Suncor Energy reports 2012 fourth quarter results

Suncor Energy reports 2012 fourth quarter results 
All financial information, unless otherwise noted, is unaudited, in
Canadian dollars, and has been prepared in accordance with Canadian
generally accepted accounting principles (GAAP). Certain financial
measures in this news release - namely operating earnings, cash flow
from operations, return on capital employed (ROCE) and Oil Sands cash
operating costs - are not prescribed by GAAP. See the Non-GAAP
Financial Measures section of this news release. Production volumes
are presented on a working-interest basis, before royalties, unless
otherwise noted. 
CALGARY, ALBERTA -- (Marketwire) -- 02/05/13 --  


 
--  Operating earnings of $1.000 billion ($0.65 per common share) and a net
    loss of $562 million ($0.37 per common share). Net loss includes an
    after-tax impairment charge of $1.487 billion for the Voyageur upgrader
    project. 
--  Cash flow from operations of $2.235 billion ($1.46 per common share). 
--  Average Oil Sands segment production of 378,700 barrels per day
    (bbls/d). Total average production of 556,500 barrels of oil equivalent
    per day (boe/d). 
--  Refining and Marketing caps record year for earnings and cash flow from
    operations, benefiting from lower feedstock cost from Suncor's Oil Sands
    operations. 
--  Sanction of the Hebron project offshore Newfoundland and Labrador. 
--  Firebag complex achieves 72% production growth from the fourth quarter
    of 2011. Stage 4 final project costs anticipated to be approximately 15%
    below budget.

 
Suncor Energy Inc. recorded fourth quarter 2012 operating earnings of
$1.000 billion ($0.65 per common share), compared to $1.427 billion
($0.91 per common share) for the fourth quarter of 2011. The decrease
in operating earnings compared to the fourth quarter of 2011 was due
primarily to lower average price realizations in Oil Sands, a product
mix for Oil Sands that included a lower proportion of sweet synthetic
crude oil (SCO), and lower production from offshore assets completing
planned maintenance. Suncor continued to absorb much of the impact of
lower price realizations in the Oil Sands through its integration
with its inland refineries that benefited from lower feedstock costs. 
Cash flow from operations was $2.235 billion ($1.
46 per common share)
for the fourth quarter of 2012, compared to $2.650 billion ($1.69 per
common share) for the fourth quarter of 2011. Cash flow from
operations decreased due primarily to the same factors affecting
operating earnings. 
The net loss was $562 million ($0.37 per common share) for the fourth
quarter of 2012, compared with net earnings of $1.427 billion ($0.91
per common share) for the fourth quarter of 2011. The net loss
included an after-tax impairment charge of $1.487 billion for the
Voyageur upgrader project. Return on capital employed (ROCE)
(excluding major projects in progress) for the twelve months ended
December 31, 2012 was 7.3%, compared to 13.8% for the twelve months
ended December 31, 2011. The impairment of the Voyageur upgrader
project impacted ROCE by approximately 4%. 
"Our integrated model combined with our focus on operational
excellence continues to add value to Suncor," said Steve Williams,
Suncor president and chief executive officer. "First, our ability to
capture margins through the integration of our oil sands feedstock to
our inland refineries contributed significantly to generating close
to $10 billion in cash flow from operations in 2012. Second, we have
increased nameplate capacity of our Edmonton refinery by 5,000
barrels per day due to our focus on operational excellence. And
finally, we've seen record oil sands production for the year while at
the same time, our dedication to managing costs is anticipated to
result in a capital savings on Firebag Stage 4 of approximately 15%." 
Suncor's total upstream production during the fourth quarter of 2012
averaged 556,500 boe/d, compared to 576,500 boe/d during the fourth
quarter of 2011. 
Oil Sands production (excluding Suncor's proportionate share of
production from Syncrude) contributed an average of 342,800 bbls/d in
the fourth quarter of 2012, compared with fourth quarter 2011
production of 326,500 bbls/d. The increase in Oil Sands production
was primarily due to the ramp up of production from the Firebag
complex, partially offset by the impacts of planned and unplanned
maintenance at upgrading facilities. At Firebag, average bitumen
production increased to 123,400 bbls/d in the fourth quarter of 2012
from 113,000 bbls/d in the third quarter of 2012 and 71,700 bbls/d in
the fourth quarter of 2011. 
Cash operating costs for Oil Sands operations averaged $38.00/bbl in
the fourth quarter of 2012, compared to $39.00/bbl in the fourth
quarter of 2011. Cash operating costs per barrel were lower due to
higher production volumes from the ramp up of Firebag volumes and
consistent total cash operating costs, as compared to the fourth
quarter of 2011. 
Suncor's proportionate share of production from Syncrude contributed
an average of 35,900 bbls/d of production during the fourth quarter
of 2012, compared to 30,300 bbls/d in the fourth quarter of 2011. 
