Suncor CEO Vows to Protect Dividend Amid Oil-Price Swoon
February 04 2016 - 2:30PM
Dow Jones News
CALGARY, Alberta—The head of Suncor Energy Inc. on Thursday said
he would protect his company's dividend and avoid further job cuts,
vows that come a day after Canada's largest crude-oil producer
reported a hefty quarterly loss and slashed spending plans.
Calgary, Alberta-based Suncor reported a fourth-quarter net loss
of 2 billion Canadian dollars ($1.45 billion) late Wednesday amid
sharply lower oil prices, while maintaining its quarterly dividend
at 29 Canadian cents a share.
Suncor plans to keep that shareholder payout intact, and would
shed noncore assets if its cash flow is pinched by lower crude-oil
prices, Chief Executive Steve Williams said.
"We believe we will be able to protect that dividend," Mr.
Williams said on a conference call. He said some noncore assets
have been identified for possible sale to raise cash for dividend
payments, but didn't specify which assets.
North American energy producers are facing pressure to shore up
their balance sheets as crude prices trade at 12-year lows, forcing
some to cut or eliminate shareholder payments. Canadian oil-sands
producer Husky Energy Inc. suspended its dividend last month.
Suncor said budgetary belt-tightening won't affect its 2016
production forecast of between 525,000 and 565,000 barrels of oil
equivalent a day. In 2015, the company's annual output totaled
577,800 barrels of oil equivalent a day.
"Our cash operating costs are below $20 a barrel [so] we
certainly don't see ourselves shutting-in" production, Mr. Williams
said.
Suncor is the first major Canadian energy producer to post
earnings for the quarter, but its weak results are expected to be
replicated by peers reporting later this month and next, including
Cenovus Energy Inc., Husky Energy and Canadian Natural Resources
Ltd.
Suncor has no plans to trim its workforce further after cutting
a net 1,700 jobs last year, Mr. Williams said. Those reductions
were higher than the 1,000-person cut the company had previously
announced.
Reflecting a grim outlook for crude oil prices, Suncor slashed
its spending plans for the year ahead, to a range of C$6 billion to
C$6.5 billion. That is down from the C$6.7 billion to C$7.3 billion
budget it had projected as recently as last November.
Up to C$100 million of that reduction will come from deferring
planned maintenance until 2017 at a large oil-sands project known
as Firebag in northern Alberta, Mr. Williams said. Suncor will also
delay a decision on adding a coker unit to its Montreal refinery,
which would allow it to process oil-sands crude, and will postpone
some investments that would bolster oil-sands well operations, he
said.
Should Suncor face any downgrade in its credit ratings because
of rising debt levels, the executive said he is confident it would
be limited to a single-notch revision and that its rating would
remain investment grade.
In its latest quarter, Suncor's production from oil sands
operations rose 12.6% to 439,000 barrels a day from 384,200 a day a
year earlier. Its average realized oil-sands price fell to C$41.55
per barrel in the fourth quarter, from C$69.51 a barrel in the same
period of 2014 and C$47.93 a barrel in the third quarter.
Suncor's share of production from the Syncrude oil sands
consortium fell to 30,900 barrels a day in the fourth quarter from
35,100 barrels a day a year earlier. That was largely because of
unplanned maintenance, a problem that has dogged Syncrude in recent
years.
Mr. Williams said he expects Syncrude's performance will improve
after his company boosts its ownership stake in the mining
consortium when it completes its takeover of smaller rival Canadian
Oil Sands Ltd.
Following months of wrangling in the wake of an unsolicited
offer last October, Suncor won over Canadian Oil Sands' board last
month with an increased, all-stock bid worth just over C$4
billion.
Canadian Oil Sands is the largest owner of the Syncrude mining
consortium, with a 36.7% stake. The takeover deal will give Suncor,
which now has a 12% stake in Syncrude, effective control over the
seven-member consortium. Syncrude's mines are currently operated by
the Canadian unit of Exxon Mobil Corp., which owns 25% of Syncrude
through its Imperial Oil Ltd. subsidiary.
Write to Chester Dawson at chester.dawson@wsj.com
(END) Dow Jones Newswires
February 04, 2016 14:15 ET (19:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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