Clouds loom for oilsands firms in midst of ‘bumper quarter’

Operational snags hit Canadian majors while stronger prices raise revenues

CALGARY Oilsands companies spent Thursday addressing operational or longtime financial concerns, after what should have been a quarter that showed dramatic improvements for oilsands producers.

Three of Canada’s largest oil producers reported increased revenues on Thursday, aided by higher oil prices and stronger refining margins.

But while analysts had predicted a “bumper quarter” for the oilsands sector, producers were hindered by operational or hedging problems.

Suncor Energy Inc., the largest integrated oil company in Canada, beat analysts’ targets on Thursday but spent much of its earnings call answering questions on restarting operations at Syncrude, a 350,000 barrels-per-day joint-venture project, that unexpectedly shut down after a power loss in late June.

“We were disappointed with the outage and to be frank, I am not satisfied with the asset’s performance,” Suncor president and CEO Steve Williams said during the call, adding that the outage should cause all Syncrude jointventure partners to accelerate plans to improve reliability.

Suncor owns the largest stake in the project, with 58.74 per cent. Imperial Oil, which owns 25 per cent, did not respond to a request for comment.

Suncor earned $972 million in the quarter, up 123 per cent from the $435 million it earned in the same period a year earlier. Revenue, boosted by higher oil prices and refinery margins, along with additional production from its new Fort Hills and Hebron projects, was $10.3 billion, up from $7.2 billion a year earlier, and ahead of analyst expectations of $9.3 billion.

“Don’t think for one second that this is a move away from our capital discipline,” Williams said, adding that even though the company is more profitable, it is in no rush to sanction new projects. He also hinted a dividend hike could be on the way. Suncor stock closed 2.3 per cent higher at $54.34.

Institutional investors and analysts have been calling on oil companies around North America to use the cash they are generating from higher oil prices conservatively — either by returning money to shareholders or paying down debt.

All three of the Canadian oil majors reporting Thursday indicated they would do just that.

Husky Energy Inc. reported $448 million in net earnings in the second quarter, a turnaround from the $93 million net loss it posted for the same period a year earlier. Revenue was $5.98 billion for the quarter ended June 30, up from $4.35 billion a year earlier. Husky also announced a 67-per-cent increase in its dividend Thursday from 7.5 cents per share to 12.5 cents per share, as it reported a bump in profit.

“This dividend level is affordable, and has a yield that is comparable with our peers,” Husky president and CEO Rob Peabody said in a release. The stock spiked 1.4 per cent to $20.94.

But Husky also spent part of its earnings call fielding questions about an operational problem. An explosion and fire at the company’s recently acquired refinery in Superior, Wis., in the spring is now expected to keep the facility out of commission for another 18 to 24 months.

Cenovus Energy Inc., which has been trying to deleverage after digesting a majority of Conocophillips’s Canadian assets for $17.7 billion last year, indicated that any cash it generates over and above its operational needs would reduce debt.

Cenovus reported a net loss of $410 million in the second quarter, down significantly from the $2.5 billion it reported at the same time a year earlier. Revenue was above analyst estimates at $5.83 billion, up from $4.04 billion in the second quarter of 2017.