Oil sands growth plans on schedule and on budget
All financial figures are unaudited and in Canadian dollars unless noted
otherwise. Certain financial measures referred to in this document are
not prescribed by generally accepted accounting principles (GAAP). For a
description of these measures, see "Non-GAAP Financial Measures" in
Suncor's 2007 first 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, April 26 /CNW/ - Suncor Energy Inc. today reported first quarter
2007 net earnings of $551 million ($1.20 per common share), compared to
$713 million ($1.56 per common share) in the first quarter of 2006. Excluding
the impact of net insurance proceeds accrued in 2006 and the effects of
unrealized foreign exchange gains on the company's U.S. dollar denominated
long-term debt, first quarter 2007 net earnings were $539 million ($1.17 per
common share), compared to $509 million ($1.11 per common share) in the first
quarter of 2006. Cash flow from operations was $790 million in the first
quarter of 2007, compared to $1.314 billion in the first quarter of 2006.
Excluding the impact of insurance proceeds accrued in 2006, the increase
in net earnings was primarily due to strong retail and refining margins in
downstream operations, lower Alberta Crown royalty expenses and lower
effective federal and provincial income tax rates.
These positive factors were partially offset by lower oil sands
production and higher operating expenses, both related to unplanned
maintenance at the oil sands facility during the quarter. Reduced earnings in
Suncor's Natural Gas business also negatively impacted earnings.
Suncor's total upstream production averaged 283,100 barrels of oil
equivalent (boe) per day during the first quarter of 2007, compared to 300,300
boe per day in the first quarter of 2006. Oil sands production during the
first quarter averaged 248,200 barrels per day (bpd) compared to first quarter
2006 production of 264,400 bpd. Natural gas production in the first quarter of
2007 was 209 million cubic feet equivalent (mmcfe) per day, compared to first
quarter 2006 production of 215 mmcfe per day.
During the first quarter, oil sands cash operating costs averaged $26.30
per barrel, compared to $19.05 per barrel during the first quarter of 2006.
The increase in cash operating costs was due to higher operating expenses
being applied to a lower production volume.
As a result of lower than planned production in the first quarter, Suncor
has revised its outlook for 2007. Production is now targeted at 255,000 bpd to
265,000 bpd, down slightly from original targets of 260,000 bpd to 270,000
bpd. Cash operating cost targets have been adjusted upward to $23.50 to $24.50
per barrel from $21.50 to $22.50 per barrel.
In Suncor's downstream operations, refining and retail margins were
higher in the first quarter of 2007 compared to the first quarter of 2006 due
to tighter supply of refined products in both the Ontario and U.S. Rocky
Mountain markets. Total refinery throughput increased compared to the first
quarter of 2006, when Suncor's U.S. operations were impacted by planned
Suncor's next major growth phase includes an expansion of existing
upgrading facilities that targets an increase in production capacity to
350,000 bpd in 2008. Engineering on this portion of the project is
substantially complete and construction is approximately 75% complete. The
project remains on schedule and on budget.
A targeted 50-day shutdown to Upgrader 2 to tie-in new facilities related
to the expansion is expected to begin on May 31. During the tie-in work,
Upgrader 1 is expected to continue normal production.
Work underway also includes the expansion of Suncor's Firebag in-situ
operations, with construction targeted for completion in 2007. The project,
which is expected to increase the bitumen production capacity of Firebag
Stages 1 and 2 by about 35%, also includes the addition of cogeneration
facilities. The cogeneration portion of the project is complete with the
balance of project construction approximately 65% complete.
"The current expansion of bitumen production and upgrading capacity is an
important step in the Voyageur growth plan we launched in 2001," said Rick
George, president and chief executive officer. "We are well on our way toward
targeted production of more than half a million barrels per day."
