Suncor (SU) Q4 Earnings Surpass Estimates, Revenues Up Y/Y
Canadian energy giant Suncor Energy Inc. SU reported fourth-quarter 2017 operating earnings per share of 63 cents, surpassing the Zacks Consensus Estimate of 55 cents. Strong refined product sales, reduced total expenses and higher crude price realizations drove the company’s earnings. In the year-ago quarter, the company posted earnings of 29 cents a share.
Quarterly operating earnings came in at C$1,310 million compared with C$636 million in the year-ago quarter, reflecting an increase of 106%. Meanwhile, quarterly revenues of C$3,941 million increased from C$3,352 million in the year-ago quarter.
Suncor Energy Inc. Price, Consensus and EPS Surprise
Suncor Energy Inc. Price, Consensus and EPS Surprise | Suncor Energy Inc. Quote
Production
Total upstream production in the reported quarter was 736,400 barrels of oil equivalent per day (BOE/d), which decreased marginally from the prior-year level of 738,500 BOE/d. The decline in production was due to a drop in output from the Syncrude operations and the Exploration and Production segment.
Oil Sands operations volume was 446,800 barrels per day (Bbl/d) compared with 433,400 Bbl/d in the year-ago quarter. The increase can be attributed to improved mining and extraction reliability and record Firebag production, partially offset by the lower production at MacKay River.
Production from Syncrude operations was 174,400 Bbl/d compared with 187,000 Bbl/d in the year-ago quarter. The decrease was due to the lower upgrader reliability. In the quarter under review, the Syncrude upgrader reliability was 94% lower than year-ago quarter’s 102%.
Suncor’s Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) produced 115,200 BOE/d compared with 118,100 BOE/d in the prior-year quarter. Lower offshore production drove the company’s results, partially offset by the increased output in Libya.
Notably, Suncor’s newly commissioned Hebron asset started production in this quarter, ahead of its schedule.
Also, refinery utilization came in at 94% compared with 93% in the year-ago quarter.
Product Sales
The company’s refined product sales of 526,800 Bbl/d increased from the prior-year quarter level of 514,800 Bbl/d owing to strong reliability at most of Suncor’s refineries. It was partially offset by the impact of Montreal refinery’s third-party power outage.
Expenses
Total expenses in the reported quarter declined to C$7,156 million from C$7,415 million in the year-ago quarter. The company’s financing expenses decreased C$225 million compared with C$532 million incurred in the year-ago quarter. Lower exploration, depreciation and transportation expenses also lowered expenses. The results were partly offset by increased costs related to purchase of crude oil and products.
Balance Sheet & Capital Expenditures
As of Dec 31, 2017, Suncor had cash and cash equivalents of C$2,672 million and total long-term debt of C$13,372 million. The total debt-to-capitalization ratio was approximately 25.6%. The company incurred capital expenditures of C$1,444 million in the quarter under review.
Dividend and Share Repurchase
Suncor returned C$526 million to shareholders through dividends and bought back C$835 million of outstanding shares in fourth-quarter 2017.
Dividend Hike
The company’s board members have approved a 12.5% hike in its quarterly dividend. Suncor will now reward shareholders with a dividend of 36 cents per share. This translates to an annualized dividend of $1.44 per share. The increased dividend will be paid on Mar 26, 2018 to shareholders of record as of Mar 5.
Guidance
The full-year outlook range for E&P production is envisioned to lie within 105,000-115,000 Boe/d. The same for Syncrude production is projected between 150,000 Bbls/d and165,000 Bbls/d. Furthermore, the full-year outlook range for Syncrude cash operating costs anticipated to lie in the $32.50-$35.50/bbl band.
For 2018, the estimated capex came in at $4.5-$5 billion.
Q4 Price Performance
In the fourth quarter of 2017, Suncor has gained 4.8% compared with 2.3% rise of its industry.
About the Company
Calgary, Alberta-based Suncor is Canada’s premier integrated energy company. Its operations include oil sands development and upgrading, conventional and offshore crude oil and gas production, petroleum refining, and product marketing under the Petro-Canada brand. In fact, Suncor is one of the largest owners of oil sands in the world. The company also explores, acquires, develops, produces and markets crude oil and natural gas in Canada and globally, and transports and refines crude oil as well as market petroleum and petrochemical products primarily in Canada.
Zacks Rank and Key Picks
Suncor sports a Zacks Rank #1 (Strong Buy). Some other top-ranked stocks in the oil and energy sector are Cabot Oil & Gas Corporation COG, Andeavor ANDV and Pioneer Natural Resources Company PXD. All the companies carry the same bullish rank as Suncor. You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX -based Cabot is an independent energy company. Its sales for the fourth quarter of 2017 are expected to increase 36% year over year. For 2017, the bottom line is expected to be up 342.9%.
Andeavor is a San Antonio, TX-based downstream energy company. Its revenues for the fourth quarter of 2017 are expected to increase 62.2% year over year. The company delivered an average positive earnings surprise of 37.8% in the last four quarters.
Irving, TX- based Pioneer Natural Resources is an independent oil and gas exploration and production company. Its revenues for the first quarter of 2018 are expected to improve 15.6% year over year. For 2018, the bottom line is anticipated to be up 98.2%.
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