Suncor Energy reports second quarter 2015 results

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Suncor Energy reports second quarter 2015 results

by ahnationtalk on July 30, 2015582 Views

Press Releases

CALGARY, ALBERTA–(July 29, 2015) – Unless otherwise noted, all financial figures are unaudited, presented in Canadian dollars (Cdn$), and have been prepared in accordance with International Financial Reporting Standards (IFRS), specifically International Accounting Standard (IAS) 34 Interim Financial Reporting as issued by the International Accounting Standards Board. Production volumes are presented on a working interest basis, before royalties, unless noted otherwise. Certain financial measures referred to in this document (cash flow from operations, operating earnings, Oil Sands cash operating costs and free cash flow) are not prescribed by Canadian generally accepted accounting principles (GAAP). See the Non-GAAP Financial Measures section of this news release. References to Oil Sands operations, production and cash operating costs exclude Suncor’s interest in Syncrude’s operations.

“Suncor generated strong cash flows in excess of $2.1 billion during the second quarter of 2015, more than enough to fund our capital requirements and our dividend,” said Steve Williams, president and chief executive officer. “As a result, we are returning more value to shareholders by increasing our dividend and renewing our share buyback program.”

• Cash flow from operations of $2.155 billion ($1.49 per common share) versus $2.406 billion ($1.64 per common share) in the prior year quarter, despite a decrease in crude oil benchmarks of over 40%.

• Operating earnings of $906 million ($0.63 per common share) and net earnings of $729 million ($0.50 per common share).

• Solid refinery utilization and a favourable downstream business environment resulted in Refining and Marketing operating earnings of $631 million.

• Production from Oil Sands operations increased by 45,000 barrels per day (bbls/d) from the prior year quarter, to 423,800 bbls/d, despite planned maintenance at Firebag. The increase, combined with lower natural gas prices and a continued focus on cost reduction initiatives, resulted in a further decrease in cash operating costs per barrel to $28.00 for the quarter.

• The company’s 2015 capital expenditures outlook has been reduced by $400 million to $5.8 – $6.4 billion as a result of Suncor’s continued focus on capital discipline and cost reduction initiatives.

• Suncor’s Board of Directors has approved an increase to the company’s dividend to $0.29 per common share, and the renewal of the share repurchase program, demonstrating the company’s ability to generate cash flows and return value to shareholders.

Financial Results

Suncor Energy Inc. recorded second quarter 2015 operating earnings of $906 million ($0.63 per common share) and cash flow from operations of $2.155 billion ($1.49 per common share), compared to $1.135 billion ($0.77 per common share) and $2.406 billion ($1.64 per common share), respectively, in the prior year quarter, reflecting the lower crude oil price environment. Highlights of the second quarter included increased Oil Sands operations production, a favourable downstream pricing environment and solid refinery utilizations. For the twelve months ended June 30, 2015, free cash flow was $795 million, compared to $3.599 billion for the twelve months ended June 30, 2014.

Net earnings were $729 million ($0.50 per common share) in the second quarter of 2015, compared with net earnings of $211 million ($0.14 per common share) in the prior year quarter, which included impairment charges. Net earnings for the second quarter of 2015 included a $423 million deferred income tax charge related to a 2% increase in the Alberta corporate income tax rate. During the second quarter of 2015, the company also recorded an after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt of $178 million and an after-tax gain of $68 million on the disposal of the company’s share of certain assets and liabilities of Pioneer Energy in the Refining and Marketing segment. Net earnings in the prior year quarter included after-tax impairment charges of $718 million on the company’s interest in the Joslyn mining project, $297 million against the company’s Libyan assets, and $223 million on various Oil Sands assets, partially offset by an after-tax foreign exchange gain of $282 million.

Operating Results

Suncor’s total upstream production was 559,900 barrels of oil equivalent per day (boe/d) in the second quarter of 2015, compared with 518,400 boe/d in the prior year quarter, due primarily to strong reliability in Oil Sands operations and the continued ramp up of Golden Eagle production in the U.K.

Oil Sands operations production was 423,800 bbls/d in the second quarter of 2015, compared to 378,800 bbls/d in the prior year quarter, primarily due to reliable operations resulting in minimal unplanned maintenance. Planned maintenance at Firebag and at Upgrader 1 was completed during the second quarter of 2015.

Cash operating costs per barrel for Oil Sands operations decreased in the second quarter of 2015 to $28.00/bbl, compared to $34.10/bbl in the prior year quarter, due to increased production and lower costs as a result of lower natural gas prices and a continued focus on cost reduction initiatives.

“As a result of our continued focus on operational excellence, production at Oil Sands operations increased by 45,000 bbls/d,” said Williams. “At the same time, we reduced our absolute operating costs consistent with the commitments we outlined in the first quarter of this year.”

Suncor’s share of Syncrude production was 24,900 bbls/d in the second quarter of 2015, and remained comparable to the prior year’s second quarter production of 24,300 bbls/d as both periods included planned maintenance.

