All financial figures are unaudited and in Canadian dollars unless noted
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 2007 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. 25 /CNW/ - Suncor Energy Inc. today reported third quarter
2007 earnings of $588 million ($1.27 per common share) excluding the impact of
unrealized foreign exchange gains on the company's U.S. dollar denominated
long-term debt and project start-up costs, compared to $691 million ($1.50 per
common share) in the third quarter of 2006. Net earnings for the third quarter
of 2007 were $677 million ($1.47 per common share), compared to $682 million
($1.48 per common share) in the third quarter of 2006. Cash flow from
operations was $1.027 billion in the third quarter of 2007, compared to
$1.153 billion in the third quarter of 2006.
The decrease in net earnings was primarily due to a reduction in oil
sands sales volumes and increased downstream refined product purchases; both
the result of planned maintenance outages. Sales were down in oil sands due to
a planned maintenance outage in July that impacted production rates, while
refined product purchases were increased to ensure customer requirements were
met during a planned outage at the Sarnia refinery in September. These
negative impacts were partially offset by higher price realizations for oil
sands products. Cash flow from operations was lower partially due to the same
factors that impacted net earnings, as well as an increase in cash income tax
expenses in the third quarter of 2007, compared to the third quarter of 2006.
"If you back out the impact of the maintenance work, you'll see that from
an operational perspective, both our oil sands operation and our downstream
businesses had a good quarter," said Rick George, president and chief
executive officer. "Production at oil sands and utilization rates in the
downstream were fairly strong."
Earnings for the first nine months of 2007 were $1.640 billion ($3.56 per
common share) excluding the impacts of income tax rate revaluations, net
insurance proceeds (relating to the January 2005 fire), unrealized foreign
exchange gains on the company's U.S. dollar denominated long-term debt, and
project start-up costs, compared to $1.972 billion ($4.30 per common share) in
the same period for 2006. Net earnings for the first nine months of 2007 were
$1.869 billion ($4.06 per common share), compared to $2.613 billion ($5.69 per
common share) for the same period in 2006. Earnings decreased as a result of
increased maintenance and lower production at oil sands during the first nine
months of 2007, compared to the same period in 2006.
Cash flow from operations for the first nine months of 2007 was
$2.701 billion, compared to $3.787 billion in the first nine months of 2006.
Cash flow from operations was lower partially due to the same factors that
impacted net earnings, as well as an increase in cash income tax expenses in
the first nine months of 2007 compared to the first nine months of 2006.
Suncor's total upstream production averaged 274,300 barrels of oil
equivalent (boe) per day in the third quarter of 2007, compared to 277,400 boe
per day in the third quarter of 2006. Oil sands production contributed 239,100
barrels per day (bpd) in the third quarter of 2007, compared to 242,800 bpd in
the third quarter of 2006. In Suncor's natural gas business, production was
211 million cubic feet equivalent (mmcfe) per day, compared to third quarter
2006 production of 208 mmcfe per day.
Oil sands cash operating costs in the third quarter of 2007 averaged
$25.10 per barrel, compared to $23.70 per barrel during the third quarter of
2006. The increase in cash operating costs per barrel was primarily due to
higher maintenance costs and slightly lower production resulting from the July
"At oil sands we saw major improvements during the latter half of the
quarter. We used the outage to tie-in new operating units and we saw
production rates climb considerably after start-up," said George. "It's a good
indicator that we can expect a strong fourth quarter and that we'll have a
great start to 2008."
The tie-ins completed are key to increasing production capacity to
350,000 bpd in 2008.
Despite the gains in the third quarter, unscheduled outages throughout
the year have impacted year-to-date results at oil sands. As a result,
management has changed its outlook, targeting an annual production average of
240,000 bpd to 245,000 bpd and cash operating cost of $26.50 to $27.00 per
"This remains a complex business with many day-to-day challenges and
uncertainties," said George. "We must increase our focus on achieving
This includes making progress to address issues at Suncor's Firebag
in-situ operation where high emissions have resulted in intervention by both
Alberta Environment and the Alberta Energy and Utilities Board. Until
emissions are reduced, production at Suncor's in-situ operation has been
capped by regulators at approximately 42,000 barrels of bitumen per day.
Suncor's revised outlook reflects this constraint.
"We're taking a number of steps to address regulator concerns including
accelerating the construction of emission abatement equipment," said George.
"At the same time we're also examining ways to increase bitumen supply from
our mining operations to help offset supply restraints at Firebag."
