Suncor Energy Inc. remains opposed to the Alberta government-ordered oil production curtailments, but new CEO Mark Little conceded Thursday the program was actually “slightly positive” for the company’s financial results in the first quarter.
The Calgary-based oilsands producer and refining giant reported net income for the first three months of the year that beat analyst expectations thanks to higher oil prices, record downstream results, growing oilsands production and a $264-million after-tax insurance gain on its assets in Libya.
Little, who takes over as chief executive from Steve Williams at the company’s annual general meeting Thursday, said the results show the value of Suncor’s integrated business model and extensive pipeline contracts at a time of turmoil in the industry.
“In the fourth quarter of 2018, there were low benchmark prices with wide heavy and light crude oil differentials. Whereas, in the first quarter of 2019, there were higher benchmark prices and narrow differentials,” he said on a conference call.
“Both quarters, we were able to generate significant funds from operations.”
Alberta’s decision to impose quotas on its biggest oil producers was designed to free up pipeline space and draw down crude storage after price discounts on western Canadian oil spiked last autumn.
The move was welcomed by oilsands producers like Cenovus Energy Inc., whose CEO pointed out last week the resulting higher prices have helped boost royalties to Alberta’s treasury.
But it’s opposed by rivals such as Imperial Oil Ltd. and Husky Energy Inc. who note that crude-by-rail exports plunged to 131,000 barrels per day in February from an all-time high of 354,000 bpd in December — which means oil export capacity was actually reduced.
Both points are accurate, said Little, but he added the confusion means Suncor and others are reluctant to spend money on new projects.
“We believe that for investment to return to the province, we must find a path forward for Albertans to get fair value for all of the production in the province and, to that end, we will be working with new Alberta government and industry to achieve this goal,” he said.
Alberta’s United Conservative Party, which was sworn into power in Edmonton this week, has supported curtailments brought in by the NDP government and favours gradually reducing the cuts over the coming year.
Suncor said its quota strategy involved maximizing highly profitable upgraded synthetic crude oil volumes, while throttling back lower margin mined raw bitumen, a move that has temporarily increased its operating costs per barrel.
It noted total oilsands production of 657,000 barrels per day in the first quarter, compared with 572,000 bpd a year earlier, thanks to gains at the expanded Fort Hills oilsands mine and higher contributions from the Syncrude mine and upgrader, in which it has a 58.7 per cent stake.
The company said average realized bitumen prices jumped to $62.92 per barrel at Fort Hills in the first quarter, up from $30.57 in the fourth quarter of 2018, as oil price discounts eased due to the curtailment program.
Its shares were little changed on the Toronto Stock Exchange on Thursday despite good marks given by financial analysts on its results released late Wednesday.
The company reported net earnings of $1.47 billion or 93 cents per share in the three months ended March 31, up from $789 million or 48 cents in the same period of 2018.
Its operating profit came to $1.2 billion, compared with $985 million in the first quarter of 2018.
The company says refining and marketing delivered record operating earnings of $1 billion, up from $789 million in the first quarter of 2018.
Suncor said production from its East Coast offshore Hebron project increased to 18,300 bpd (net to Suncor) and is continuing to grow following the completion of a fifth production well in the first quarter.
It said first oil was achieved ahead of schedule in the quarter at the Oda project offshore Norway, in which it has a 30 per cent stake.