Markets reward Suncor for conduct
Quick cuts to costs, jobs indicates company is ‘ not fooling around’
Investors and financial analysts applauded Thursday after Suncor Energy Inc. announced it had completed 1,000 layoffs in just two and half months and that it would realize annual cost savings of $ 600 million to $ 800 million in 2015, a year earlier than expected.
The company also reported firstquarter production that was well above its full- year guidance.
Shares rose more than four per cent to as much as $ 38.91 on the Toronto Stock Exchange Thursday morning. They closed at $ 38.65, up $ 1.37. The stock has ranged between $ 30.89 and $ 47.19 in the past 52 weeks.
“Prudent cost management was a central focus for us well before the downturn in crude prices,” said Steve Williams, president and chief executive officer of the integrated oilsands company, in a news release late Wednesday.
“It remains so today, and is helping to maintain the strength of our balance sheet and effectively position the company both now and for the future.”
Suncor shares fell initially to below $ 35 after it announced in mid- January it would cut 1,000 jobs from its workforce of 14,000 and trim $ 1 billion from its 2015 capital budget to a range of $ 6.2 billion and $ 6.8 billion. It said it would maintain its production forecast for an average of 540,000585,000 barrels of oil equivalent per day ( boe/ d) in 2015.
The company, Calgary’s largest oil producer by market capitalization, said Wednesday its production averaged 598,000 boe/ d ( excluding Libya) in the first three months of the year, with production from oilsands ( excluding Syncrude) of about 440,000 barrels per day ( 346,000 bpd of synthetic oil).
“Suncor provided an update that highlighted the company is not fooling around,” quipped CIBC analyst Arthur Grayfer in a note to investors following the April Fool’s Day report.
“The update is encouraging as it suggests the company is on track to achieve guidance ( something that has not always occurred in the past), while continuing to improve the cost structure of the business.” He said first quarter production beat his estimate by about three per cent.
Analyst Nick Lupick of Alta-Corp Capital said in a note to investors that Suncor is a “strong entity” which is “among the best positioned to weather a prolonged commodity downturn,” praising its balance sheet and profitable downstream portfolio.
Greg Pardy, an analyst for RBC Dominion Securities, said Suncor beat his first- quarter production estimate by six per cent with stronger- than- expected output from both oilsands and conventional assets.
Suncor said in its report that average refinery utilization was 95 per cent.