Suncor Beats Earnings, Lags Revenue

Zacks

Canada’s biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. (SU) reported mixed first-quarter 2013 results. The volume growth of Oil Sands along with better refinery and marketing margins aided earnings. However, these were partially negated by higher depreciation, depletion, amortization and impairment expenses.

Earnings per share, excluding certain items, came in at 90 Canadian cents (89 U.S. cents) in the first quarter, much above the Zacks Consensus Estimate of 75 cents. Comparing year over year, the results improved 7.1% from 84 Canadian cents per share.   

In the reported quarter, total revenue of C$10.02 billion ($9.84 billion) increased 2.7% from the year-ago level though it missed the Zacks Consensus Estimate by 4.3%.

Quarterly operating earnings of C$1.37 billion were above C$1.32 billion a year ago, while cash flow from operations decreased to C$2.3 billion from C$2.4 billion in the first quarter of 2012.

Production

Upstream production during the quarter averaged 596,100 barrels of oil equivalent per day (BOE/d), up from the first-quarter 2012 level of 562,300 BOE/d.

Excluding proportionate production share from the Syncrude joint venture, oil sands volume was 357,800 barrels per day (Bbl/d), higher than 305,700 Bbl/d recorded in the prior-year quarter. The quarter’s results were positively influenced by higher volumes from Firebag.

Production from the Syncrude operations fell 11.9% year over year to 31,200 Bbl/d in the quarter. The decrease is owing to the unplanned and planned maintenance in mining and upgradation.

Suncor’s Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) produced 207,100 BOE/d against 221,200 BOE/d in the prior-year quarter. The decrease is primarily due to maintenance of the Terra Nova subsea infrastructure along with the decline in production in North America Onshore.  

Product Sales

The company’s Refining and Marketing segment generated total refined product sales of 86,200 cubic meters per day, up 7.6% from the prior-year quarter. The result was aided by the increase in demand for gasoline.

The depreciation, depletion, amortization and impairment expenses of Suncor have increased by 5.5% to C$999 million in this quarter as compared to the first quarter of 2012.

Dividend

Suncor has increased its quarterly dividend by 53.9% to 20 Canadian cents per share as compared to the previous dividend declaration of 13 Canadian cents per share. The increased dividend will be paid on Jun 25, 2013 to the shareholders of record as of Jun 4, 2013. Suncor also planned to buyback up to C$2.0 billion shares.

Balance Sheet & Capital Expenditure

As of Mar 31, 2013, Suncor had cash and cash equivalents of C$4.6 billion and total long-term debt (including current portions) of C$10.4 billion. The debt-to-capitalization ratio was approximately 20.7%. The company also incurred C$1.5 billion in capital expenditure during the quarter.

Guidance

Suncor targets capital spending of almost $7.3 billion for 2013.

Zacks Rating

Suncor currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

However, in the energy sector, three firms that are expected to significantly outperform the broader U.S. equity market over the next one to three months are InterOil Corp. (IOC), EPL Oil & Gas Inc. (EPL) and SemGroup Corp. (SEMG). All three firms sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on SU

Read the Full Research Report on IOC

Read the Full Research Report on SEMG

Read the Full Research Report on EPL

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