The Exploration and Production segment contributed production of
177,800 boe/d in the fourth quarter of 2012, compared with production
of 219,700 boe/d in the fourth quarter of 2011. The decrease was
primarily due to planned maintenance events at Buzzard and Terra
Nova, which were completed in the fourth quarter of 2012, and
subsequent delays ramping up production, the ongoing suspension of
the company's operations in Syria as a result of political unrest and
international sanctions, and production declines in North America
Onshore, partially offset by the restart of operations in Libya. 
"Although we are pleased with our underlying cost discipline and
performance trends," added Williams, "we know there are areas we need
to improve. Our reliability at our oil sands upgraders and the delays
associated with our Terra Nova planned maintenance were
disappointing. However, we remain committed to a relentless focus on
operational excellence to improve performance." 
In the company's downstream Refining and Marketing segment, total
refined product sales averaged 87,000 cubic metres per day during the
fourth quarter of 2012, compared to 81,600 cubic metres per day in
the fourth quarter of 2011. This increase was due primarily to lower
production in the fourth quarter of 2011 resulting from third-party
hydrogen supply issues at the Edmonton refinery. Results for the
segment continued to be strong, reflecting lower feedstock costs for
Suncor's inland refineries and strong refinery utilization. Effective
January 1, 2013, Suncor increased the nameplate capacity of the
Edmonton refinery to 140,000 bbls/d from 135,000 bbls/d, due to
demonstrated reliability and continuous improvement in operating
efficiency. 
Strategy and Operational Update 
The company announced a $7.3 billion capital and exploration budget
for 2013. Approximately $3.3 billion of this capital is expected to
be directed towards growth projects, with a continued focus on
capital discipline and the execution of high return projects.
Approximately half of Suncor's growth capital is earmarked for
advancing projects in the Exploration and Production segment,
including Hebron, Golden Eagle, and development drilling and
facilities at other East Coast Canada assets. Growth capital plans in
the Oil Sands are balanced between advancing development plans for
Oil Sands Ventures, building new infrastructure to enhance marketing
flexibility and takeaway capacity, and commencing work on a variety
of debottlenecking projects. Growth capital in the Refining and
Marketing segment is expected to be focused on projects to prepare
the Montreal refinery to receive shipments of western crude
feedstock. 
As previously announced, Suncor has been working with its respective
partners to undertake detailed reviews of each of its planned Oil
Sands Ventures growth projects, focusing on cost and quality with a
view to generating long-term value for shareholders. 
With respect to the Fort Hills mining project, the partners expect a
sanction decision to occur in the second half of 2013. Suncor plans
to provide an update on the targeted timing for a sanction decision
on the Joslyn project when available. 
Suncor's view is that the economic outlook for the Voyageur upgrader
project is challenged. Suncor and its partner continue to work
diligently towards determining an outcome for the project. The
partners have been considering options for the project, including the
implications of cancellation or indefinite deferral. No formal
decisions regarding the project have been made and the partners
continue to work toward a decision by the end of the first quarter of
2013. The Voyageur upgrader project cannot be sanctioned to proceed
without the approval of both partners and in the case of Suncor,
Suncor's board of directors. In the interim, Suncor and its partner
have agreed to minimize expenditures on the project pending a
decision. 
Given the challenging economic outlook for the Voyageur upgrader
project, at the end of the fourth quarter of 2012, the company
performed an impairment test. Based on an assessment of expected
future net cash flows, the company recorded an after-tax impairment
charge of $1.487 billion, after which the company's carrying value
for net assets relating to the Voyageur upgrader project as at
December 31, 2012 was approximately $345 million. 
At In Situ, the company commissioned the Firebag Stage 4 cogeneration
units in the fourth quarter ahead of schedule, and is currently
injecting steam into both well pads for Stage 4. Stage 4 continued to
progress as the company achieved first oil from Stage 4 wells late in
the fourth quarter of 2012. Stage 4 central processing facilities
operated at 10% capacity throughout the quarter. The project is
nearly complete and expected to come in approximately 15% under the
most recent budget estimate of $2.0 billion. The company anticipates
that bitumen production from the Firebag complex will continue to
grow during 2013 and reach production capacity of approximately
180,000 bbls/d over the next year. 
New assets were brought into service to support Oil Sands operations
during the quarter: the Wood Buffalo pipeline, which connects the
company's Athabasca terminal at the base plant in Fort McMurray to
other third-party pipeline infrastructure in Cheecham, Alberta, and
the first two of four new storage tanks in Hardisty, Alberta, which
will connect to the Enbridge mainline pipeline in 2013. 
"During the quarter we made good progress by constructing new
infrastructure to enhance the takeaway capacity and marketing
flexibility of our oil sands operations," said Williams. "These
developments, coupled with our integrated model, put Suncor in an
advantaged position as the industry works to address the challenges
of moving oil sands crudes out of Alberta." 
