Suncor Energy Inc. said third-quarter profits tumbled sharply as weak crude prices overshadowed cost savings in its massive oil sands operations.
The Calgary-based company, which is pursuing a $4.5-billion all-share takeover of Canadian Oil Sands Ltd., late on Wednesday said it lost $376-million, or 26 cents per share, in the three months ended Sept. 30. That compares with a profit of $729-million in the previous quarter and a $919-million profit, or 63 cents per share, a year ago.
Suncor said operating earnings plunged to $410-million, or 28 cents per share, down from $1.3-billion, or 89 cents a share, in 2014. Cash flow skidded to $1.8-billion from $2.9-billion in the year-ago period.
The results underscore deteriorating conditions in the energy industry as major producers deal out another round of austerity to cope with the sustained drop in world and U.S. oil prices to under $50 (U.S.) a barrel.
This week, global oil giant Royal Dutch Shell PLC mothballed a major oil sands development and U.S.-based Devon Energy Corp. let go 15 per cent of its Canadian workforce, adding to thousands of job cuts across the sector.
Suncor said the average sales prices for its oil sands output was $47.93 (Canadian) per barrel in the third quarter, down from $60.81 in the previous quarter and $89.38 in the same period of 2014.
The company has sought to capitalize on the downturn with a hostile takeover bid for Canadian Oil Sands, its partner and the largest owner in the Syncrude Canada Ltd. consortium. Suncor insists a bigger stake would enable it to improve performance at the struggling project, but the target company's board has urged shareholders to spurn the offer, saying it undervalues its oil-sands holdings.
"We have been disappointed for with Syncrude's performance for some time now," Suncor chief executive officer Steve Williams said in a statement Wednesday. Suncor owns 12 per cent of the Syncrude project, which was temporarily shut down in September after a fire in a processing unit.
"The asset ran at only 67 per cent of capacity during the third quarter, and about 70 per cent so far this year, in stark contrast to Suncor's upgrading operations that have been consistently achieving above 90 per cent reliability this year," Mr. Williams said.
Suncor, which has lopped about $1.4-billion from its capital budget and laid off roughly 1,200 employees this year, maintained its budget of between $5.8-billion to $6.4-billion. The company also kept its dividend at 29 cents per share.
The largest oil-sands producer has aggressively pushed down costs at its sprawling operations in northern Alberta. It said Wednesday oil sands cash operating costs per barrel averaged $27 in the quarter, the lowest since 2007 and down from $31.10 per barrel a year ago.
Supporting the results were big gains in the refining and marketing division, which earned $613-million in the third quarter compared to $426-million a year ago.
Despite weak prices, Suncor said overall production rose to 566,100 barrels of oil equivalent per day, from 519,300 oil-equivalent barrels at the same time last year, primarily as result of increased production in the U.K.
The third-quarter results were affected by an unrealized foreign exchange loss of $786-million on the revaluation of U.S. dollar-denominated debt.