CALGARY – Suncor Energy Inc. says its capital spending in 2012 will be $850 million lower than previously planned.
Canada’s largest energy company (TSX:SU) says now expects to spend $6.65 billion this year, down from $7.5 billion as it earlier predicted.
Suncor owes the lower spending to its new Firebag Stage 4 oilsands project, which came in 10 per cent under budget, as well as slowing the pace of developments it jointly owns with French energy giant Total SA.
“At the start of the year, we said that cost and quality metrics would be Suncor’s priorities when executing growth projects,” said CEO Steve Williams in a release.
“We’re delivering on these goals by spending capital efficiently and maintaining a disciplined approach to pre-sanction spending on our operated growth projects.”
Suncor isn’t the only oilpatch name to signal a more frugal approach these days. Talisman Energy Inc.’s new CEO, Hal Kvisle, said on a conference call earlier this week that 2013 spending will be about 25 per cent lower than this year, with much less of a focus on risky international exploration.
Late Wednesday, Suncor also announced third-quarter net earnings of $1.56 billion, or $1.01 per share, compared to $1.29 billion, or 82 cents per share, during the same 2011 period. The upswing was mainly due to exchange rate fluctuations.
Operating earnings, a better gauge of the company’s underlying performance, fell to $1.3 billion, or 85 cents per share, compared to $1.790 billion, or $1.14 per share, a year earlier.
The earnings beat the average estimate of 78 cents per share, according to Thomson Reuters.
Suncor said the drop in operating earnings was due to higher share-based compensation expense, lower production volumes from offshore assets undergoing planned maintenance work and higher depreciation, depletion and amortization charges.
Revenues were $9.6 billion, down from $10.4 billion in the corresponding 2011 quarter.
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 Total to work together in the oilsands.
On the company’s second-quarter conference call in July, CEO Williams said Suncor and Total are reviewing their plans for the Fort Hills and Joslyn mines and the Voyageur upgrader in an effort to drive down costs.
That means that the partners’ expansion plans may take longer than previously thought — a sacrifice Suncor is willing to make if it means avoiding major cost overruns the sector experienced before the recession.
The three projects involved in that joint venture are being weighed on their individual merits, and could theoretically be scrapped if they’re not found to be economically viable.
A decision had been expected to come toward the middle of next year, but the process is now expected to take longer.
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.
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. Production has since been resuming there.
In December, Suncor pulled its employees out of Syria in order to comply with sanctions aimed at isolating the regime of President Bashar Assad. During the second quarter Suncor took a $694 million charge against its second-quarter results related to Syria, where violence continues to rage.
Suncor also has assets in the U.K. North Sea, off Canada’s East Coast, four refineries and a chain of Petro-Canada-branded gas stations.