TS&P comments on Suncor Energy's ratings Thursday January 29, 12:01 pm ET
(The following statement was released by the rating agency) NEW YORK, Jan 29 - Standard & Poor's Ratings Services today said that Suncor Energy Inc.'s (A-/Stable/--) announcement of a possible revision to the royalty formula associated with its synthetic oil production would not affect the ratings or outlook on the company. Although the higher crude prices and the proposed royalty changes could accelerate Suncor's royalty payments to 2004 from 2010, the expected magnitude of the royalty liability would have an immaterial effect on Suncor's cash flows and cash flow protection measures. Assuming a US$26 West Texas Intermediate (WTI) price and a 78 U.S. cents foreign exchange rate, Suncor has forecasted a C$28 million royalty liability for 2004. At a US$30 WTI price, the royalty would increase by an additional C$100 million, assuming all else is equal. Furthermore, the cash flow impact of the royalty change will be tempered by the current royalty formula associated with Suncor's existing synthetic oil production, which calculates the royalty liability after deducting capital and operating costs from revenues.