For an undeveloped oil sands project, Fort Hills spends a lot of time in the news.
Teck Resources Ltd., which controls 20 per cent of Fort Hills, last week said it is deferring $1.5-billion from its original 2012-2013 capital spending budget. One of the reasons was “a delay in the development of Fort Hills as our partner updates the design basis for the project,” Teck said its results.
Suncor Energy Inc., the largest partner in the project with a 40.8-per-cent stake, said last July that it is conducting a review of three major expansion projects, carefully analyzing costs. Fort Hills is one of the projects under scrutiny; in July, Suncor’s chief executive Steve Williams said that “in principle, there is the opportunity to not progress those projects.”
But when it comes to Fort Hills, Teck’s use of the word “delay” is more precise.
A Suncor spokeswoman said Teck’s reference to Suncor’s cost-driven schedule is not new because the oil company announced its review in July.
A spokeswoman for France’s Total SA, the third partner in Fort Hills, said there has not been a formal announcement about a delay in the project, and referred questions about timing to Suncor because the Canadian energy giant operates the project.
Suncor, however, could clear up any confusion on its third-quarter earnings on Wednesday.
“Management could possibly provide … some clues into what high-cost projects will likely be put on the shelf and what low cost projects/de-bottlenecks can be brought forward to provide higher returning growth,” Phil Skolnick, an analyst at Canaccord Genuity, said in a research note ahead of the fall earnings season.
Analysts are also keeping their ears open for details about the company’s new-found enthusiasm for share buyback programs.
Executives could “talk up” plans to focus on returns, dividends and buyback, Mr. Skolnick said. In September, Suncor announced a $1-billion buyback plan, building on a $1.5-billion buyback program it announced in September, 2011. That marked Suncor’s first go at buying back its own stock in an effort to bolster the company’s value.
Suncor could handover downstream results which beat expectations, Mr. Skolnick said. And beating expectations is one of its specialties. Suncor has the best track record of bettering analysts’ financial predictions, having done so nine out of the past 14 quarters, he noted.
However, he thinks the company’s third quarter might not be enough to juice its stock because the market has already accounted for strong downstream results, and has outperformed its peers by 4 per cent since the end of June.