From Stockwatch - SU Debt Reduction Oil sands giant Suncor Energy Inc. (SU) lost 27 cents to $39.19 on 18.2 million shares, after releasing its second quarter financials. The headline-grabbing number was its net profit of $3.99-billion, quadruple its earnings of $868-million in the same period last year. This year's figure included a $715-million asset impairment reversal.
Lofty profit aside, the numbers bore some scars of Suncor's recent operational woes. Production of 720,000 barrels a day was a tad below analysts' predictions of 729,000 barrels a day (although cash flow of $3.80 a share was still above analysts' predictions of $3.72 a share). Moreover, Suncor decreased its full-year production target while increasing its budget, the exact opposite of what investors prefer. The company originally wanted to produce up to 790,000 barrels a day on a budget of $4.7-billion. Now it is aiming for a maximum of 760,000 barrels a day on a budget of up to $5.2-billion. The hike reflects inflation as well as extra spending "to improve safety and reliability."
"Safety" got heavy emphasis in the press release, at one point appearing 13 times in four paragraphs. A poor safety record is what cost former chief executive officer Mark Little his job last month, after another worker died at one of Suncor's oil sands assets. This was the fifth workplace fatality in 19 months and the 13th since 2014. No other oil sands company comes close, as activist investor Elliott Investment Management pointed out in April, when it disclosed itself as a shareholder of Suncor and published a scathing open letter to demand top-level changes. The first of these changes appeared about two weeks ago. Suncor appointed three Elliott nominees to its board, two of whom are now on the search committee for a new CEO. Interim CEO Kris Smith is in charge in the meantime.
"We must acknowledge where we have fallen short and recognize the critical need to drive our safety improvement work with focus and vigour," said Mr. Smith today. He added that Suncor is "fully committed" to improving its record. In time, Suncor must hope, its dented reputation will improve as well.
Mr. Smith kept the mood lighter elsewhere in the press release, patting Suncor on the back for achieving record quarterly cash flow and returning $3.2-billion to shareholders in the form of dividends and buybacks. (Its 47-cent quarterly dividend represents a yield of 4.8 per cent.) The Suncor is also on track to achieve its debt reduction target by year-end, well in advance of its original target of 2025.imeline may get a boost from a new asset sale: Mr. Smith announced that Suncor is selling its non-core Norwegian North Sea assets for $410-million. He did not disclose the buyer, but Norway's Sval Energi stepped forward. It said the deal will add 4,000 barrels a day and 19 million barrels of reserves once it closes later in the year.