CALGARY — The CEO of Suncor Energy Inc. says it will not increase capital spending this year despite higher oil prices, instead vowing to spend any increases in free cash flow on debt repayment and share buybacks.
The Calgary-based oilsands and refining giant won’t backtrack after chopping operating costs by $1.3 billion or 12 per cent in 2020 versus 2019 and reducing capital spending by $1.9 billion or 33 per cent compared to the original guidance midpoint, Mark Little said on a conference call on Thursday.
The austerity pledge echoes similar recent vows from oilsands rivals Imperial Oil Ltd. and Cenovus Energy Inc. despite recent one-year highs in U.S. benchmark oil prices.
Suncor, however, says it has restarted construction of two carbon emission reducing projects paused last March as the COVID-19 pandemic erupted — a $1.4-billion project to install two cogeneration units at its oilsands Base Plant and a new $300-million wind power plant in southern Alberta.
“We’ve restarted construction of the cogen facility at Base Plant and the Forty Mile wind project, which is already accounted for within our current capital guidance,” said Little on the call, explaining both will provide “great value adds” for shareholders while reducing the company’s carbon intensity.
“That said, despite the commodity price outlook being well above our planning basis for 2021, I can assure you that we will not increase our 2021 capital guidance above the current range.”
Suncor has guided to capital spending of between $3.8 billion and $4.5 billion in 2021 while paying down between $1 billion and $1.5 billion of debt and repurchasing between $500 million and $1 billion in shares.
The company announced it sold its 26.69 per cent working interest in the producing Scottish offshore Golden Eagle project for US$325 million and contingent payments of up to US$50 million.
In a separate news release, U.K.-based EnQuest PLC said Thursday it is the buyer.
Little held a moment of silence at the start of the conference call to remember three contractors killed in accidents at its oilsands mining operations over the past two months, while vowing to investigate the events to ensure they don’t happen again.
Suncor reported a fourth-quarter net loss of $168 million on revenue of $6.6 billion, compared with a net loss of $2.34 billion on revenue of $9.6 billion in the same period of 2019, with both sets of numbers heavily influenced by asset writedowns.
The company says the current loss includes a $142-million after tax transportation provision related to the recently cancelled Keystone XL oil export pipeline project, offset by a $539-million unrealized after-tax foreign exchange gain on U.S. dollar denominated debt.
Spokeswoman Erin Rees later explained the pipeline provision is a one-time expense associated with Suncor “backstopping” the TC Energy Corp. project as one of its contracted shippers.
“Timing on the payment is dependent on several factors and we believe it was prudent to accrue the amount given the cancellation of the permit,” she said.
Suncor’s loss also includes a writedown announced last month of $423 million on its minority share of the White Rose and West White Rose offshore Newfoundland and Labrador oil projects due to uncertainty about their future.
Suncor stock fell by as much as $1.17 or five per cent in trading on the Toronto Stock Exchange and was down about half that amount to $21.69 by early afternoon. Its 52-week high is $41.06.
The slide came despite analyst reports that credited Suncor for meeting or exceeding expectations in cost cutting and production and attributed the financial miss to the unexpected one-time Keystone XL provision.
Suncor reported total oil and gas production of 769,200 barrels of oil equivalent per day, down from 778,200 boe/d in the year-earlier quarter.
Refinery crude throughput was 438,000 barrels per day, down from 447,500 bpd a year earlier.
This report by The Canadian Press was first published Feb. 4, 2021.
Companies in this story: (TSX:SU, TSX:IMO, TSX:CVE)
Dan Healing, The Canadian Press