CALGARY – Suncor Energy Inc. recorded lower net earnings during the second quarter and booked $694 million in charges related to a natural gas asset in war-torn Syria.
Canada’s largest energy company said Tuesday net earnings amounted to $333 million, or 21 cents per share, compared to $562 million, or 36 cents per share, a year earlier.
In December, Suncor pulled its employees out of Syria in order to comply with sanctions aimed at isolating the regime of President Bashar Assad, condemned internationally for his government’s bloody crackdown on pro-democracy protests.
The company has not recorded any production from the Middle Eastern country in 2012.
“The situation in Syria has not improved, and the company is not certain if or when it will be feasible to resume operations,” Suncor said in a release.
“Based on an assessment of expected future net cash flows over a range of possible outcomes, the company recorded after-tax impairment charges and write-offs of $694 million against its assets in Syria in the second quarter of 2012.”
After those adjustments, the carrying value of Suncor’s net assets in Syria at the end of June was about $250 million.
Stripped of one-time items, Suncor’s operating earnings were $1.26 billion, or 81 cents per share, compared to $980 million, or 62 cents per share, during the same period a year earlier.
That handily beat the 72 cents per share analysts polled by Thomson Reuters had on average been expecting.
Cash flow was $2.34 billion, or $1.51 per share, compared to $1.98 billion, or $1.26 per share, in the second quarter of 2011.
Suncor said the stronger operating earnings and cash flow were due to increased production volumes and better margins at its refineries, but were offset somewhat by lower oil prices.
Suncor’s total production was 542,400 barrels of oil equivalent per day, compared to 460,000 barrels a year earlier.
The company tweaked its full-year production outlook to between 540,000 and 580,000 barrels per day from its previous forecast in April of between 530,000 and 580,000 barrels per day.
Suncor performed well despite the fact that it, along with other Canadian producers, gets a double discount for the crude it produces in the oilsands.
Heavy crude, like that from in the oilsands, already fetches a lower price than West Texas Intermediate, the easier-to-refine U.S. benchmark.
And WTI, in turn, has been trading at a lower price than international crude benchmarks such as Brent from the North Sea because there isn’t enough pipeline capacity to bring it to the most lucrative markets.
Companies that have refinining businesses, like Suncor, are cushioned from that dynamic somewhat because it means they can buy their crude to fill their refineries for less.
“Suncor’s ability to deliver strong operating earnings and cash flow despite widening price discounts to WTI further illustrates the strength and value of our integrated model,” said CEO Steve Williams in a release.
“This reduced exposure to market volatility coupled with exceptional performance from our Western North America refineries allowed Suncor to produce consistent financial results in the second quarter.”
Williams became CEO of Suncor in May, when Rick George retired after more than two decades at the helm. Williams had been Suncor’s chief operating officer prior to his promotion to the top job.
Suncor is the largest operator in the oilsands, with huge mining operations north of Fort McMurray, a 12 per cent interest in the Syncrude Canada Ltd. mine, a 41 per cent stake in the yet-to-be-developed Fort Hills mine and steam-driven operations at Firebag and Mackay river.
In December 2010, Suncor inked a $1.75-billion deal with the Canadian division of France’s Total SA to work together in the oilsands.
Through its merger with Petro-Canada in 2009, Suncor inherited oil assets in Libya and Syria. As conflict broke out in Libya in February 2011, Suncor pulled its employees out of the North African country. The situation has stabilized and production has since resumed, averaging 42,700 barrels per day during the second quarter.
Suncor is currently assessing its ability to restart exploration activities in Libya in the second half of 2012.
Suncor shares closed at $29.76 per share Tuesday on the Toronto Stock Exchange, a drop of 54 cents.