A death and two operational incidents at Suncor Energy Inc. SU-T sites over the past month have hit the company’s oil production.
Suncor released details of the incidents Tuesday in its fourth-quarter production results. And while the news didn’t immediately affect share prices, analysts expressed concern that the events underscore problems with the Calgary-based company’s recent operational track record.
A worker died in January after the heavy haul truck they were driving rear-ended another truck as the two vehicles were driving up a mine haul ramp. The collision also sent two workers in the front truck to hospital with minor injuries.
The company is still investigating the Jan. 6 death at its Base Plant operation, north of Fort McMurray.
The crash followed two separate operational issues at Suncor oil sands sites in the second half of December – one at its Syncrude mine, the other at its Firebag operation. Together, the problems cut production by approximately 195,000 barrels a day in the latter half of December.
As a result, overall annual production in 2021 came in about 1 per cent below the company’s target of 740,000 b/d.
Suncor said in its fourth-quarter statement the issues have been resolved and, as of Jan. 17, Syncrude and Firebag have returned to normal production levels.
The incidents at Syncrude and Firebag were both attributed in part to the deep freeze that blanketed Alberta in mid-December. High temperatures earlier in the month in Fort McMurray plummeted to around -20, with lows dropping to -35. After temperatures rose to normal seasonal levels, the mercury dived again around Christmas, with highs of -26 and lows of -40.
The issue at the Syncrude site stemmed from the failure of two new chains that drive crushing equipment at its Mildred Lake mine, both of which were installed in late in 2020.
“Repeat chain failures and sustained extreme weather conditions in the region impacted labour productivity together with freezing of oil sands ore on feed aprons, conveyor belts and internal workings,” Suncor said. As a result, an expected one-week repair time grew to three weeks.
At Firebag, two critical furnaces failed on Dec. 16 because of frozen air louvers. The site’s two largest plants went offline as a result, shutting down production of approximately 170 wells (about 100 wells remained in production).
Suncor said it is now reviewing whether its winterization program “is sufficiently robust to withstand extended periods of cold weather.”
In a research note Tuesday, TD Equities wrote that the extreme cold snap in Western Canada late last year “will likely become a recurring theme across our coverage, as both liquids and natural gas volumes were undoubtedly affected to varying degrees from late December to early January.”
While the impact to production was fairly negligible, it said the three incidents extend Suncor’s recent track record of operational inconsistency.
“While clearly not the end of the world from a materiality perspective, and while we are certain that [Suncor] is not the only company that was impacted by the cold snap, we view this as a slight setback from a ‘credibility rebuild’ perspective as it follows several other missteps over the past two years,” it said.
National Bank of Canada analysts noted similar concerns. A research note Tuesday said “the major issue is the fact that annual operational issues seem to be continuing, leaving us unenthused about how quickly production can be restored at major facilities.”
Suncor president and chief executive officer Mark Little said in a statement the fatality and operational incidents are not acceptable.
“I am deeply disappointed by these events and I am committed to implementing corrective actions, continuing to strengthen our processes and accountability, and to improving Suncor’s performance,” he said.
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