EARNINGS / Suncor Energy reports 1st 3 months Results
CALGARY, April 22 /CNW/ -
First Quarter Highlights
- Despite a 30% drop in oil prices, Suncor Energy's first quarter 1998
earnings declined only 17% to $50 million ($0.46 per share), compared
to 1997 first quarter results of $60 million ($0.54 per share).
Excluding non-operational gains, operating earnings were $48 million,
compared with $55 million in the first quarter of 1997.
- Cash flow from operations was $144 million ($1.31 per share), compared
to $149 million ($1.37 per share) in the first quarter of last year, a
decline of less than 4%. Revenue for the quarter was $543 million
compared to $571 million during the same period in 1997.
- Total upstream production of crude oil, natural gas and natural gas
liquids reached an all-time record of 135,100 barrels of oil equivalent
(BOE) per day, an 11% increase from the 1997 first quarter average of
121,600 BOE per day.
- Oil Sands posted another record first quarter production level,
averaging 91,800 barrels per day, compared with an average of 81,300
barrels per day in the first quarter of 1997. Oil Sands cash costs
declined from $14.50 per barrel to $12.00 per barrel.
- Suncor's growth plans remain on track. During the quarter the company
arranged a new $1.3 billion syndicated credit facility to assist with
financing Project Millennium.
- Suncor's Exploration and Production business continued its aggressive
exploration and development program during the quarter, with capital
and exploration expenditures rising to a record $93 million from $56
million in the first quarter of 1997. First quarter average daily
production was 43,300 BOE, a 7% increase compared with the 40,300 BOE
per day production level achieved in the first quarter of 1997.
- In the downstream, Sunoco's efforts continued during the quarter to
broaden Sunoco's product offering in key commercial and residential markets.
First Quarter Performance Contributes to Growth Objectives
''Suncor's growth plans are moving ahead as scheduled,'' says Rick
George, president and chief executive officer. ''We are prepared to weather
the current commodity price weaknesses and concentrate on our long-term
expansion strategies,ƒ says George. —Our growing production, our lower unit
costs, and our hedging program help reduce the impact of low crude prices.''
George says Suncor's first quarter earnings decline reflects the weak
natural gas and oil prices during the quarter. The company's crude oil hedging
program, which pre-sold about 30% of Suncor's 1998 oil production at U.S. $20
(approximately CDN$28) per barrel, gave Suncor some protection against
continuing oil price weakness.
George says Suncor's growth projects are on track: the Steepbank Mine and
fixed plant expansion are on target for startup this year; Suncor's
Exploration and Production business has never been so active; Sunoco is
continuing with efforts to broaden its product offering to existing and new
consumers; and the company's Stuart Oil Shale Project in Australia is on
schedule for startup in late 1999. ''I am optimistic that the remainder of
1998 will see Suncor continuing to move forward on its strategic growth
plans.''
Suncor's long-term growth plans received a vote of confidence during the
quarter with the company's successful arrangement of $1.3 billion in new
credit facilities. This financing is one component of Suncor's planned
multi-billion dollar expansion over the next four years.
During the quarter Suncor took several actions as part of its plan to
address the risk of global climate change, including an agreement to fund the
generation of wind power in Alberta and an emissions reduction trade with
U.S.-based Niagara Mohawk Power Corporation. ''Our actions show that we take
the risk of climate change seriously, and that we are willing to look both
inside and outside our plant gates for solutions,'' says George.
George says he is also pleased that Suncor's stock was added to the
prestigious TSE 35 during the quarter. ''We are proud to be one of Canada's
newest 'blue chip' companies,'' he says.
Consolidated Financial Results
Earnings in the first quarter were $50 million, or $0.46 per share,
compared to $60 million, or $0.54 per share in the same period last year.
Excluding gains from asset sales, operating earnings were $48 million in 1998,
compared with $55 million earned in the first quarter of 1997. The earnings
decline was mainly due to lower commodity prices, volume related cost
increases, and higher interest expenses that were only partially offset by
higher upstream sales volumes.
Cash flow from operations was $144 million, or $1.31 per share, down from
$149 million, or $1.37 per share in the first quarter of 1997.
Business Unit Performance
Oil Sands Sets First Quarter Production Record
Suncor's Oil Sands business posted record first quarter production,
averaging 91,800 barrels per day, up from 81,300 barrels per day in the same
period last year.
Oil Sands earnings were $50 million for the quarter, compared with $51
million in the first quarter of 1997. The impact of weaker oil prices was
largely offset by record sales levels and lower unit costs.
Cash flow from operations was $96 million, compared with $95 million
during the same period last year.
Record production levels drove cash costs down to $12.00 per barrel for
the quarter compared to $14.50 per barrel for the first quarter of 1997.
Suncor's Oil Sands business continues to target an average cash cost per
barrel of $13.25 for the year. Cash costs for the balance of the year are
expected to be higher because of the seasonal nature of maintenance and
project activities.
The development of the Steepbank Mine and fixed plant expansion continued
during the quarter, with the fixed plant expansion now in the commissioning
phase and the Steepbank Mine projected for start-up in the third quarter.
