The processing facility at the Suncor tar sands operations near Fort McMurray, Alberta, is seen in an undated file photo.TODD KOROL/Reuters
Suncor Energy Inc.'s quarterly profit fell sharply as record oil sands production and lower costs failed to offset weak oil prices.
The Calgary-based company late on Wednesday said it lost $341-million, or 24 cents a share, in the first three months of the year. That compares with a profit of $1.45-billion, or $1.01 a share, in the same period a year ago.
Suncor attributed the swing, in part, to a $940-million foreign exchange loss on the value of its U.S. dollar-denominated debt. Overall production climbed to 602,400 barrels of oil equivalent a day, the company said, up about 10 per cent from the same period last year. Operating earnings rang in at $175-million versus $1.7-billion a year ago.
The results reflect oil prices that plunged by more than half between June 2014 and January of this year, prompting waves of layoffs and project cancellations in Alberta as major energy companies struggle to wring profits from one of the world's priciest extraction zones.
U.S. and world oil prices have rebounded amid signs that a punishing supply glut may be starting ease ahead of an expected jump in U.S. gasoline demand this summer.
However, some analysts say a recovery will be tempered as higher prices eventually spur a revival in U.S. shale output and OPEC kingpin Saudi Arabia keeps pumping to retain market share.
West Texas Intermediate crude for future delivery jumped $1.52 (U.S.) to $58.58 per barrel in trading Wednesday. The U.S. benchmark fell by half in the quarter from the same period a year ago.
Suncor, Canada's largest integrated oil and gas firm, said oil sands production rose to a record 440,400 barrels per day in the three months ending March 31. That compares to 389,300 barrels in the same period a year ago.
The company said operating costs per barrel in northern Alberta fell 20 per cent from last year to $28.40 (Canadian) per barrel, reflecting lower natural gas costs and increased volumes. Suncor this month accelerated plans to trim as much as $800-million from operating expenses.
Those efforts are paying off, chief executive Steve Williams said. "Our cost reduction initiatives have taken hold across the company," he said in a statement.
Cash flow from operations was $1.5-billion, down sharply from $2.9-billion a year ago.
To cope with skidding oil prices, the company has scrapped plans to repurchase shares this year, chopped $1-billion from its 2015 capital budget, and shed 1,000 workers from its payroll.
It has also postponed investment in a second phase of its steam-driven MacKay River development in the oil sands, and put off an expansion to its White Rose joint venture offshore Nova Scotia.
The company is committed to its Fort Hills mine, despite oil's swoon. Construction on the mine is 25 per cent complete, Suncor said, and it is on track to pump first oil by year-end 2017.
Its 2015 budget of between $6.2-billion and $6.8-billion is unchanged. However, the company lowered its expectations for oil prices this year. It now expects WTI to average $54 (U.S.) a barrel, from $59 previously. Suncor maintained its quarterly dividend at 28 cents per share.
Suncor is cutting costs as it pumps more oil into a weak market. Its average realized price for oil sands crude was $47.60 (Canadian) per barrel in the quarter, crimping returns.
In the quarter, Mr. Williams said the company slashed another 200 jobs from its head office in Calgary and a satellite office in Toronto. That's in addition to 1,000 layoffs announced earlier this year.
He played down speculation about the company raising its stake in the Syncrude Canada Ltd. consortium, saying Suncor is in no rush to do deals.
It's "very difficult for acquisitions to work in oil sands because we have the highest-quality resource," he told analysts on Thursday. "We have organic projects which those things have to work against, so it's very tough for us to make those work."
However, he said Suncor would be open to possible refining acquisitions in North America and opportunities offshore Canada's East Coast.
"But overall our view has been there's still a gap between buyers and sellers' expectations," he said.