Canada’s biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. (SU), reported lower-than-expected fourth-quarter 2013 earnings, reflecting lower price realization in oil sands operations along with decreased refinery utilization.
Earnings per share, excluding certain items, came in at 66 Canadian cents (62.9 US cents) in the fourth quarter, far below the Zacks Consensus Estimate of 81 US cents. However, comparing year over year, the results improved 1.5% from 65 Canadian cents per share.
In the reported quarter, total revenue of C$10.19 billion (US$9.71 billion) increased 7.4% from the year-ago level, supported by higher output from upstream and Syncrude operations.
However, the figure failed to beat the Zacks Consensus Estimate of US$10.2 billion, owing to production shut down in Libya.
Quarterly operating earnings of C$973.0 million were below C$988.0 million recorded a year ago. On the flip side, cash flow from operations increased to C$2.35 billion from C$2.23 billion in the fourth quarter of 2012.
For the year ended Dec 31, 2013, Suncor reported adjusted income of C$3.13 per share (US$3.04 per share), below the Zacks Consensus Estimate of US$3.16. However, the figure is in line with the previous year’s adjusted profit.
Revenues of C$40.3 billion (US$39.14 billion) were 4.6% above the year-ago number and were also marginally higher than the Zacks Consensus Estimate of US$38.8 billion.
Production
Upstream production during the quarter averaged 558,100 barrels of oil equivalent per day (BOE/d), up from the fourth quarter of 2012 level of 556,500 BOE/d.
Oil sands volume was 409,600 barrels per day (Bbl/d), higher than 342,800 Bbl/d recorded in the year ago quarter. The quarter’s results were aided by higher production volumes from Firebag.
Production from Syncrude operations moved up 2.8% year over year to 36,900 Bbl/d in the quarter.
Suncor’s Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) produced 111,600 BOE/d against 177,800 BOE/d in the prior-year quarter. Production shut down in Libya affected the results negatively. The results were also impacted as Suncor sold its conventional natural gas business.
The Refining and Marketing segment averaged 419,000 bbls/d of refinery crude against 437,000 bbls/d in the year-ago quarter. The refinery utilization fell to 91% from 96% a year ago. Sarnia and Montreal refineries’ planned maintenance work along with Edmonton refinery’s unplanned maintenance activities hampered the result.
Product Sales
The company’s total product sales of 84,000 cubic meters per day were down 3.5% from the prior-year quarter.
Dividend Increase
Suncor reported quarterly dividend of 23 Canadian cents per share, reflecting a sequential increase of roughly 15.0%. The new dividend is expected to be paid on Mar 25, 2014 to the shareholders of record as of Mar 4, 2014.
Balance Sheet & Capital Expenditure
As of Dec 31, 2013, Suncor had cash and cash equivalents of C$5.2 billion and total long-term debt (including current portions) of C$10.7 billion. The debt-to-capitalization ratio was approximately 21.8%. Also, during the quarter, the company incurred C$1.8 billion in capital expenditure.
Guidance
Suncor plans to invest roughly C$7.8 billion in 2014, of which C$4.2 billion will be expended toward growth projects.
The company lowered its projection for total output to the range of 525,000–570,000 BOE/d.
Zacks Rank
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.
Meanwhile, one can look at better-ranked players in the energy sector like Cabot Oil & Gas Corporation (COG), Athlon Energy Inc. (ATHL) and Warren Resources Inc. (WRES). All the stocks sport a Zacks Rank #1 (Strong Buy).
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