Canada’s biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. (SU), reported strong first-quarter 2014 earnings. Improved inland crude price realization and the weakening of the Canadian dollar aided the result.
Earnings per share, excluding certain items, came in at C$1.22 (US$1.11) in the first quarter, steering past the Zacks Consensus Estimate of 88 US cents. Comparing year over year, the results also improved 35.6% from 90 Canadian cents per share.
In the reported quarter, total revenue of C$10.48 billion (US$9.51 billion) increased 4.6% from the year-ago level.
However, the top line failed to beat the Zacks Consensus Estimate of US$10.0 billion, owing to lower upstream production.
Quarterly operating earnings of C$1.8 billion were above C$1.4 billion recorded a year ago. Moreover, cash flow from operations increased to C$2.9 billion from C$2.3 billion in the first quarter of 2013.
Production
Upstream production during the quarter averaged 545,300 barrels of oil equivalent per day (BOE/d), down from the first quarter of 2013 level of 596,100 BOE/d.
Oil sands volume stood at 389,300 barrels per day (Bbl/d), higher than 357,800 Bbl/d recorded in the year-ago quarter. The results were supported by higher production volumes from Firebag.
Production from Syncrude operations moved up 12.5% year over year to 35,100 Bbl/d in the quarter.
Suncor’s Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) produced 120,900 BOE/d, lower than 207,100 BOE/d in the prior-year quarter. Production shut down in Libya affected the results. The results were also impacted by the sale of the conventional natural gas business of Suncor.
The Refining and Marketing segment averaged 442,000 Bbls/d of refinery crude against 443,000 bbls/d in the year-ago quarter. The refinery utilization came in at 96%, in line with the year-ago quarter level. Commerce City refinery’s planned maintenance work hampered the results.
Product Sales
The company’s total product sales of 515,300 Bbls/d were down 5.0% from the prior-year quarter.
Balance Sheet & Capital Expenditure
As of Mar 31, 2014, Suncor had cash and cash equivalents of C$4.9 billion and total long-term debt (including current portions) of C$11.0 billion. The debt-to-capitalization ratio was approximately 20.6%. Also, during the quarter, the company incurred C$1.4 billion in capital expenditure.
Zacks Rank
Suncor currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S equity market over the next one to three months.
One can also look at better-ranked players in the energy sector like Boardwalk Pipeline Partners LP (BWP), Matrix Service Company (MTRX) and Helmerich & Payne Inc. (HP). All the stocks sport a Zacks Rank #1 (Strong Buy).
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