 2007.
Suncor's outlook provides management's targets for 2008 in certain key
areas of the company's business. Outlook forecasts are subject to change.
Nine Month Actuals
September 30, 2008 2008 Full Year Outlook
Production (bpd)(1) 222 600 235 000
Diesel 9% 9%
Sweet 33% 34%
Sour 57% 56%
Bitumen 1% 1%
Realization on WTI @ Cushing WTI @ Cushing
crude sales basket(1) less Cdn$3.37 less Cdn$3.50 to
per barrel Cdn$4.50 per barrel
Cash operating costs(1)(2) $37.45 per barrel $36.50 per barrel
per day) 223 220
Natural gas 91% 91%
Liquids 9% 9%
(1) Based on third quarter results and expectations for the
fourth quarter, the outlook for oil sands production, cash operating
costs, realization on crude sales basket and natural gas production
has been adjusted. The June 30 oil sands production outlook was
240,000 to 250,000 bpd (diesel 12%, sweet 38%, sour 50%, and
bitumen 0%) with a corresponding cash operating cost range of
$35.00 to $36.00 per barrel. The June 30 realization on crude sales
basket was WTI @ Cushing less Cdn$2.50 to Cdn$3.50. The June 30
natural gas production outlook was 210 to 220 mmcf equivalent per
(2) Cash operating cost estimates are based on the following assumptions:
production volumes and sales mix as described in the table above and
a natural gas price of $8.00 per gigajoule at AECO. Based on natural
gas prices in the first nine months of 2008 and expectations for the
fourth quarter, the natural gas price assumption has been adjusted.
The June 30 natural gas price assumption was $6.70 per gigajoule at
AECO. This estimate also includes costs incurred for third-party
bitumen purchases. Cash operating costs per barrel are 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
(3) 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.
Assumptions used to develop our outlook are based on year-to-date
performance and management's best estimates for the remainder of the year.
Factors that could potentially impact Suncor's operations and financial
performance in 2008 include:
- Bitumen supply. Ore grade quality, unplanned mine equipment and
extraction plant maintenance, tailings storage and regulatory
restrictions could impact 2008 production targets. Production could
also be impacted by the availability of third-party bitumen.
- Planned maintenance to portions of Upgrader 2. Although this
maintenance is reflected in operational targets for the year,
production estimates could be impacted if unplanned work is
identified, or the schedule is impacted by labour or material supply
- Crude oil hedges. Suncor has hedging agreements for 10,000 bpd in
2008. These costless collar hedges have an average floor of US$59.85
per barrel with an average ceiling of US$101.06 per barrel.
Legal Notice - Forward-Looking Information
This document contains certain forward-looking statements 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
All statements 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," "invests," "could," "focus,"
"goal," "proposed," "target," "objective," "potential," "forecast," "predict,"
"enable," "outlook," 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.
The risks, uncertainties and other factors that could influence actual
results have not changed since the 2008 second quarter report other than the
additional risk that Suncor's ability to borrow in the capital debt markets at
acceptable rates may be affected by market instability. Other risks include
but are not limited to, changes in the general economic, market and business
conditions; fluctuations in supply and demand for Suncor's products;
volatility of and assumptions regarding 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 (for example, the
Voyageur project, including our Firebag in-situ development) 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 implementation of recommendations to enhance how
the performance of the royalty regime is measured and reported, the Government
of Canada's proposed Clean Air regulatory framework and the development of
greenhouse gas regulation by other provincial and state governments); the
future potential for lawsuits against greenhouse gas emitters, based on links
drawn between greenhouse gas emissions and climate change; unexpected issues
associated with management and reclamation of our tailings ponds; 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.
Many of these risk factors are discussed in further detail throughout
Suncor's third quarter 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
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 operates a refining and marketing business in Ontario with retail
distribution under the Sunoco brand. U.S.A. downstream assets include pipeline
and refining operations in Colorado and Wyoming and retail sales in the Denver
area under the Phillips 66(R) brand. 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 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.
A full copy of Suncor's third quarter report to shareholders, including
management's discussion and analysis 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 third quarter
results, visit www.suncor.com/webcasts.
For further information:
For further information: Investor inquiries: John Rogers, (403)
269-8670; Media inquiries: Brad Bellows, (403) 269-8717