Suncor Beats Zacks View – Analyst Blog

Canada-based Suncor Energy Inc. (SU) reported better-than-expected first quarter results, helped by additional upstream production from the Petro-Canada merger and higher crude prices. Earnings per share, excluding certain items, came in at 18 Canadian cents (18 US cents), slightly ahead of the Zacks Consensus Estimate of 16 US cents.

 

Compared with the corresponding quarter of last year, Suncor’s adjusted earnings per share was down 56.1% (from 41 Canadian cents to 18 Canadian cents), while operating earnings of C$287 million was down from the C$380 million achieved a year ago. The negative comparisons reflect reduced oil sands production on the back of two upgrader fires and an unfavorable exchange rate.

 

However, revenue of C$7.0 billion was up 52.6% from the first quarter 2009 level.

 

Cash flow from operations went up from C$801 million in the first quarter of 2009 to C$1.1 billion, primarily due to increased volumes added as a result of the Petro-Canada merger.

 

 

Upstream production during the quarter averaged 564,600 barrels of oil equivalent per day (BOE/d), up significantly from the first quarter 2009 level of 314,500 BOE/d, mainly on account of Petro-Canada contribution.

 

Excluding proportionate production share from the Syncrude joint venture, oil sands volumes fell 27.2% year over year to 202,300 barrels per day (Bbl/d), mainly reflecting unplanned maintenance activities following fires at upgraders in December 2009 and February 2010.

 

Post acquisition, Suncor holds a 12% share in the Syncrude oil sands joint venture (located near Suncor’s existing oil sands operations in Alberta). Syncrude operations contributed an average 32,300 Bbl/d of sweet crude production for the first quarter of 2010.

 

Suncor’s natural gas business produced an average 733 million cubic feet equivalent per day (MMcfe/d), as against 219 MMcfe/d during the year-ago period, again on the strength of the Petro-Canada acquisition.

 

International and offshore production contributed an average 207,800 Bbl/d. Volumes were adversely affected by minor unplanned outages at the company’s North Sea operations and by limitations on production quotas in Libya. However, all of the East Coast Canada assets performed better than management’s expectations during the quarter.

 

 

Looking ahead to 2010, Suncor guided towards international production of 133,000 BOE/d, while East Coast Canada production is expected to be 60,000 Bbl/d. Natural gas volumes are anticipated to be 580 MMcfe/d. The company expects oil sands production of 280,000 Bbl/d. Total upstream volumes are expected at 608,000 BOE/d.

 

 

In 2010, Suncor is targeting to divest an array of non-core assets (some of which it acquired through its acquisition of Petro-Canada last year) to fund its core oil sands development projects in western Canada. In fact, Suncor is targeting asset sale of up to C$4 billion in 2010, as it looks to reduce debt following the Petro-Canada acquisition.

 

The company has already divested properties in U.S. Rockies, British Columbia, central Alberta, and Trinidad and Tobago, while there are plans to sell some Western Canada and North Sea assets as well. To date, Suncor has divested around C$1.5 billion in non-core assets.