Suncor's plans to increase production to 500,000 bpd to 550,000 bpd in
2010 to 2012 involve a number of investments including increased bitumen
production from mining and in-situ sources, additional facility infrastructure
and a third oil sands upgrader. Plans are proceeding on schedule, with
fabrication of major vessels for the planned upgrader underway.
In Suncor's downstream operations, work continues on modifications to the
company's Sarnia refinery, which are planned to enable the facility to process
up to 40,000 bpd of oil sands sour crude. The budget for the project has been
increased to $960 million from $800 million due to labour shortages and
material supply issues. A shutdown to tie-in new facilities is planned for the
third quarter with completion targeted for the fourth quarter. Portions of the
refinery are expected to continue production during the shutdown period.
"Although our longer-term growth plans remain on track, we're continuing
to see significant capital cost pressures across our business," said George.
"We will maintain, with our business partners, a sharp focus on the pieces of
the cost equation we can control."
As Suncor invests for future growth, prudent debt management remains a
priority. Net debt levels increased to $2.3 billion at the end of the first
quarter from $1.9 billion at year-end 2006.
Suncor's outlook provides management's targets for 2007 in certain key
areas of the company's business. Outlook forecasts, which are updated
quarterly, are subject to change.
Three months 2007
ended March 31, 2007 full year outlook
Production (bpd)(1) 248,200 bpd 255,000 to 265,000
Diesel 12% 10%
Sweet 41% 42%
Sour 44% 43%
Bitmen 3% 5%
Realization on crude WTI at Cushing less WTI at Cushing less
sales basket Cdn$2.44/barrel Cdn$7.50 to $8.50/barrel
costs(2) $26.30 per barrel $23.50 to $24.50 per barrel
equivalent per day) 209 215 to 220
1) The 2007 production outlook has been revised from original targets of
260,000 to 270,000 bpd. The 2007 oil sands production target includes
approximately 5% non-upgraded bitumen sold directly to the market. In
2006, the production target referred only to synthetic crude oil
2) The 2007 cash operating cost outlook has been revised from original
targets of $21.50 to $22.50 per barrel. Cash operating cost estimates are
based on the following assumptions: i) production of 255,000 bpd to
265,000 bpd; ii) a production sales mix as described in the chart above;
and iii) a natural gas price of US$7.60 per thousand cubic feet (mcf) at
Henry Hub. Cash operating costs per barrel are not prescribed by
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 Suncor's first quarter 2007 Report to Shareholders.
3) 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
- 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 while allowing
participation in higher crude oil prices with an average ceiling of
approximately US$101.06 per barrel. The company will consider costless
collars totalling up to 30% of annual planned crude oil production if
strategic opportunities are available.
- Scheduled tie-ins of modified facilities at Suncor's oil sands
operation are planned to begin May 31, 2007. Upgrader 2 is expected to
be shutdown for approximately 50 days while this work is underway.
During the outage, Upgrader 1 is expected to continue normal
production. Although this shutdown is reflected in operational targets
for the year, production estimates could be impacted if the work takes
longer than planned or is impacted by labour or material supply
issues. The tie-in work is required to enable production capacity to
be increased to a planned 350,000 bpd in 2008.
- Scheduled tie-ins of modified facilities at Suncor's refineries.
Suncor plans to begin a shutdown of the Sarnia refinery in the third
quarter of 2007 (with completion scheduled in the fourth quarter of
2007) to tie-in modified facilities that are expected to enable the
facility to process up to 40,000 bpd of oil sands sour crude.
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%
range of uncertainty. Some of the forward-looking statements may be identified
by words like "expects," "anticipates," "estimates," "plans," "scheduled,"
"intends," "believes," "projects," "indicates," "could," "focus," "goal,"
"proposed," "target," "objective," "may," "outlook," "on our way,"
"investigating," "continue," 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 changes to fees and royalties, changes in
environmental and other regulations; 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 first quarter 2007 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: Media inquiries: Brad Bellows, (403) 269-8717;
Investor inquiries: John Rogers, (403) 269-8670