Suncor Energy Inc. (TSX:SU), which aims to merge with Petro-Canada (TSX:PCA) this year, said Thursday it had an operationally strong first quarter, despite having been dragged to a loss by low oil prices and various accounting and foreign exchange impacts.
Production from the second-largest oilsands producer’s vast operations near Fort McMurray was about 278,000 barrels per day during the first three months of 2009, compared to 248,000 a year earlier.
“Operationally we’re feeling very good. It was a very solid quarter for us,” chief executive officer Rick George told an analyst conference call.
George made his remarks after Suncor reported a net loss of $189 million, or 20 cents per share, for the quarter ended March 31, reversing year-earlier profit of $708 million or 77 cents per share.
UBS Investment Research analyst Andrew Potter said Suncor demonstrated “improved reliability.”
“Overall it was a strong quarter operationally for Suncor,” he wrote in a note to clients.
Cash flow from operations was more than 50 per cent lower for the quarter at $479 million compared to $1.16 billion during the same quarter the year before.
Suncor said it would have booked a profit without the effects of foreign exchange impacts on the company’s debt, mark-to-market accounting losses on commodity derivatives and costs associated with delaying some projects.
The company pegged its adjusted earnings at $227 million or 24 cents per share compared to $805 million or 87 cents per share the year before.
“No surprise to anyone — low commodity prices were the story here,” said chief financial officer Ken Alley, who is set to retire once Suncor wraps up the Petro-Canada (TSX:PCA) merger.
Alley told analysts Suncor’s debt levels rose to $8.6 billion, which was in line with expectations.
The company has “ample” liquidity, with $2.3 billion in cash and undrawn credit facilities, he added.
“We feel very comfortable with our liquidity position as we look through the rest of the year,” Alley said.
Uncertain economic conditions are prompting the company to delay the completion of its Firebag sulphur plant, which it says will be completed in the third quarter of this year rather than the second quarter. It said the project will likely exceed estimated costs of $375 million with a final price tag of $400 million.
Future phases of the Firebag steam-assisted gravity drainage project and an upgrader to go with Suncor’s US$20.6-billion Voyageur project have already been put into “safe mode.”
“We are discussing with our suppliers and the contractors what they can do on costs,” George said.
Other major capital spending ventures will be reviewed after the completion of a $19-billion merger with Petro-Canada (TSX:PCA) announced a month ago.
“It will be a strict return on capital calculation,” George said.
“What I don’t know is how those all stack up. We have got a lot of work to do over the next months.”
The deal has received U.S. regulatory approval and a review by the Competition Bureau is ongoing.
George said he could not elaborate on that process, other than to say it’s “on track.”
Shareholders of both companies will vote on the merger at meetings set for early June.
Late Wednesday, Suncor and Petro-Canada revealed the management lineup of the merged company, which includes current Suncor executives filling most key roles.
George will remain chief executive officer, chief operating officer Steve Williams will continue in his role and Bart Demosky, Suncor’s senior-vice president of business services, was named chief financial officer.
Kirk Bailey, Suncor’s executive vice president of oilsands, will continue in his position, while Mike MacSween will become senior vice-president of in situ.
Petro-Canada’s Neil Camarta be executive vice-president of natural gas, while Boris Jackman will be executive vice-president of refining and marketing.
Suncor shares were up about three per cent to $30.42 in afternoon trading on the Toronto Stock Exchange.