Suncor to reconsider oil-sands growth plan

by on July 25, 2012 8:44 pm BST

Suncor, which late on Tuesday reported a
better-than-expected 28% jump in second-quarter profit, will no longer commit
to an ambitious growth programme that would see production nearly double by the
beginning of the next decade, Reuters reported.

“I’m not focused on getting to a million barrels
a day of production by 2020,” Steve Williams, who replaced Rick George as
Suncor’s boss earlier this year, said on a conference call.

“That said, I have no doubt we will eventually
get to that level of production and beyond. But what I am focused on is
achieving strong returns for our shareholders. Growth for the sake of growth
doesn’t interest me much.”

Suncor is the dominant producer in the oil sands of
northern Alberta, the world’s third-largest storehouse of crude oil. It plans
to increase its lead over competitors with two new oil sands mines and an
upgrader to convert bitumen wrested from the sands into synthetic crude oil, to
be built as part of a joint venture with French oil major Total.

But those plans have not been entirely welcomed by
shareholders concerned about a return to the massive cost overruns that plagued
the industry before the 2008 financial crisis. Suncor shares have fallen by
nearly a quarter over the past 12 months in part because of concerns that its
expansion plans will squeeze profits.

Now, Williams said, the partners will examine the
economics of each of the planned growth projects before looking for spending
approvals from their boards of directors in 2013. During that process, the
joint venture may decide not to go ahead with one or more of the projects.

“They will be individual projects and individual
board approvals,” he said. “In principle, there is the opportunity to
not progress these projects.”

For the second quarter, Suncor’s operating profit,
which excludes most one-time items, rose 28% from the second quarter of 2011 to
C$1.26 billion, or 81 Canadian cents a share, from C$980 million, or 62
Canadian cents a share.

The result beat the average analyst estimate of 72
Canadian cents for the measure, according to Thomson Reuters I/B/E/S.

Suncor, which also has conventional oil and gas
operations in Canada, North Africa and the North Sea, as well as refineries in
Canada and the United States, said its cash flow rose 18% to C$2.34 billion.

It reported a net income of C$333 million, or 21 Canadian
cents a share, down 40% from C$562 million, or 36 Canadian cents, in the
year-before quarter as it wrote down the value of its Syrian operations by
C$694 million. It was forced to abandon the operations because of international
sanctions against Syria.

Suncor’s total upstream production rose 18% to
542,400 barrels of oil equivalent per day from 460,000 boepd a year earlier.