Average daily production is targeted to rise to 105,000 barrels per day by the
end of 1998.
Regulatory approval to proceed with construction of the Wild Rose
Pipeline was received on April 17, and work is expected to begin immediately.
Wild Rose Pipe Line Inc. is a wholly owned subsidiary of IPL Energy Inc. The
pipeline will be used to ship Suncor's oil sands production to North American
markets.
During the quarter, Suncor Energy signed an agreement with Novagas Canada
Limited Partnership (NCL) for NCL to develop an 'off-gas' extraction plant
near Fort McMurray. NCL will fund and construct the plant. The agreement is
expected to provide Suncor Energy with a source of revenue from the sale of
these gas by-products and their transportation to NCL's Redwater fractionation
facility.
Retail Margins Hold Steady for Sunoco
Sunoco's first quarter earnings were $8 million, compared with $7 million
in the first quarter of 1997. Cash flow from operations was $24 million in the
quarter compared to $25 million in the first quarter of 1997.
Refining profits were $6 million in the first quarter compared with $5
million in the same quarter of 1997. This increase was primarily due to higher
income from Sunoco's chemical joint venture, and was partially offset by lower
volumes resulting from the relatively warm winter.
Sunoco's retail marketing earnings were $2 million, the same level as the
first quarter last year. While retail volumes were higher, they were offset by
slightly higher expenses during the period.
Sunoco's new energy marketing business is continuing its expansion into
the residential and commercial natural gas business in Ontario.
During the first quarter Sunoco opened its first Fleet Fuels Cardlock (a
self-serve fuel stop for commercial truckers) outlet in Hamilton, Ontario,
with plans to open another two Cardlock operations in the second quarter. This
initiative is designed to allow Sunoco to sell more of its diesel production
through its own network.
Exploration and Production Increases Exploration and Development Activity
First quarter earnings for Suncor's Exploration and Production business
declined to $4 million from $10 million in the first quarter of last year.
1998 results included a gain of $2 million from the portfolio optimization
program compared to a gain of $5 million in the first quarter of 1997.
Excluding these items, operating earnings declined $3 million as a result of
significantly lower crude oil and natural gas prices, more than offsetting the
7% increase in volumes.
Although first quarter natural gas prices were 23% lower than the first
quarter of last year, current and forward markets have strengthened. As part
of E&P's ongoing hedging program 100 mmcf per day of natural gas production
has been hedged at an average price of $1.93 per mcf for the May to October
time period.
Cash flow from operations for the quarter was $39 million, down from $46
million in the first quarter of 1997, reflecting the significant drop in
commodity prices.
Production volumes for the quarter averaged 43,300 BOE per day compared
with 40,300 BOE per day in the first quarter of 1997. The production increase
was mainly driven by an 8% increase in natural gas volumes. Included in the
1998 total average daily production volume was 1,000 BOE per day from Suncor's
Burnt Lake heavy oil pilot project. Production volumes are on target to
average 45 - 47,000 BOE per day for the year.
Exploration and development activity were at an all time high, and
capital expenditures for the first quarter of this year rose to $93 million
from the $56 million in the same period last year. Of the $93 million capital
expenditures, 60% was focused on drilling activities targeted to meet SuncorŠs
aggressive reserve replacement and production targets for 1998. This increased
activity reflects Exploration and Production's efforts to prepare drilling
locations earlier in the year to increase cash flow and production and take
advantage of rig availability.
Exploration and Production continues to be engaged in a property
portfolio optimization program to sell non-core properties and reinvest the
proceeds in exploration, production and acquisition of strategic properties
with an emphasis on natural gas. Proceeds from the property portfolio
optimization program in the first quarter of 1998 were $6 million.
Heavy oil development is one of Suncor's long-term growth priorities. A
delineation drilling program of the company's Firebag leases near Fort
McMurray was conducted in the first quarter and showed encouraging results. A
second program is planned for winter to continue evaluation of the Firebag
leases. Any future production from these leases would be tied to Suncor's Oil
Sands operations.
Australia Oil Shale Project Continues on Schedule
The Stuart Oil Shale Project is on budget and on schedule. The goal of
Suncor and its joint venture participants, Southern Pacific Petroleum NL and
Central Pacific Minerals NL is to have the plant mechanically completed by the
second quarter of 1999, with production to begin by year end 1999. The first
phase of the project, which is located just outside Gladstone in the
Australian state of Queensland, is targeted to produce 4,500 barrels of oil
per day.
Suncor Energy is a Canadian integrated energy company operating an oil
sands plant in Fort McMurray, Alberta; a conventional exploration and
production business in Western Canada; a refining and marketing operation in
Ontario and Quebec; and an oil shale development project in Queensland,
Australia. Suncor Energy common shares are listed for trading on the Toronto,
Montreal and New York stock exchanges(symbol SU). For more information about
Suncor Energy, visit our website at www.suncor.com.
Note: This news release contains forward-looking information. Actual
future results may differ materially. The risks, uncertainties and other
factors that could influence actual results are described in Suncor Energy's
annual report to shareholders and other documents filed with regulatory
authorities. |
