Canada

Varcoe: Oilsands producer earns $12.5 billion in ‘blockbuster’ quarter

The earnings allowed Canada’s five largest producers to return more money to shareholders and moderately increase capital expenditures.

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More money, more problems?

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That’s not the case in the Canadian oil sands today, but even with soaring levels of cash flow and profits, not all outstanding issues simply went away.

But more money certainly gives producers a range of options to move forward.

Canada’s five largest oil sands producers recently reported record second-quarter earnings of $12.5 billion, prompting companies to return more money to shareholders and capital spending. You can increase it moderately.

“They are cash machines right now,” Wood Mackenzie analyst Scott Norlin said Friday.

“From a revenue perspective… this is an absolute blockbuster.”

Suncor Energy posted a net profit of $4 billion in the period, but interim CEO Kris Smith pledged on Friday’s conference call to focus on improving the integrated producer’s safety record and operational performance.

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On Thursday, the country’s largest oil producer, Canadian Natural Resources, reported a $3.5 billion profit, but President Tim McKay opposed a planned emissions cap for Ottawa’s oil and gas sector. .

Five major oil sands operators, including Cenovus Energy, Imperial Oil and MEG Energy, saw their combined profits up more than 300% from the same quarter in 2021 as oil and gas prices surged between April and June. did.

Nolin noted that these producers paid out $1.9 billion in dividends and bought back $8.1 billion of their own shares in the second quarter.

Since 2020, the companies have combined $46.8 billion toward debt service, dividends and buybacks, according to Wood Mackenzie data.

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“This is a wake-up call to make people aware of how profitable this business is,” said Rafi Termadian, senior portfolio manager at Canoe Financial, which owns shares in Suncor and Canadian Natural Resources. ‘ said.

While oil and gas prices surged in the wake of Russia’s invasion of Ukraine this spring, US benchmark oil prices have fallen in recent days, closing at $89.01 a barrel on Friday.

At Suncor, consolidated producers reported a record $5.3 billion in adjusted funding from operations during the quarter. The company’s downstream refining and marketing businesses performed well, and Suncor also announced the sale of its Norwegian assets for $410 million.

Total production for the quarter averaged 720,000 barrels of oil equivalent (boe) per day, although the company lowered its full-year production guidance.

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It also raised its forecast for capital spending this year to about $5 billion from $4.7 billion.

Suncor reported that adjusted funding from operations for the fourth quarter reached $5.3 billion.
Suncor reported that adjusted funding from operations for the fourth quarter reached $5.3 billion. Bailey Seymour/Special to Post Media

About half of the increase was due to inflationary pressures, which were commonly held back across sectors as labor and equipment costs jumped. The remainder was related to the reopening of the West White Rose project, along with increased spending during maintenance work to improve safety and reliability.

Safety is an important issue for Suncor.

Activist investor Elliott Investment Management, which holds shares in Suncor, said 12 employees and contractors had been killed since 2014, including the death of a contractor on July 7 at Suncor’s oil sands base mine. Died.

The next day, CEO Mark Little stepped down from his top position.

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Kris Smith, Suncor’s former vice president of downstream operations, was named interim CEO, and the company later responded to Elliott’s proposal for a strategic review that could lead to the sale of the company’s chain of Petro-Canada retail sites. I agree.

“My primary focus is improving Suncor’s safety and operational performance,” Smith told analysts by phone Friday.

“It’s clear what needs to be done to improve safety performance. No further diagnostics are needed. But what we have to do is do it.”

Suncor has strengthened its risk management system and will continue to invest in technologies to improve safety, such as collision avoidance systems.

“Whatever the problem is, it’s going to take time and money to fix,” said Phil Skonik, an analyst at Eight Capital.

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“They have a long road ahead of them.”

At Canadian Natural Resources, the company posted another strong quarter, producing 1.21 million baud per day, up 6% from the same period last year.

Net income increased 125% to $3.5 billion.

The Calgary-based company joins the ranks of producers announcing a special dividend, increasing annual capital spending by $575 million to $4.9 billion. Not only was this boosted by inflation, but he also added $375 million towards strategic growth opportunities.

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Canadian Natural has raised its production outlook for next year by another 40,000 baud per day.

One concern was raised during the company’s second quarter earnings call. McKay questioned the emissions caps the federal government would put in place for Canada’s oil and gas sector.

Last month, the Trudeau government launched talks on a pledge to “cap and cut” greenhouse gas emissions from the industry.

Modeling included in federal plans shows that total oil patch emissions will decline by 42% (from 2019 levels) by 2030, including a , will require large-scale investments in areas such as carbon capture and storage development.

Canadian Naturals is part of a consortium of oil sands producers working together to achieve net-zero emissions by 2050, but Pathways Alliance members face federal caps and McKay’s overly ambitious goals. It is growing concerned about meeting Ottawa’s interim target, which it called a target.

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In an interview, McKay welcomed the introduction of a federal tax credit for the CCUS project, but noted that the group hired engineering and regulatory experts to develop an emissions plan, noting that the alliance is already “progressing as quickly as possible.” I am,” he emphasized.

“In my opinion, the (federal) government arbitrarily puts up numbers on specific dates and would have been better off actually doing all the regulatory and engineering (work) necessary to get these going. project,” he added.

“It’s very difficult to do that in the timeframe they have.”

While these goals will be difficult to reach within eight years, oil sands producers are rapidly gaining the financial strength to tackle a long series of goals.

Chris Varcoe is a columnist for the Calgary Herald.

cvarcoe@postmedia.com

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Varcoe: Oilsands producer earns $12.5 billion in ‘blockbuster’ quarter

Source link Varcoe: Oilsands producer earns $12.5 billion in ‘blockbuster’ quarter

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