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Canada’s premium integrated energy company, Suncor Energy Inc. (SU - Analyst Report) reported second quarter 2013 earnings of 62 Canadian cents (61 US cents) per share, missing the Zacks Consensus Estimate of 67 cents. The earnings also reflect a decrease of 18 Canadian cents from the year-ago quarter profit.
A combined effect of several factors such as reduction in production levels in the ‘Oil Sands’ segment as well as increase in operating costs and other costs associated with planned maintenance events can be held responsible for the downfall.
Total revenue of C$9,714 million (US $9,493 million) increased slightly from the year-ago level of C$9,707 million, beating the Zacks Consensus Estimate of $9,262 million.
Cash flow from operations was reported at C$2.25 billion, down approximately 4.1% from the second quarter of 2012.
Upstream production during the quarter was 500,100 barrels of oil equivalent per day (BOE/d), down from the second-quarter 2012 level of 542,400 BOE/d.
Oil sands volume was 276,600 barrels per day (Bbl/d), lower than 309,200 Bbl/d in the prior-year quarter. The quarter’s results were negatively impacted by a planned turnaround at Upgrader 1 and unplanned third-party activities; the latter being the cause of approximately 36,000 bbls/d reduction in yield.
Production from the Syncrude operations grew 14.7% year over year to 32,800 bbls/d in the quarter. The increase is due to the effects of maintenance activities undertaken in the second quarter of the previous year.
Suncor’s Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) yielded 190,700 BOE/d against 204,600 BOE/d in the prior-year quarter. The reduction was primarily due to lower production levels in Libya, partially offset by increased production at White Rose and Terra Nova.
The Refining and Marketing segment averaged 414,500 bbls/d of refinery crude against 427,200 bbls/d in the year-ago quarter. The refinery utilization fell to 90% from 94% a year ago. The lower utilization levels were primarily due to maintenance activities that suppressed utilization at the Edmonton refinery.
The company’s total product sales of 84,600 cubic meters per day was down 3.3% from the prior-year quarter primarily due to lower production levels owing to Suncor’s planned maintenance events.
The depreciation, depletion, amortization and impairment expenses of Suncor decreased 35.3% to C$1,029 million year over year.
Balance Sheet & Capital Expenditure
As of Jun 30, 2013, Suncor had cash and cash equivalents of C$4,530.0 million and total long-term debt (including current portions) of C$10,855 million. The debt-to-capitalization ratio was approximately 21.2%. The company also incurred C$1,980 million as capital and exploration expenditure during the quarter.
Suncor expects an increase in its production capacity due to several maintenance events undertaken during the quarter. This has also enhanced the company’s asset portfolio strength. Suncor targets capital spending of almost C$7.0 billion for 2013.
Suncor currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
However, other firms in the integrated energy sector that are expected to significantly outperform the broader U.S. equity market over the next one to three months are Enerplus Resources Fd (ERF - Snapshot Report), Arc Resources Ltd (AETUF) and Canadian Oil Sands (COSWF). All three stocks sport a Zacks Rank #1 (Strong Buy).