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Suncor Energy 1st quarter 2007 Production March
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Suncor Energy reported first quarter 2007 net earnings of $551 million ($1.20 per common share), compared to $713 million ($1.56 per common share) in the first quarter of 2006. Excluding the impact of net insurance proceeds accrued in 2006 and the effects of unrealized foreign exchange gains on the company's U.S. dollar denominated long-term debt, first quarter 2007 net earnings were $539 million ($1.17 per common share), compared to $509 million ($1.11 per common share) in the first quarter of 2006. Cash flow from operations was $790 million in the first quarter of 2007, compared to $1.314 billion in the first quarter of 2006.
The increase in net earnings was primarily due to strong retail and refining margins in downstream operations, lower Alberta Crown royalty expenses and lower effective federal and provincial income tax rates (these exclude 2006 insurance.) These factors were partially offset by lower oil sands production and higher operating expenses, both related to unplanned maintenance at the oil sands facility during the quarter. Reduced earnings in Suncor's Natural Gas business also negatively impacted earnings.
Suncor's total upstream production averaged 283,100 boe per day during the first quarter of 2007, compared to 300,300 boe per day in the first quarter of 2006. Oil sands production during thefirst quarter averaged 248,200 bpd compared to first quarter 2006 production of 264,400 bpd. Natural gas production in the first quarter of 2007 was 209 mmcfe per day, compared to first quarter 2006 production of 215 mmcfe per day.
During the first quarter, oil sands cash operating costs averaged $26.30 per barrel, compared to $19.05 per barrel during the first quarter of 2006. the increase in cash operating costs was due to higher operating expenses being applied to a lower production volume. As a result of lower than planned production in the first quarter, Suncor has revised its outlook for 2007. Production is now targeted at 255,000 bpd to 265,000 bpd, down slightly from original targets of 260,000 bpd to 270,000
bpd. Cash operating cost targets have been adjusted upward to $23.50 to $24.50 per barrel from $21.50 to $22.50 per barrel.
In Suncor's downstream operations, refining and retail margins were higher in the first quarter of 2007 compared to the first quarter of 2006 due to tighter supply of refined products in both the Ontario and U.S. Rocky Mountain markets. Total refinery throughput increased compared to the first quarter of 2006, when Suncor's U.S. operations were impacted by planned maintenance.
Suncor's next major growth phase includes an expansion of existing upgrading facilities that targets an increase in production capacity to 350,000 bpd in 2008. Engineering on this portion of the project is substantially complete and construction is approximately 75% complete. The project remains on schedule and on budget. Suncor's plans to increase production to 500,000 bpd to 550,000 bpd in 2010 to 2012 involve a number of investments including increased bitumen production from mining and in-situ sources, additional facility infrastructure and a third oil sands upgrader. Plans are proceeding on schedule, with fabrication of major vessels for the planned upgrader underway.
In Suncor's downstream operations, work continues on modifications to the company's Sarnia refinery, which are planned to enable the facility to process up to 40,000 bpd of oil sands sour crude. The budget for the project has been increased to $960 million from $800 million due to labour shortages and material supply issues. A shutdown to tie-in new facilities is planned for the third quarter with completion targeted for the fourth quarter. Portions of the refinery are expected to continue production during the shutdown period. As Suncor invests for future growth, prudent debt management remains a priority. Net debt levels increased to $2.3 billion at the end of the first quarter from $1.9 billion at year-end 2006.
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Barry
Mr. Do It All
Apr 27, 2007, 5:38 PM
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