Suncor burned by wildfire damages and slump in oil production
Suncor Energy (SU) emerged slightly singed from its latest earnings report on Thursday. The largest crude oil producer in Canada announced net losses of C$735 million after Alberta wildfires near Fort McMurray forced its oils sands operations to be temporarily suspended back in May. Lower oil prices were also to blame for the company’s sluggish earnings, which came in at a net loss of C$0.46 a share for Q2. It was a marked decline from last year’s profits of C$0.50 during the same time period.
Suncor sustained further losses on derivatives, early debt repayments and some standard maintenance requirements, while also feeling the headwinds of a strong US dollar. Cash flow was down from C$2.2 billion in Q2 2015 to C$916 million this year.
The Alberta based company lost out on almost 20 million barrels of oil production between May and July due to the disastrous fire outbreak, but production facilities remained intact. “The forest fires in the Fort McMurray area significantly impacted the region,” CEO Steve Williams announced in a statement. “We shut in our oil-sands production and focused on the safe evacuation of employees, their families and the community.”
Overall, Suncor’s total oil production shrank to 330,700 barrels a day, down 40% from the same quarter last year. But full year production guidance remained unaltered at 585,000 to 620,000 barrels a day. By 2019 the company expects to up that number even further, churning out around 800,000 barrels a day.
It’s a projection that sits awkwardly with Suncor’s recent announcement that the company will cut the intensity of its emissions 30% by 2030. Williams acknowledged on the earnings call to investors that the sustainability targets were indeed “ambitious,” but added that: “We believe the best place for Suncor, the best place for Alberta, the best place for Canada to be, is at the leading edge of those conversations, and then we can start to form the world’s policy around how you manage climate change.” The stock slipped on the news.
Despite the drop in oil prices Suncor has been working steadily to beef up its assets over the last 12 months, investing around C$9 billion in a string of acquisitions. The company recently increased its ownership of Canadian crude oil producer Syncrude to 53.7% after purchasing Murphy Oil Corps and Canadian Oil Sands earlier in the year. Higher operating expenses took their toll on the bottom line as a result, coming in at a loss of C$565 million for the quarter. Suncor previously announced a C$2 billion equity sale back in June to help fund its new acquisitions.