Suncor tallying higher Petro-Canada savings
Suncor Energy Inc. expects cost-savings from its merger with Petro-Canada to dramatically exceed what it predicted when the blockbuster deal closed about 15 months ago.
CALGARY: Suncor Energy Inc. expects cost-savings from its merger with Petro-Canada to dramatically exceed what it predicted when the blockbuster deal closed about 15 months ago.
Canada’s largest energy company initially called for synergies of $300 million, then bumped that up to $400 million about a year ago.
But on Nov. 4, Suncor reported better-than-expected third-quarter results and CEO Rick George said the company now expects that figure to hit $800 million.
“Almost all that $800 million in savings has been triggered to date and you should start to see that in our results on a go-forward basis – maybe not all at once, but over a period of time,” George told analysts on a conference call.
Earlier, the oil sands giant said it earned just over $1 billion, or 65 cents per share, compared to profits of $929 million, or 69 cents per share a year earlier.
Operating earnings – which strip out the effects of one-time items – were $654 million, or 42 cents per share, versus $343 million, or 25 cents per share in the same 2009 period.
Both the net and operating earnings handily beat average analyst estimates of 36 cents per share compiled by Thomson Reuters.
The company says the increase was primarily due to additional oil and natural gas production and higher benchmark prices.
As well, Suncor booked $491 million from selling non-core assets. The company also took $220 million in impairment charges and writeoffs in the latest quarter.
Revenues increased to nearly $8.9 billion for the quarter, up from $8.5 billion last year.
Higher benchmark prices were partially offset by the widening price gap between light and heavy crude, and the stronger Canadian dollar relative to the US dollar.
Oil sands output, excluding the company’s share from the Syncrude joint venture, edged higher to 306,600 barrels per day from 305,300 barrels a year earlier, the company said.
“It was one of our strongest quarters in terms of oil sands production, and what makes that even more important is that we’ve reached these volumes while also completing major planned maintenance,” George said.
During the quarter, Suncor continued with its plans to divest of a number of non-core assets.
In August, the company completed the sale of its Trinidad and Tobago assets and its shares in Petro-Canada Netherlands B.V. Suncor also sold off its non-core natural gas properties in west-central Alberta and its non-core UK offshore assets.
Shortly after announcing the Petro-Canada merger, Suncor said it aimed to bring in between $2 billion and $4 billion from the sales.
To date, Suncor has disposed of, or reached agreements to dispose of, assets worth approximately $3.5 billion.
The company has also sold some retail gas outlets in Ontario, as required by the Competition Bureau following the Petro-Canada deal.
Suncor’s main focus continues to be on the oil sands, where it has vast mining operations just north of
Fort McMurray, Alta., a 12% stake in the Syncrude Canada Ltd. partnership and steam-driven operations at Firebag.
It also has an operating stake in the long-stagnant Fort Hills mine alongside Total SA and Teck Resources Ltd.
Suncor has said it plans to develop its other oil sands projects before it brings Fort Hills to the front-burner.
© 2010 The Canadian Press