Let’s get the obvious out of the way: Suncor Energy Inc.s’ earnings slumped this quarter, plummeting to $333-million, versus $1.457-billion last quarter and $562-million during the same period in 2011.
But strip out the serious problems in Syria, which led to after-tax impairment charges and write-offs of $694-million because the company hasn’t produced anything in the war-torn country this year, and Suncor suddenly looks much better.
Yes, the oil giant took a small hit on cash flows and operating earnings relative to recent quarters, but that’s mainly because oil prices dropped.
More importantly, the nagging concern that everyone’s had about rising oil sands cost wasn’t an issue.
The company’s cash operating costs in the oil sands, excluding its stake in Syncrude, came in at $38.55 per barrel for the first six months of the year. That ’s lower than the $41.05 during the same time frame in 2011. Suncor’s seen these costs fall because of things like lower maintenance and natural gas energy costs, as well as higher production volumes.
Suncor’s oil sands production, excluding the Syncrude stake again, hit 309,200 barrels per day during the second quarter, up from 243,200 barrels per day during the same period in 2011 and 305,700 in the first quarter. As production increases, the company can divide its fixed costs over more barrels.
So while there isn’t much Suncor can do about the production losses caused by the atrocities in Syria, the company is making progress where it has control in the oil sands. And in this region, the firm’s Firebag Stage 4 expansion is now 90 per cent complete, and initial production is expected early in 2013, so Suncor should get even more scale soon.