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Suncor CEO and president Steve Williams. (Jeff McIntosh/THE CANADIAN PRESS)
Suncor CEO and president Steve Williams. (Jeff McIntosh/THE CANADIAN PRESS)

Suncor cuts its spending plans by 11 per cent Add to ...

Suncor Energy Inc. has trimmed its 2012 budget by about 11 per cent after coming in under budget on one of its expansion efforts and slowing spending on major growth projects.

Canada’s largest oil company expects to spend $6.65-billion this year, down $850-million from its previous estimate of $7.5-billion, Suncor said in its third-quarter results released late Wednesday. The company is in the midst of a detailed review of three major expansion projects, and this pause means spending plans have changed.

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Suncor said its joint venture partners are involved in the review calculations and that the company’s original schedule for making investment decisions – known as sanctioning – has been scotched. Suncor previously said it is redoing the math on its Fort Hills oil sands mine, Joslyn mine, and the Voyageur upgrader expansion effort.

“As a result of the continued focus on capital discipline and cost management, the pace of pre-sanction spending has been closely managed,” Suncor said in its statement. “While decisions regarding sanctioning had been targeted to occur mid-2013, these reviews are expected to impact the timing of such decisions. New target dates have not yet been determined.”

It is extremely expensive to produce oil from Alberta’s bitumen deposits, which has forced energy companies to be more careful as they expand production. Further, Alberta is once again facing a labour crunch further threatening to make it even more expensive for oil companies to grow.

Suncor said there were two key reasons it shrunk its budget: its skinnier spending forecast on its Firebag expansion; and slower pace of spending on its major oil sands joint ventures.

The company expects its Firebag Stage 4 project is expected to come in 10 per cent under its $2-billion budget and is three months ahead of schedule. The first drops of oil are expected to surface in the fourth quarter, Suncor said.

“At the start of the year, we said that cost and quality metrics would be Suncor’s priorities when executing growth projects,” Steve Williams, Suncor chief executive, said in a statement. “We’re delivering on these goals by spending capital efficiently and maintaining a disciplined approach to pre-sanction spending on our operated growth projects.”

Suncor is partners with France’s Total SA and Canada’s largest miner, Teck Resources Ltd., on the Fort Hills project. Last week Teck said Fort Hills was delayed. Suncor and Total also hold hands on Joslyn and Voyageur.

Suncor also said it deferred spending on non-operated sustaining projects at Syncrude Canada Ltd. and non-operated, early-stage growth projects, including Hebron and Golden Eagle. It also used less of the “discretionary pool of capital, and implement a higher standard for economic returns on smaller oil sands growth and sustaining projects.”

Mr. Williams took over from Suncor’s long-time chief executive Rick George earlier this year. Mr. Williams in July said the company would not chase growth just for the sake of increasing the number of barrels of oil it produces. He pledged to focus on the most profitable growth projects.

Suncor earned $1.555-billion or $1.01 per share in the third quarter, up from $1.287-billion or 82 cents per share in the same frame last year. Its operating earnings totalled $1.303-billion or 85 cents a share, down from $1.789-billion or $1.14 per share in the third quarter last year.

The Calgary-based company said net earnings climbed because of exchange rate fluctuations on the revaluation of U.S. dollar denominated long-term debt. Its operating earnings fell because of higher share-based compensation expenses; lower production volumes from offshore assets undergoing planned maintenance; and higher depreciation, depletion and amortization charges, Suncor said.

Follow on Twitter: @CarrieTait

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