Stockwatch – Suncor Feels Impact of Lower Oil Prices on Profits

Stockwatch – Oil sands giant Suncor Energy Inc. (TSE:SU, Mkt cap 57.80B, P/E 19.17, Div/yield 0.28/2.82, EPS 2.07, Shares 1.46B) has seen more than $780 million shaved off its profits in 12 months, after feeling the effects of lower crude oil pricing.

The Calgary-based company has revealed its earnings for the third quarter were $919 million, or 63 cents per share, down from nearly $1.7 billion, or $1.13 per share, a year earlier.

Operating earnings, which removes the effects of anomalous items, were $1.3 billion, or 89 cents per share, surpassing the average analyst estimate of 77 cents per share, according to Thomson Reuters.

It represents only a slight dip from the same period in 2013, when operating earnings stood at $1.4 billion, or 95 cents per share.

Revenue, too, was comparable, amassing $10.3 billion in the third quarter, which is not too dissimilar from the $10.4 billion figure posted last year.

Steve Williams, president and chief executive officer, suggested the firm is content with the results given the shift in the industry.

“Our focused strategy, integrated model and strong balance sheet are competitive strengths that will continue to serve us well through the current lower crude price environment,” he added.

Suncor highlighted foreign exchange fluctuations and a drop in production from its exploration and production business as reasons why net earnings have taken a hit.

Company-wide production dropped to 519,300 barrels of oil equivalent per day from 595,000 barrels due to asset sales, maintenance work at some of its operations and lower production from Libya.

Output from its oil sands business, however, rose to 411,700 barrels per day during the third quarter from 396,400 in the same year-earlier period.

Suncor added that it is not looking at more exploration and production projects in the near future.

“We have been very, very disciplined and found nothing of interest to us. So while we have the capability to do it, you’ve seen us exercise discipline around what we’ve actually done,” Williams explained.

Stockwatch – Suncor has the financial strength and diversified base of operations to do well and maintain its dividend that currently produces a 2.8% yield.

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