Suncor Energy Inc. (NYSE:SU), Canada’s top crude oil producer, reported a 90 percent drop in first-quarter operating profits amid the steep decline in global oil prices. The Calgary, Alberta, company this week posted a net loss of 341 million Canadian dollars ($283.5 million), or 24 Canadian cents a share, compared with a net profit of C$1.49 billion a year earlier. Gross revenues totaled C$2.3 billion for the first three months of 2015, compared with C$3.89 billion for the same period last year.
Suncor said its quarterly results reflected the Canadian dollar’s weakening against the U.S. greenback, including a C$940 million after-tax foreign-exchange loss on the revaluation of U.S. dollar-denominated debt.
Global oil prices have dropped by about half since last summer as crude production far outpaced demand in emerging economies. On Thursday, Brent crude was trading at US$65.84 a barrel, far below the break-even oil prices of major new Canadian oil sands projects. Suncor’s Fort Hills development, Canadian Natural Resources Ltd.’s Horizon expansion and Imperial Oil Ltd.’s Kearl Phase 2 all need oil prices of US$90 per barrel or higher to outweigh the expensive production costs, Citigroup Global Markets Inc. found in a January study.
The Canadian oil sands patch is among the most expensive areas to develop -- much of the crude must be mined or melted out of the ground -- making the country's energy companies among the hardest hit in recent months.
To offset losses from low oil prices, Canada’s oil sands producers are ramping up production volumes and pressing ahead with multibillion-dollar investment plans. Steve Williams, Suncor’s president and CEO, said the C$13.5 billion Fort Hills mining project is on schedule and on budget. “We are starting to see an increase in labor supply and productivity in the Fort McMurray region” of Alberta, he said.
Suncor’s total production averaged 602,400 barrels of oil equivalent a day in the first quarter, up about 10.5 percent from 545,300 barrels a day in the prior year quarter. Oil sands production in particular was up 13 percent to 440,400 barrels per day.
The company said its increased production and lower natural gas prices trimmed its operating costs per barrel by 20 percent to C$28.40 in the first quarter. The Canadian oil giant is on track to curb operating expenses by as much as C$800 million this year.