Suncor Tops Bottom Line, Keeps View - Analyst Blog
November 01 2012 - 4:30AM
Zacks
Canada’s biggest energy firm and
the largest oil sands outfit, Suncor Energy Inc.
(SU) reported mixed third-quarter 2012 earnings, reflecting volume
growth at Oil Sands along with better refinery margins and start-up
of operations in Libya. These were, however, partially negated by
steeper operating expenses and low oil price realized.
Earnings per share, excluding certain items, came in at 85 Canadian
cents (85 US cents) in the third quarter, surpassing the Zacks
Consensus Estimate of 75 cents. Comparing year over year, the
results dropped 25.4% from C$1.14 per share earned in the
prior-year quarter.
In the reported quarter, total revenue of C$9.60 billion ($9.64
billion) plunged 7.9% from the year-ago level as well as missed our
expectation by 6.0%.
Quarterly operating earnings of C$1.30 billion were down from
C$1.79 billion a year ago, while cash flow from operations
increased marginally to C$2.74 billion from C$2.72 billion in the
third quarter of 2011.
Production
Upstream production during the quarter averaged 535,300 barrels of
oil equivalent per day (BOE/d), down from the third quarter of 2011
level of 546,000 BOE/d.
Excluding proportionate production share from the Syncrude joint
venture, oil sands volumes were 341,300 barrels per day (Bbl/d),
higher than 326,600 Bbl/d recorded in the prior-year quarter. The
current quarter results were positively influenced by higher
volumes from Firebag.
Production from Syncrude operations moved up 4.7% year over year to
37,600 Bbl/d in the quarter, with the restart of a coker
facility.
Suncor’s Exploration and Production segment (consisting of
International and Offshore and Natural Gas segments) produced
156,400 BOE/d, as against 183,500 BOE/d in the prior-year quarter.
The planned maintenance works at East Coast Canada units along with
the freeze of activates in Syria posed as roadblocks for the
segment’s performance.
Product Sales
The company’s Refining and Marketing segment generated total
refined product sales of 87,500 cubic meters per day, up slightly
from the prior-year quarter result. The result was aided by
refineries running at full capacity in Western North America.
Balance Sheet & Capital Expenditure
As of September 30, 2012, Suncor had cash and cash equivalents of
C$5.45 billion and total long-term debt (including current
portions) of C$9.73 billion. The debt-to-capitalization ratio was
approximately 19.6%. Also, during the quarter, the company incurred
C$1.7 billion in capital expenditure.
Guidance
For 2012, Suncor guided total production of 540,000–580,000 Boe/d,
with East Coast Canada production expected in the range of
45,000–50,000 Bbl/d. International volumes are estimated to range
between 85,000 Boe/d and 90,000 Boe/d, while production at North
American Onshore will be in the band of 310–340 million cubic feet
equivalent per day.
The company expects oil sands production of 325,000–340,000 Bbl/d
and projects Syncrude production at approximately 35,000–36,000
Bbl/d.
Suncor targets capital spending of almost $6.65 billion for 2012,
of which 49% will be expended towards growth projects.
Our Recommendation
Suncor currently retains a Zacks #2 Rank, which translates into a
short-term Buy rating.
With significant oil sands and conventional production platform,
huge long-lived oil-sands reserves and an impressive downstream
portfolio, Suncor remains well poised for earnings and revenue
growth in the coming days. The company also displays abundant
resources, efficient operating base and strong technical
know-how.
Another prominent Canadian energy firm Canadian Natural
Resources (CNQ) will report its third quarter results on
November 8, before the opening bell.
CDN NTRL RSRCS (CNQ): Free Stock Analysis Report
SUNCOR ENERGY (SU): Free Stock Analysis Report
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