Fires burn hole in Suncor cash flow

$ 928M DROP SEEN

• As oilsands companies send crews back to the Fort McMurray region of Alberta and prepare to restart production following the devastating wildfires, the cumulative hit to the industry’s cash flow is expected to be in the billions of dollars.

The biggest hit is expected to be felt by Suncor Energy Inc., which was forced to shut down and evacuate its operations between Fort McMurray and Fort MacKay. The shutdowns will cut $928 million, or 20 per cent, from its operating cash flows this year, according to RBC Capital Markets. Those facilities were producing 300,000 barrels of oil per day before the fire.

Suncor, Canada’s largest integrated oil producer, announced Sunday that it expected initial production from its Base Plant mining operation and MacKay River steam- based oilsands plant by the end of the week.

This will help the company generate cash after the multiweek shutdown of its major facilities. The company started producing oil from its Firebag operation last week.

Cash flow is a key measure of financial viability in the oilpatch, an indication of producers’ ability to generate enough money to maintain and grow their operations. Analysts have watched these figures closely over the past two years as oil prices have collapsed.

The cash- flow impact on other producers — the fire knocked roughly one million bpd of oilsands production offline, forcing producers to forego about $ 70 million in revenues each day — is expected to be significant, though it has yet to be quantified.

Husky Energy Inc. and Imperial Oil Ltd. declined a request to provide updates on when production would resume at their respective projects. Husky’s Sunrise venture produces 60,000 bpd, while Imperial’s Kearl mine produces 220,000 bpd.

Imperial announced May 19 that it had restarted “limited operations” at its Kearl project but did not indicate when production would resume.

The RBC report estimated there would be a “commensurate” impact on Suncor’s balance sheet, as the com- pany is expected to draw on its $3.1 billion of cash and cash equivalents or $6.7 billion of available credit during the outage and re-start.

The company said in a release that it had moved 4,000 employees and contractors back to the Fort McMurray region and would transport an additional 3,500 people to northern Alberta during the course of the week.

Suncor also noted that pipelines and power lines have been repaired and restored to allow the company to re- start production at its Base Plant, which has a nameplate capacity of 350,000 bpd.

RBC estimated that by the time production resumes, Suncor’s facilities will have been shutdown for 35 days and Syncrude Canada Ltd.’s facilities will have been shut down for 40 days. Syncrude produced 315,000 bpd in the first quarter.

“Right now, we have about 1,000 workers on our site,” Syncrude s pokesperson Leithan Slade said Monday, adding those people were working to prepare the mining operation for a production restart.

He said the company did not have a timeline for pumping oil again, but hoped to provide an update by the end of the week.

Similarly, Conoco-Phillips Canada spokesperson Rob Evans said his company was able to re- open its oilsands camp on Friday and had 350 workers on site preparing to restart production. “We do not have a timeline,” Evans said.

WE DO NOT HAVE A TIMELINE (FOR PUMPING OIL AGAIN.)