Suncor Energy Inc., the world's largest oil-sands producer, said second-quarter profit soared 14- fold as the company increased output after recovering from a fire last year at its plant in northern Alberta.
Net income rose to C$1.22 billion ($1.08 billion), or C$2.59 a share, from C$83 million, or 18 cents, a year earlier, the Calgary-based company said today in a statement. Results from the second quarter of 2005 were lowered by C$29 million in a restatement for changes in accounting for production costs. Sales rose 71 percent to C$4.07 billion.
A fire in January 2005 shut one of two oil-processing units in Alberta, cutting daily output by about 50 percent for most of the year. The unit was repaired in September, and an expansion project more than doubled daily oil-sands production in the province to 267,300 barrels a day in the second quarter from 128,200 barrels a year earlier.
``They were at the top end of what this plant can do, and they did it for the whole quarter,'' said Martin Molyneaux, an analyst at FirstEnergy Capital Corp. in Calgary who rates Suncor shares at ``outperform'' and owns an undisclosed number.
Lower Canadian tax rates increased profit by C$419 million, Suncor said. Excluding that and other one-time items, the company reported earnings of C$1.64 a share. On that basis, Molyneaux said the company beat his estimate of C$1.46 mostly because of higher-than-expected refining and marketing profit.
`Outstanding Results'
``The refining and marketing side just left the Street in the dust,'' Molyneaux said in a telephone interview. ``It was outstanding results from refining and marketing.''
Profit from the marketing and refining in Canada soared more than 12-fold to C$63 million from C$5 million a year earlier, and refining profit in the U.S. rose 84 percent to C$57 million.
Shares of Suncor fell 9 cents to C$93.37 at 12:49 p.m. on the Toronto Stock Exchange. The stock, which has 11 buy recommendations from analysts and nine holds, has risen 27 percent this year.
``We've got to be very close to the peak on refining margins,'' Chief Executive Officer Rick George said on a conference call with investors and analysts. ``You are seeing some real projections of refinery expansion over the next three or four years in the U.S, and I think that will have a moderating effect.''
Oil Sands
George, 56, is increasing Suncor's oil-sands output to help meet growing fuel demand worldwide. The company plans to spend C$3.6 billion to boost daily output from Alberta's tar-like reserves to about 350,000 barrels by 2008 from an expected 260,000 barrels this year.
The company's Sarnia, Ontario, refinery will be closed for up to 60 days in the second half of this year for modifications that will enable it to process about 40,000 barrels of ``sour,'' or high-sulfur, crude produced from oil sands, George said. The C$800 million project will lower feedstock costs by as much as C$7 per barrel and increase profitability, he said.
Increased production helped lower per-barrel oil-sands cash operating costs by 32 percent to an average of C$18.30 a barrel, the company said. That's below the company's forecast of per- barrel operating costs of C$18.75 to C$19.50 for the year.
Lower Gas Costs
Operating costs fell partly on lower prices for natural gas, a fuel used in the processing of oil-sands into oil, FirstEnergy's Molyneaux said. Gas prices have dropped more than 30 percent this year as mild winter weather reduced demand for the fuel and left abundant supplies in storage.
Suncor mostly uses mechanical shovels to scoop up oil- encrusted sand and process the bitumen, or heavy oil, it contains into synthetic oil. Refiners purchase the synthetic oil to make gasoline, diesel and other petroleum products.
The company said its oil sold for an average of C$75.34 a barrel, excluding hedges, in the second quarter, a gain of 32 percent from a year earlier.
Second-quarter natural-gas production rose 8 percent to 189 million cubic feet a day. The fuel sold for C$6.22 per thousand cubic feet, excluding hedging, a drop of 14 percent.
The company also owns oil refineries in Denver and filling stations in Colorado and Ontario.
Net income rose to C$1.22 billion ($1.08 billion), or C$2.59 a share, from C$83 million, or 18 cents, a year earlier, the Calgary-based company said today in a statement. Results from the second quarter of 2005 were lowered by C$29 million in a restatement for changes in accounting for production costs. Sales rose 71 percent to C$4.07 billion.
A fire in January 2005 shut one of two oil-processing units in Alberta, cutting daily output by about 50 percent for most of the year. The unit was repaired in September, and an expansion project more than doubled daily oil-sands production in the province to 267,300 barrels a day in the second quarter from 128,200 barrels a year earlier.
``They were at the top end of what this plant can do, and they did it for the whole quarter,'' said Martin Molyneaux, an analyst at FirstEnergy Capital Corp. in Calgary who rates Suncor shares at ``outperform'' and owns an undisclosed number.
Lower Canadian tax rates increased profit by C$419 million, Suncor said. Excluding that and other one-time items, the company reported earnings of C$1.64 a share. On that basis, Molyneaux said the company beat his estimate of C$1.46 mostly because of higher-than-expected refining and marketing profit.
`Outstanding Results'
``The refining and marketing side just left the Street in the dust,'' Molyneaux said in a telephone interview. ``It was outstanding results from refining and marketing.''
Profit from the marketing and refining in Canada soared more than 12-fold to C$63 million from C$5 million a year earlier, and refining profit in the U.S. rose 84 percent to C$57 million.
Shares of Suncor fell 9 cents to C$93.37 at 12:49 p.m. on the Toronto Stock Exchange. The stock, which has 11 buy recommendations from analysts and nine holds, has risen 27 percent this year.
``We've got to be very close to the peak on refining margins,'' Chief Executive Officer Rick George said on a conference call with investors and analysts. ``You are seeing some real projections of refinery expansion over the next three or four years in the U.S, and I think that will have a moderating effect.''
Oil Sands
George, 56, is increasing Suncor's oil-sands output to help meet growing fuel demand worldwide. The company plans to spend C$3.6 billion to boost daily output from Alberta's tar-like reserves to about 350,000 barrels by 2008 from an expected 260,000 barrels this year.
The company's Sarnia, Ontario, refinery will be closed for up to 60 days in the second half of this year for modifications that will enable it to process about 40,000 barrels of ``sour,'' or high-sulfur, crude produced from oil sands, George said. The C$800 million project will lower feedstock costs by as much as C$7 per barrel and increase profitability, he said.
Increased production helped lower per-barrel oil-sands cash operating costs by 32 percent to an average of C$18.30 a barrel, the company said. That's below the company's forecast of per- barrel operating costs of C$18.75 to C$19.50 for the year.
Lower Gas Costs
Operating costs fell partly on lower prices for natural gas, a fuel used in the processing of oil-sands into oil, FirstEnergy's Molyneaux said. Gas prices have dropped more than 30 percent this year as mild winter weather reduced demand for the fuel and left abundant supplies in storage.
Suncor mostly uses mechanical shovels to scoop up oil- encrusted sand and process the bitumen, or heavy oil, it contains into synthetic oil. Refiners purchase the synthetic oil to make gasoline, diesel and other petroleum products.
The company said its oil sold for an average of C$75.34 a barrel, excluding hedges, in the second quarter, a gain of 32 percent from a year earlier.
Second-quarter natural-gas production rose 8 percent to 189 million cubic feet a day. The fuel sold for C$6.22 per thousand cubic feet, excluding hedging, a drop of 14 percent.
The company also owns oil refineries in Denver and filling stations in Colorado and Ontario.
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