|
Suncor goes from big to bigger
GARY PARK For Petroleum News
Suncor Energy, by far the dominant force in the Alberta oil sands, has unloaded some of its spare cash to gain a controlling stake in the Syncrude Canada consortium, which has a nameplate capacity of 350,000 barrels per day.
For C$937 million, Suncor will buy Murphy Oil’s 5 percent, boosting its share to almost 54 percent, effectively gaining the control it has long desired of an operation that has struggled with management and operational difficulties.
It has also been weighing possible deals during the prolonged slump in oil prices.
The deal, which is expected to close in the second quarter subject to approval by Canada’s competition regulator, comes on the heels of Suncor closing a C$4.2 billion deal for the 36.74 percent holding by Canadian Oil Sands, adding to its own 12 percent.
The disappearance of Murphy would leave the remaining 46 percent interest with Imperial Oil 25 percent, China’s Sinopec 9 percent, Nexen 7 percent and Mocal Energy (a unit of Nippon Oil) with 5 percent.
Suncor Chief Executive Officer Steve Williams said the transaction “is a strategic fit for our portfolio given the quality of the resource (estimated at 5.1 billion barrels of proven and probable reserves), our existing interest in Syncrude and the potential for value creation.”
“This growth gives us even more leverage to oil prices as they recover,” he said.
But, contrary to popular thinking, he said Suncor has “no explicit ambition to expand our interest in Syncrude,” nor did it have any ambition to become the project operator.
Primary goal reliability “Our primary objective is to get reliability up into the 90 percent range and to get the costs down,” Williams said.
Suncor said the larger stake in Syncrude would enable it to devote more resources to the joint venture, where repeated outages in recent years have dragged production rates well under capacity.
Overall, Suncor reported production of 691,400 barrels of oil equivalent per day in the first quarter, up from 602,400 boe per day in the same period of 2015, largely following its takeover of Canadian Oil Sands.
Cash operating costs in the oil sands averaged C$24.25 per barrel during the quarter, down from C$28.40 a year earlier.
Suncor posted an operating loss of C$500 million for the period compared with a profit of C$175 million a year earlier.
Results from peers Among its peers, MEG Energy reported a net profit of C$131 million against a loss of C$508 million in the first quarter of 2015, while Cenovus Energy narrowed its loss for the opening quarter to C$118 million from C$668 million after laying off 1,600 employees over the past year.
MEG’s bitumen production fell about 7 percent to 76,640 bpd, but its net operating costs were down 19 percent to C$8.53 per barrel. The company contributes to target output of 80,000-83,000 bpd this year.
Cenovus reported combined production from its conventional deposits and oil sands operations was down 9 percent to 197,551 bpd.
The company now expects to lower spending this year to C$1.2 billion and is on track to remove another C$200 million in costs from its balance sheet.
Cenovus Chief Executive Officer Brian Ferguson said there are indications that the crude market will move closer to a supply-demand balance in the second half of 2016.
| 