‘No one knows’ where oil prices are headed as Imperial, Suncor report earnings

Above watch: Some industry analysts are saying things will get worse before they get better in the oil field. Gary Bobrovitz reports.

CALGARY- The top executives of two major oilsands producers say they’re looking past swings in crude prices and focusing instead on what’s within their control.

“The truth is no one knows” where oil prices are heading, Rich Kruger, CEO of Imperial Oil Ltd. (TSX:IMO), said Thursday at the company’s annual meeting.

“So, at Imperial, we are approaching our business as if we may be in for a sustained period of lower prices,” he said.

If the market improves, “so be it – all the better.”

During the first quarter, U.S. benchmark crude prices hovered around the US$50 a barrel mark – about half of what they were a year earlier. In recent weeks, the price has been edging up closer to US$60 – though few in the oilpatch are jumping for joy at this point.

Buckling down for a prolonged slump is “more of a management approach than it is a forecast or prediction about what the future may be,” said Kruger.

Unlike many of its peers, Imperial has not laid off any staff – nor does it intend to.

But in his speech, Kruger said Imperial is being more choosy about where it’s spending its capital, scrutinizing expenses and leaning on suppliers and contractors to improve costs and productivity.

Imperial, majority owned by U.S. heavyweight ExxonMobil Corp., posted first-quarter profits that were down 55 per cent from a year ago, dropping to $421 million.

It said it partially offset the effect of lower crude prices with higher production, which was up by about 3,000 barrels per day from last year to the equivalent of 333,000 barrels per day.

Meanwhile, Suncor Energy Inc. (TSX:SU) CEO Steve Williams said every time he meets with an analyst or an investor he’s asked about his outlook for oil prices.

“To be honest, I’m not overly concerned with crude prices, at least not short-term spot prices,” Williams said on an analyst conference call.

“Suncor has no impact on global pricing and I’d rather concentrate my efforts on the things which we can control.”

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Canada’s largest oilsands producer has cut 1,200 jobs this year or 200 more than announced in January, when it slashed $1 billion from its 2015 budget.

It’s focused on further driving down costs and avoiding operational upsets that can take an oilsands project off-line for weeks while the problems are fixed.

Suncor says it’s doing well on both counts – oilsands cash operating expenses are down 20 per cent and Williams says oilsands operations ran “almost flawlessly” in the first quarter.

On Wednesday night, Suncor posted a $341-million net loss for the first three months of 2015. In the same period a year earlier, it turned a net profit of about $1.49 billion.

Without unusual items in the mix, like foreign exchange impacts, Suncor posted $175 million in operating earnings, down sharply from $1.79 billion in the first quarter of 2014.

Both Suncor and Imperial have interests in the massive Syncrude Canada oilsands mine north of Fort McMurray, Alta., which has seen a litany of unplanned outages in recent years. Both Williams and Kruger stressed the importance of improving performance at Syncrude, but neither would say whether there’s any interest in taking on a bigger stake in the project.

The largest owner of Syncrude, Canadian Oil Sands Ltd. (TSX:COS), posts its quarterly results and hosts its annual meeting later Thursday. There has been speculation that with its depressed share price, it might be ripe for a takeover.