Oil Sands Truth: Shut Down the Tar Sands

Skidding oil sends Suncor into red

Skidding oil sends Suncor into red
Investors stay focused on $22.5-billion Petro-Canada takeover
Edmonton Journal
July 23, 2009

Suncor Energy sank into the red in the second quarter as skidding oil prices, hedging losses and costs related to project deferrals marred the last reporting period before it closes its $22.5-billion takeover of Petro-Canada.

CEO Rick George said his company will move ahead with major investments after the takeover, and jettison assets by focusing on projects that offer the lowest risk, highest returns and near-term cash flow.

He described Petro-Canada's assets off the Newfoundland coast and in the North Sea as "key long-term keepers."

George cast doubt, however, on some international assets.

"Risk will be a factor, and I know the market has not really liked, particularly, the risk around the Syrian and Libyan assets," he said. "That's an equation that I haven't actually had time to completely analyze or make the decisions on."

Excluding unusual items, Suncor made a profit, even as the oil industry struggled with lower commodity prices. But the results lagged expectations.

Suncor sold a higher proportion of lower-quality, high-sulphur crude in the quarter, which was a factor in its weaker-than-expected showing, said Lanny Pendill, an analyst at Edward Jones. Increases in staff, royalty and tax expenses also hurt, he said.

"While results for the quarter were lower than what people anticipated, the underlying operations performed very well and continued to show improvement," Pendill said.

"The oilsands operations continue to ramp up production, cash costs continue to come down within the oilsands business, and that's something you certainly want to see."

Suncor lost$51 million, or six cents a share compared with a year-earlier profit of $829 million, or 89 cents a share. Excluding the one-time items, the company earned $185 million, or 20 cents a share.

Analysts, on average, had expected earnings of 35 cents a share, according to Reuters Estimates.

Investors remain focused on the takeover of Petro-Canada, which will create Canada's largest oil company and a dominant force in oilsands production and processing.

The country's Competition Bureau approved the deal on Tuesday after Suncor agreed to sell 104 gas stations in southern Ontario.

Canadian energy firms had been expected to report lower profits as the recession sapped oil and gas demand and pulled prices down from last year's record levels. Results, however, have improved since the first three months of the year.

Precision Drilling Trust said its second-quarter profit surged 164 per cent as its $2-billion takeover of Houston-based Grey Wolf late last year and a foreign exchange gain cushioned the impact of a major downturn in drilling activity.

Canada's biggest drilling contractor earned$57.5 million, or 22 cents a unit, up from a year-earlier $21.7 million, or 16 cents a unit.

The 2009 results included a gain of $74 million, or 20 cents a unit, from foreign exchange.

Precision said its Canadian rig fleet operated at a record low rate during the period, with the few bright spots being North American shale gas regions such as the Marcellus in Pennsylvania and Horn River, B. C.

Chief executive Kevin Neveu said the company will use its cash to repay debt. "Precision has sufficient liquidity to ride out a prolonged industry downturn," he told analysts.

© Copyright (c) The Edmonton Journal


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