Suncor Energy Reports Third Quarter Results
OREANDA-NEWS. Unless otherwise noted, all financial figures are unaudited, presented in Canadian dollars (CdnUSD ), and have been prepared in accordance with International Financial Reporting Standards (IFRS), specifically International Accounting Standard (IAS) 34 Interim Financial Reporting as issued by the International Accounting Standards Board. Production volumes are presented on a working interest basis, before royalties, unless noted otherwise. Certain financial measures referred to in this document (operating earnings, cash flow from operations, free cash flow, Oil Sands cash operating costs, and return on capital employed (ROCE)) are not prescribed by Canadian generally accepted accounting principles (GAAP). See the Non-GAAP Financial Measures section of this news release. References to Oil Sands operations, production and cash operating costs exclude Suncor's interest in Syncrude's operations.
"Suncor delivered a solid financial quarter despite lower crude oil pricing," said Steve Williams, president and chief executive officer. "Our focused strategy, integrated model and strong balance sheet are competitive strengths that will continue to serve us well through the current lower crude price environment."
Operating earnings of USD 1.306 billion (USD 0.89 per common share) and net earnings of USD 919 million (USD 0.63 per common share).
Quarterly cash flow from operations of USD 2.280 billion (USD 1.56 per common share), and an increase in free cash flow to USD 3.082 billion for the twelve months ended September 30, 2014.
Strong refinery utilizations at Refining and Marketing allowed Suncor to take advantage of a favourable downstream business environment, reinforcing the strength of the company's integrated model.
Record Oil Sands operations production of 411,700 barrels per day (bbls/d), combined with the company's continued focus on cost management, enabled Suncor to decrease its cash operating costs per barrel to USD 31.10 for the quarter.
Successful divestiture of the Wilson Creek assets in Exploration and Production and the announcement of the sale of the Pioneer retail assets, combined with the acquisition of a sulphur recovery facility in Refining and Marketing, highlight Suncor's continued focus on core assets.
Increased rail capacity and additional loading and offloading commitments further strengthened the company's access to new and existing markets.
Financial Results
Suncor Energy Inc. delivered solid third quarter financial results during a lower commodity price environment, including operating earnings of USD 1.306 billion (USD 0.89 per common share) and cash flow from operations of USD 2.280 billion (USD 1.56 per common share), compared to USD 1.426 billion (USD 0.95 per common share) and USD 2.528 billion (USD 1.69 per common share), respectively, in the prior year quarter. Highlights of the current quarter results include strong Oil Sands operations production and strong refinery utilization at Refining and Marketing which took advantage of a favourable downstream business environment. The decrease in operating earnings and cash flow from operations from the prior year quarter was primarily due to lower production volumes in Exploration and Production and lower upstream price realizations, consistent with a decrease in benchmark prices. For the twelve months ended September 30, 2014, free cash flow increased to USD 3.082 billion, compared to USD 2.083 billion for the twelve months ended September 30, 2013.
Net earnings were USD 919 million (USD 0.63 per common share) for the third quarter of 2014, compared with net earnings of USD 1.694 billion (USD 1.13 per common share) for the prior year quarter. Net earnings for the third quarter of 2014 included an after-tax gain of USD 61 million on the disposal of the Wilson Creek assets in Exploration and Production, offset by a USD 54 million income tax and interest charge related to a prior period in Oil Sands. Net earnings also included the impact of an after-tax foreign exchange loss on the revaluation of U.S. dollar denominated debt of USD 394 million, compared to an after-tax foreign exchange gain of USD 138 million and an after-tax gain of USD 130 million from the sale of the conventional natural gas business in the prior year quarter. Net earnings for the third quarter of 2014 were also impacted by the same factors that influenced operating earnings described above.
Operating Results
Suncor's current quarterly results continued to benefit from a profitable portfolio comprising nearly 100% crude-oil weighted production, compared to 93% in the prior year quarter. Suncor's total upstream production was 519,300 barrels of oil equivalent per day (boe/d) in the third quarter of 2014, a decrease from 595,000 boe/d in the prior year quarter, reflecting the sale of the conventional natural gas business, planned maintenance in Exploration and Production, and reduced production in Libya, all partially offset by higher production volumes in Oil Sands operations.
Oil Sands operations increased production volumes to 411,700 bbls/d in the third quarter of 2014, compared to 396,400 bbls/d in the prior year quarter. The increase was primarily due to the full ramp up of Firebag following the commissioning of hot bitumen infrastructure assets in the third quarter of 2013. This increase was partially offset by unplanned maintenance in upgrading and extraction, the commencement of planned coker maintenance in Upgrader 1 late in the third quarter, and the impacts of a weather-related site-wide power outage. The unplanned maintenance included an outage at Upgrader 2 that occurred late in September. Production had returned to normal rates by the middle of October; however, as a result the company expects to be in the low end of its annual production guidance range.
"Increased production and a continued emphasis on cost management helped drive lower cash operating costs per barrel at our Oil Sands operations," said Williams.
Cash operating costs per barrel for Oil Sands operations decreased in the third quarter of 2014 to an average of USD 31.10/bbl, compared to USD 32.60/bbl in the prior year quarter, primarily due to higher production volumes. Total cash operating costs decreased slightly from the prior year, primarily due to decreased costs in mining operations, partially offset by higher natural gas input prices and maintenance costs. However, the company normally experiences some seasonality in Oil Sands operations cash operating costs and management expects a slight increase in the fourth quarter.
Suncor's share of Syncrude production increased to 29,400 bbls/d in the third quarter of 2014 from 27,200 bbls/d in the prior year quarter, primarily due to decreased planned maintenance in the current year quarter.
Production volumes in Exploration and Production decreased to 78,200 boe/d in the third quarter of 2014, compared to 171,400 boe/d in the prior year quarter, primarily due to the sale of the company's conventional natural gas business, the impact of planned maintenance at Buzzard and Terra Nova, and lower production volumes in Libya as operations slowly ramped up.
During the third quarter of 2014, Refining and Marketing commenced planned maintenance at the Montreal, Sarnia and Edmonton refineries, resulting in a decrease in average refinery utilization to 94% compared to 98% in the prior year quarter. During the maintenance event at the Montreal refinery, work continued to modify the hydrocracking unit which is expected to improve overall production yields. This project is expected to be complete by the end of the fourth quarter of 2014.
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