Suncor Energy ( SU Quick Quote SU - Free Report) reported first-quarter 2023 operating earnings of $1.01 per share, which beat the Zacks Consensus Estimate of 93 cents. This could be attributed to an increase in Upstream’s Bitumen production.
The bottom line, however, deteriorated from the year-ago quarter’s level of $1.53 due to lower crude oil realizations and a decline in upstream production.
Operating revenues of $9.1 billion beat the Zacks Consensus Estimate by 11.3%. The top line decreased approximately 15.1% on a year-over-year basis due to a decline in sales in the Upstream and Downstream segments.
The company repurchased shares worth approximately C$874 million during the reported quarter.
Segmental Performance Upstream: Total production in this segment decreased 3.1% year over year to 742,100 barrels of oil equivalent per day (boe/d) from 766,100 boe/d in the prior-year quarter. This was due to unanticipated maintenance.
The company’s exploration and production volume (international, offshore and natural gas) slipped 16.7% to 67,000 boe/d from 80,400 boe/d a year ago due to natural declines and asset sales.
Adjusted operating earnings came in at C$2.1 billion compared with C$2.95 million in the year-ago quarter.
Operating cost per barrel increased to C$29.60 from C$28.70 in the corresponding period of 2022 due to increased maintenance costs. Upgrader utilization decreased to 93% from 96% a year ago.
Bitumen production increased to 177,300 boe/d from 170,400 boe/d in the prior-year period. Oil sands volumes went down to 497,800 boe/d from 515,300 boe/d a year ago.
Fort Hills reported average first-quarter volumes of 69,200 bpd, lower than the year-ago quarter’s 87,500 bpd. Cash operating costs per barrel increased to $41.40 from $29.00 in the prior-year period. This was due to higher expenditures associated with increasing mining activities.
Downstream: Adjusted operating earnings from the unit decreased to C$998 million from the year-ago quarter’s figure of C$1.4 billion. This deterioration was due to a FIFO inventory valuation loss in the reported period.
Refined product sales totaled 514,800 bpd, down from the prior-year quarter’s level of 551,900 bpd. This can be attributed to a decrease in refinery crude throughput at the Commerce City refinery in the reported quarter.
Crude throughput came in at 367,700 bpd compared with 436,500 bpd in the year-ago period. Refinery utilization was 79% compared with 94% a year ago.
Total expenses increased 0.4% to C$9.5 billion from that recorded in the prior-year quarter.
Cash flow from operating activities came in at C$1.039 billion, down from the prior-year quarter’s C$3.072 billion. Suncor Energy incurred capital expenditures worth C$1.1 billion in the first quarter of 2023.
As of Mar 31, 2023, the company had cash and cash equivalents worth C$1.1 billion, and long-term debt of C$9.8 billion. Its total debt to total capital was 19.7%.
SU expects production in the range of 740,000-770,000 boe/d for 2023.
Oil Sands operations yield is anticipated in the band of 385,000-425,000 bbls/d, while the same for Fort Hills is projected at 85,000-95,000 bbls/d. Syncrude, and Exploration and Production operations yield is expected in the range of 175,000-190,000 bpd and 50,000-60,000 boe/d, respectively.
The company also projects a full-year capital expenditure of C$5.4-C$5.8 billion.
Zacks Rank and Key Picks
Currently, Suncor Energy carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the
sector are energy Evolution Petroleum ( EPM Quick Quote EPM - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Archrock ( AROC Quick Quote AROC - Free Report) and Ranger Energy Services ( RNGR Quick Quote RNGR - Free Report) , both holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here . Evolution Petroleum: EPM is worth approximately $219.16 million. EPM currently pays a dividend of 48 cents per share, or 7.38%, on an annual basis.
The company currently has a forward P/E ratio of 6.07. In comparison, its industry has an average forward P/E of 7.50, which means EPM is trading at a discount to the group.
Archrock: AROC is valued at around $1.55 billion. It delivered an average earnings surprise of 26.27% for the last four quarters and its current dividend yield is 6.06%.
Archrock is a provider of natural gas contract compression services and aftermarket services of compression equipment.
Ranger Energy Services: RNGR is valued at around $183.61 million. In the past year, its shares have gained 13.8%.
Ranger Energy Services currently has a forward P/E ratio of 5.30. In comparison, its industry has an average forward P/E of 11.60, which means RNGR is trading at a discount to the group.