Suncor Energy (SU) has today provided an operational update and revised its 2020 guidance, citing a recent fire, performance improvement opportunities, and the second train of production at Fort Hills.
Production estimates for the third quarter are now anticipated to be 305,000 – 320,000 bbls/d for Oil Sands Operations; with 250,000 – 265,000 bbls/d of synthetic crude oil and approximately 55,000 bbls/d of bitumen. Full year corporate production guidance has been revised to 680,000 – 710,000 bbls/d. Meanwhile Suncor’s capital spending for the full year is now guided to between C$3.6B and C$4.0B.
“Despite the operational incident and all the challenges of 2020 – unprecedented drop in oil prices, global pandemic and economic slowdown – Suncor has continued to focus on safety and maximizing value through enhanced performance and lowering costs,” said Suncor CEO Mark Little.
“We’re pleased to be making progress on lowering costs at Fort Hills and Syncrude; we’ve opportunistically advanced maintenance at Base Plant and Firebag, brought on additional capacity at Firebag, and we believe this disciplined and strategic approach lays the foundation for strong performance in 2021″ he continued.
On August 16, 2020, Suncor experienced a fire at the secondary extraction facilities of its Base Plant mine. On August 29, production was restored to 165,000 barrels per day (bbls/d) of mined bitumen. Production is expected to return to full mining rates of approximately 300,000 bbls/d by mid Q4, says Suncor, adding that insurance should reimburse the majority of repair costs in 2021.
Starting in late September, Firebag in-situ production rates will be reduced to 110,000 bbls/d for four weeks due to maintenance originally scheduled for 2022. Following completion of this work, Firebag capacity is anticipated to increase by 12,000 bbls/d to 215,000 bbls/d, with normal capacity by early November.
Suncor is also working with the Fort Hills partners to restart the second primary extraction train in September, with initial gross production of approximately 120,000 to 130,000 bbls/d. Full year production guidance has been updated to 60,000 – 65,000 bbls/d, with a reduction to the Fort Hills cash operating costs per barrel range by C$2 per barrel, to C$32.00 – C$35.00. At this initial production level, Suncor expects to retain all of the previously announced sustaining capital savings.
Syncrude 2020 planned maintenance program is complete, and returning to normal operations. The interconnecting pipelines are on track for commissioning in Q4. According to Suncor, the Syncrude cash operating costs per barrel range is down to C$34.00 – C$37.00, based on year to date performance and lower operating costs.
Shares in Suncor have plunged over 50% year-to-date, but analysts have a very bullish outlook on the stock. With 12 recent back-to-back buy calls, SU scores a Strong Buy Street consensus. The average analyst price target stands at $23 indicating upside potential of 49%.
RBC Capital’s Greg Pardy is one of the Suncor bulls. He recently reiterated a buy rating on the stock, telling investors “Suncor is not betting its future on a big lift in oil prices. As a demand-led market, the company envisions a landscape in which oil prices may remain volatile for 12- 24 months.”
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