Suncor Energy Inc. on Monday announced a 54-per-cent dividend hike, a $2-billion share buyback and better first-quarter operating earnings that were boosted by strong oilsands production and refining margins.
Canada’s largest energy company says its quarterly dividend will rise to 20 cents per share from 13 cents. The dividend is payable June 25 to shareholders of record at the close of business June 4.
“Suncor is dedicated to delivering a dividend that is reliable, sustainable, meaningful and competitive,” said CEO Steve Williams in a statement.
Suncor has also obtained stock-exchange approval to buy back an additional $2 billion of its own shares between May 2 and Sept. 19.
“Today’s 54 per cent increase in our dividend, combined with a further $2 billion share buyback program, underscores our commitment to returning cash to shareholders and reflects our confidence in the company’s future earnings and cash flow,” Williams said.
Also Monday, Suncor posted operating earnings of $1.37 billion, or 90 cents per share, compared to $1.32 billion, or 84 cents per share, during the same period a year earlier.
That handily beat the average analyst estimate of 75 cents per share, according to Thomson Reuters.
Suncor’s net earnings, which include one-time items, were $1.1 billion, or 72 cents per share, compared to $1.45 billion, or 93 cents per share, a year earlier.
Contributing to the net earnings decrease were a $146-million after-tax foreign exchange loss and a $127-million charge related to its decision not to proceed with its Voyageur oilsands upgrader.
About a month ago, Suncor said it was scrapping Voyageur because shifting market conditions challenged its economics.
Burgeoning production of light oil from regions such as North Dakota mean it no longer makes economic sense to invest billions into a facility to convert heavy oilsands crude into a lighter product refineries can handle.
Suncor took a $1.49-billion writedown on Voyageur in the fourth quarter of 2012.
The Voyageur upgrader was part of a $1.75-billion partnership inked between Suncor and French energy giant Total S.A. in late 2010.
A decision on whether to go ahead with the companies’ jointly-owned Fort Hills mine is expected later this year, while it’s not known when the fate of their Joslyn oilsands mine will be decided.
Suncor’s oilsands production averaged 357,800 barrels per day during the first three months of the year, a big increase from the 305,700 it churned out a year earlier as its steam-driven Firebag project ramped up production.
The company fed some Firebag volumes into its oilsands upgrader to offset lower output from its mining operations, which were reduced due to unplanned maintenance.
The price gap between heavy Canadian crude and the lighter U.S. benchmark has caused headaches for oilsands producers. The crux of the problem is an inability to get their product to the best-paying markets by pipeline.
But companies that produce oil as well as refine it — including Suncor — are at an advantage, as it means a cheaper raw product to run through their refineries.
“The strength of our integrated business model enabled the company to achieve solid results despite a very challenging price environment for oilsands crudes,” said Williams, adding the company’s refining business “more than offset” the low oilsands crude prices.
Earlier this month, Suncor sold the bulk of its Western Canadian natural gas business to a British-Qatari partnership for $1 billion.
The deal with Britain’s Centrica PLC and Qatar Petroleum International includes conventional properties throughout Alberta, northeastern British Columbia and southern Saskatchewan.
The company says it will direct the money from the sale toward three priorities: investing in its base business, pursuing profitable growth projects and returning cash to shareholders through dividends or share buybacks
In addition to its vast oilsands holdings, Suncor also has assets in the U.K. North Sea, off Canada’s East Coast, four refineries and a chain of Petro-Canada-branded gas stations.