New Suncor 'coming together'
$480M profit trounces forecasts one year after merger
By Shaun Polczer, Calgary Herald; Postmedia News
July 30, 2010
The new Suncor is starting to jell a year after its blockbuster merger with Petro-Canada, its chief executive said Thursday after the company marked a return to second-quarter profitability.
"I really feel like the team is coming together," CEO Rick George told analysts.
"I feel very good about the leadership team coming together -- one team, really understanding where the strategy is, what the values and beliefs are and what we've got to do to make this company a lot more efficient ... before we can actually realize (its) long-term potential."
Canada's largest integrated oil company posted net earnings of $480 million, or 31 cents a share, compared with a net loss of $51 million, or six cents a share, in the second quarter of 2009. Excluding one-time items, operating earnings of $781 million, or 50 cents a share, compared with $38 million, or four cents a share, in the corresponding period last year.
The company credited higher oil prices, offset by a stronger Canadian dollar, for the positive result.
Thanks to contributions from Petro-Canada, Suncor said its oilsands production reached a record-high 330,000 barrels per day (bpd) in April, although planned maintenance at one of its two upgraders in May and June lowered the second-quarter average. Total upstream production averaged 633,900 barrels of oil equivalent per day.
George said the company had one of its best quarters for oilsands production on record despite the maintenance shutdowns. Oilsands production excluding Syncrude averaged 295,500 bpd in the second quarter, compared with 301,000 bpd in the same quarter last year.
George said the company is targeting 65 per cent of its revenues to come from oilsands, compared with half at present. That figure will rise to 75 per cent as new projects come to fruition, he added. About 90 per cent of the company's production will be oil, he added.
The results were considerably stronger than analysts had forecast. Analysts had been expecting the company to post operating earnings of 35 to 36 cents per share.
"Suncor really clobbered market expectations," said Lanny Pendill, an oil and gas analyst who covers Canadian energy companies for Edward Jones in St. Louis. "From a growth perspective, everything's on line and going well."
A report by Barclay's Capital noted that the company generated free cash flow for the first time in almost four years.
The company has sold off about $2.4 billion worth of assets as part of a planned $4-billion divestiture aimed at reducing debt.
Construction of the Firebag third-phase oilsands expansion is continuing, with first oil expected in the second quarter of 2011.
Suncor's shares opened strong on the Toronto Stock Exchange and traded higher through the day, adding 87 cents or three per cent to close at $33.91.
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