In Suncor's downstream operations, work continues on modifications to the
Sarnia refinery that are expected to enable the facility to process up to
40,000 bpd of oil sands sour crude. A partial outage to tie-in new facilities,
which began in early September, is expected to be completed in the fourth
quarter of 2007.
Planned maintenance at portions of the Commerce City refinery is also
underway, and is expected to conclude by the end of October. The refinery is
expected to operate at reduced rates during the outage.
Suncor's outlook provides management's targets for 2007 in certain key
areas of the company's business. Outlook forecasts are subject to change.
Nine months ended 2007
September 30, 2007 full year outlook
Production(1) 229 800 bpd 240 000 to 245 000 bpd
Diesel 11% 10%
Sweet 44% 42%
Sour 42% 43%
Bitumen 3% 5%
Realization on crude WTI at Cushing less WTI at Cushing less
sales basket(2) Cdn$2.10 per barrel Cdn$2.75 to $3.75 per barrel
costs(3) $27.75 per barrel $26.50 to $27.00 per barrel
production 210 mmcfe per day 215 to 220 mmcfe per day
1) The 2007 oil sands production outlook has been revised from the
original target of 260,000 bpd to 270,000 bpd. The revised target is
based on a production goal of 275,000 bpd to 285,000 bpd for the
fourth quarter of 2007. The 2007 oil sands production target includes
non-upgraded bitumen sold directly to the market. In 2006, the
production target referred only to synthetic crude oil production.
2) The 2007 realization on crude sales basket outlook was revised from
the original target of WTI @ Cushing less Cdn$7.50 to $8.50 per
3) The 2007 cash operating cost outlook was revised from the original
target of $21.50 to $22.50 per barrel. The revised target is based on
a cash operating cost goal of $23.50 to $24.50 per barrel in the
fourth quarter of 2007. Cash operating cost estimates are based on the
following assumptions: i) annual average production of 240,000 bpd to
245,000 bpd; ii) a production mix as described in the chart above; and
iii) a natural gas price of US$7.00 per thousand cubic feet (mcf) at
Henry Hub. 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
with GAAP. See "Non-GAAP Financial Measures" on page 13 of Suncor's
third quarter 2007 Report to Shareholders.
4) The 2007 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.
Factors that could potentially impact Suncor's financial performance
- Alberta provincial royalty review. The specific impacts of proposed
changes to the Alberta royalty legislation are not yet known, however,
it is expected that royalties as a percentage of revenues will
- Regulatory intervention at the Firebag in-situ operation. Additional
maintenance and capital costs will be incurred to construct and
commission emission abatement equipment.
- Crude oil hedges. Suncor has hedging agreements for 60,000 bpd in 2007
and 10,000 bpd in 2008. These costless collar hedges have an average
floor of approximately US$51.64 per barrel in 2007 while allowing
participation in higher crude oil prices with an average ceiling of
approximately US$101.06 per barrel in 2008.
Information on risks, uncertainties and other factors that could affect
these plans is included in Suncor's annual report to shareholders and other
documents filed with regulatory authorities.
This news release contains forward-looking statements that address goals,
expectations or projections about the future. These statements are based on
Suncor's current goals, expectations, estimates, projections and assumptions,
as well as its current budgets and plans for capital expenditures. In
particular, our estimates of capital expenditures are subject to a +/- 10% or
similar range of uncertainty. Some of the forward-looking statements may be
identified by words like "goal", "targets", "expect", "plans", "forecasts",
"should", "estimates", "may", "could", "proposed", "outlook", "continues" and
similar expressions. These statements are not guarantees of future
performance. Actual results could differ materially, as a result of factors,
risks and uncertainties, known and unknown, to which Suncor's business is
subject. These could include: changes in general economic, market and business
conditions; fluctuations in supply and demand for Suncor's products;
fluctuations in commodity prices and currency exchange rates; the impact of
stakeholder consultation; the regulatory process; technical issues;
environmental issues; technological capabilities; new legislation; the
occurrence of unexpected events; Suncor's capability to execute and implement
its future plans; actions by governmental authorities including the imposition
of taxes or increases to fees and royalties, changes in environmental and
other regulations (for example, the Government of Alberta's current review of
the Crown Royalty regime, the Government of Canada's current review of
greenhouse gas emission regulations and the issuance of the September 21, 2007
Alberta Environment order and the September 24, 2007 EUB directive); and
changes in current plans. Further discussion of the risks, uncertainties and
other factors that could affect these plans, and any actual results, is
included in Suncor's annual report to shareholders and other documents filed
with regulatory authorities.
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: Patti Lewis, (403) 205-6796