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Suncor Energy (SU) Announces 2020 CapEx & Production Plan

Zacks Equity Research

Suncor Energy SU recently released its capital budget along with production guidance for 2020. For next year, it will concentrate more on investing in projects with higher yields that are immune to volatile commodity prices and pipeline constraints. It will emphasize to a greater extent on value than volume.

Further, the company’s capital expenditure program is set to primarily focus on projects that will drive its $2-billion incremental free funds flow target by 2023.

Production in 2020

Suncor expects its overall net production for 2020 in the range of 800,000-840,000 barrels of oil equivalent per day (Boe/d). This indicates a 5% increase from the mid-point of the company’s 2019 guided range for overall net production.

Moreover, the company anticipates its 2020 refiner throughputs in the band of 440,000-460,000 barrels per day (BPD). Output from oil sands operations is estimated within 420,000-455,000 barrels per day. Suncor’s production from its stake in Fort Hills is projected in the range of 85,000-95,000 BPD while the same from Syncrude is estimated at 170,000-185,000 BPD. Besides, exploration and production for 2019 is predicted within 100,000-115,000 Boe/d.

Notably, the government of Alberta ramped down output from the onset of this year in a bid to increase prices and reduce differentials between Western Canadian Select and U.S. benchmarks. Thus, Suncor’s full-year output view is influenced by Alberta administration’s strategic action. The company’s investment in this province is likely to fall on a year-over-year basis.

Capital Spending View

For 2020, this Alberta-based integrated player’s total capex is envisioned in the range of C$5.4-C$6 billion. It estimates to disburse in the range of C$4.55-C$4.95 billion for the upstream segment. Moreover, the company has plans to spend C$700-C$800 million on its downstream operations in 2019 while the corporate spending is assumed in the C$150-C$250 million bracket.

Per the company, its additional capital expenditure raise was attributable to the newly-sanctioned cogeneration facility worth $300 million combined with additional investment in digital technology initiatives and completion of the Syncrude bi-directional pipelines costing $150 million and $50 million, respectively.

Suncor Energy Inc. Price

Suncor Energy Inc. Price

Suncor Energy Inc. price | Suncor Energy Inc. Quote

Upbeat Performance in Q3

Recently, Suncor announced third-quarter 2019 results wherein its earnings surpassed estimates. The company’s operating earnings per share of 55 cents edged past the Zacks Consensus Estimate of 54 cents on the back of higher output contribution from Fort Hills and Syncrude operations.

However, the bottom line declined 24.6% from the prior-year figure of 73 cents per share. The weaker year-over-year results are due to unfavourable business environment causing low crude oil price realization along with increased operating and transport expenses.

Notably, total upstream production in the reported quarter was 762,300 barrels of oil equivalent per day (Boe/d), up 2.5% from the prior-year level of 743,800 Boe/d.

Zacks Rank & Key Picks

Suncor currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are World Fuel Services Corporation INT, HollyFrontier Corporation HFC and Phillips 66 PSX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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