Production volumes in Exploration and Production (E&P) decreased to 111,200 boe/d in the second quarter of 2015, compared to 115,300 boe/d in the prior year quarter, primarily due to a planned turnaround at Terra Nova during the second quarter of 2015 and natural declines at Hibernia and White Rose. These were partially offset by the continued ramp up of production from Golden Eagle. Production in Libya continues to be substantially shut in due to political unrest, with the timing of a return to normal operations remaining uncertain.

During the second quarter of 2015, Refining and Marketing completed planned maintenance at the Edmonton and Sarnia refineries. Average refinery utilization improved to 90% in the second quarter, compared to 85% in the prior year quarter, which included planned maintenance events at the Montreal and Edmonton refineries.

Strategy Update

Suncor continues to focus on safely and reliably operating our assets, and optimizing the value chain through integration. Subsequent to the quarter, the company reached an agreement with TransAlta Corporation (TransAlta) to exchange Suncor’s Kent Breeze and its share of the Wintering Hills wind power facilities for TransAlta’s Poplar Creek cogeneration facilities, which provide steam and power to Suncor’s Oil Sands operations.

“The agreement with TransAlta is aligned with our approach of bringing assets that are integral to our operations in-house. As a result of securing the long-term future use of the Poplar Creek cogeneration facilities, we expect to improve efficiency, reliability and profitability,” concluded Williams.

Subsequent to the quarter, Suncor’s Board of Directors approved an increase to the company’s quarterly dividend to $0.29 per common share.

Oil Sands Operations

Oil Sands operations continued work on projects that enhance safety, reliability and environmental performance, including the completion of planned maintenance at Firebag and annual coker maintenance in Upgrader 1. Second quarter spending also included ongoing well pad construction to maintain existing production levels at Firebag and MacKay River.

Oil Sands Ventures

The Fort Hills project remains on schedule with detailed engineering activities 89% complete at the end of the second quarter, while construction activities were 34% complete. Spending during the quarter included engineering, procurement, module fabrication and site construction. The project is expected to deliver approximately 73,000 bbls/d of bitumen to Suncor’s operations, with first oil expected in the fourth quarter of 2017 and 90% of its planned capacity being reached within twelve months thereafter.

Exploration and Production

Golden Eagle production averaged 15,000 boe/d (net) in the second quarter of 2015, as additional wells were brought online. Construction of the Hebron project continued in the second quarter of 2015, with first oil expected in 2017.

Growth capital in East Coast Canada includes field extension projects that leverage existing facilities and infrastructure. First oil was achieved at the South White Rose Extension project during the second quarter of 2015 and drilling activities continue. Growth capital also included spending related to drilling in the North Sea.

Operating Earnings Reconciliation(1)

Three months ended
June 30
Six months ended
June 30
(C$ millions) 2015 2014 2015 2014
Net earnings 729 211 388 1 696
Unrealized foreign exchange (gain) loss on U.S. dollar denominated debt (178) (282) 762 26
Impact of income tax rate adjustments on deferred taxes(2) 423 17
Gain on significant disposal(3) (68) (68)
Restructuring charges(4) 57
Insurance proceeds(5) (75)
Impairments(6) 1 238 1 238
Reserves redetermination(7) (32) (32)
Operating earnings(1) 906 1 135 1 081 2 928
(1) Operating earnings is a non-GAAP financial measure. All reconciling items are presented on an after-tax basis. See the Non-GAAP Financial Measures Advisory section of Suncor’s Management’s Discussion and Analysis dated July 29, 2015 (the MD&A.)
(2) Adjustments to the company’s deferred income taxes from a 12% decrease in the U.K. tax rate on oil and gas profits from the North Sea in the first quarter of 2015, and a 2% increase in the Alberta corporate income tax rate in the second quarter of 2015.
(3) After-tax gain related to the sale of the company’s share of certain assets and liabilities of Pioneer Energy in the Refining and Marketing segment.
(4) Restructuring charges related to the cost reduction initiatives in the Corporate segment.
(5) Business interruption proceeds for insurance on the Terra Nova asset in the E&P segment.
(6) After-tax impairment charges of $718 million on the company’s interest in the Joslyn mining project, $297 million against the company’s Libyan assets, and $223 million related to certain assets in the Oil Sands segment following a review of repurpose options due to previously revised growth strategies.
(7) Reserves redetermination of 1.2 million barrels of oil receivable related to an interest in a Norwegian asset that Suncor previously owned.

Corporate Guidance

Suncor has updated its 2015 corporate guidance previously issued on April 29, 2015. The changes to the company’s guidance are presented below and are based on year to date results and the company’s latest forecasts.

The outlook range for capital expenditures has been lowered from $6.2 – 6.8 billion to $5.8 – 6.4 billion as non-essential projects have been re-evaluated as part of the company’s cost reduction initiatives and overall approach to capital discipline. The changes are as follows.

Read More: http://www.suncor.com/en/newsroom/5441.aspx?id=1972098

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