In the company's East Coast Canada operations, the company and the
joint owners of Hebron announced project sanction in the fourth
quarter of 2012; Suncor has a 22.729% interest in Hebron. The
development plan includes a concrete gravity-based structure
supporting an integrated topside deck to be used for production,
drilling and accommodations. The estimated gross oil production
capacity for Hebron is 150,000 bbls/d. Suncor's share of the project
cost estimate provided by the project operator is approximately $3.2
billion. First oil is expected in late 2017. At Terra Nova,
production from the largest of three drill centres resumed following
the completion of the dockside maintenance program earlier in the
year. The second drill centre was connected in January and is
currently being commissioned. The third drill centre is expected to
be reconnected in the third quarter of 2013, when damaged flow lines
can be replaced. Despite the impact on production, the company
currently expects to meet guidance. 
In the company's International operations, although planned
maintenance at Buzzard was completed in late October, the restart of
production was delayed by power supply interruptions; however,
production exiting 2012 was over 60,000 boe/d, which exceeded
production rates prior to planned maintenance. In Libya, Suncor is
currently working to restart exploration drilling in the first
quarter of 2013. Production from Libya averaged 44,400 bbls/d during
the fourth quarter of 2012, the highest level since the merger with
Petro-Canada in 2009. Although Suncor's operations in Syria remain
suspended, the company received $300 million of risk mitigation
proceeds related to its Syrian assets during the quarter. The
proceeds are subject to a provisional repayment should operations in
Syria resume and, therefore, are recognized as a liability. As a
result, Suncor reversed $177 million of the impairment charges it
recorded against its assets in Syria earlier in the year. 
In the company's North America Onshore operations, new wells in the
Cardium oil formation in Western Canada were tied in and began
producing in December 2012. 
Suncor continued to return cash to shareholders through dividends and
share repurchases. The company repurchased $408 million of its common
shares in the fourth quarter of 2012, and returned more than $2.0
billion to shareholders through share repurchases and dividends in
2012. 
Other Items 
In January 2013, the company received a proposal letter from the
Canada Revenue Agency (CRA) relating to the income tax treatment of
the realized losses in 2007 on the settlement of the Buzzard
derivative contracts. The company strongly disagrees with the CRA's
position and will respond to the proposal letter; however, the CRA
may proceed to issue a notice of reassessment (NOR) to increase the
amount payable by approximately $1.2 billion. The company firmly
believes it will be able to successfully defend its original filing
position so that ultimately no increased income tax payable will
result from the CRA's actions. However, notwithstanding the filing of
an objection to dispute this matter, the company would be required to
make a minimum payment of 50% of the amount payable under the NOR,
estimated to be $600 million, which would remain on account until the
dispute is resolved. 
Suncor, effective as of December 27, 2012, amended and restated its
Dividend Reinvestment and Optional Common Share Purchase Plan (the
"Plan"). The Plan permits registered holders of common shares
("Common Shares") of Suncor who reside in Canada or the U.S. to have
the dividends they receive on their Common Shares reinvested in
additional Common Shares, in lieu of receiving their dividends in
cash. In addition, participants enrolled in the Plan have the
opportunity to make optional cash payments under the Plan towards the
purchase of additional Common Shares. Full details of the amended and
restatement Plan can be found on Computershare Trust Company of
Canada's website at www.computershare.com. 
Corporate Guidance 
Suncor has revised the corporate guidance it previously issued on
December 3, 2012. Effective January 1, 2013, Suncor increased the
nameplate capacity of the Edmonton refinery to 140,000 bbls/d from
135,000 bbls/d, due to demonstrated reliability and continuous
improvements in operating efficiency. As a result, Suncor revised the
company's guidance to reflect a decrease in refinery utilization.
Guidance for refinery throughput was not revised. 
For further details regarding Suncor's 2013 revised corporate
guidance, including certain outlook assumptions and other
information, see www.suncor.com/guidance. 
Non-GAAP Financial Measures 
All financial information, unless otherwise noted, has been prepared
in accordance with Canadian GAAP, specifically International
Accounting Standard (IAS) 34 Interim Financial Reporting as issued by
the International Accounting Standards Board, within Part 1 of the
Canadian Institute of Chartered Accountants Handbook, which is within
the framework of International Financial Reporting Standards (IFRS). 
Certain financial measures in this news release - namely operating
earnings, cash flow from operations, ROCE and Oil Sands cash
operating costs - are not prescribed by Canadian GAAP. Operating
earnings and Oil Sands cash operating costs are defined in the
Non-GAAP Financial Measures Advisory section of Suncor's Q4 2012
Report to Shareholders dated February 5, 2013 (the "Report to
Shareholders") and reconciled to GAAP measures respectively in the
Consolidated Financial Information and the Segment Results and
Analysis - Oil Sands section of the Report to Shareholders. Cash flow
from operations and ROCE are defined and reconciled to GAAP measures
in the Non-GAAP Financial Measures Advisory section of the Report to
Shareholders. 
These non-GAAP financial measures do not have any standardized
meaning and therefore are unlikely to be comparable to similar
measures presented by other companies. These non-GAAP financial
measures are included because management uses the information to
analyze operating performance, leverage and liquidity, and should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. 
Legal Advisory - Forward-Looking Information 
This news release contains certain forward-looking statements and
other information based on Suncor's current expectations, estimates,
projections and assumptions that were made by the company in light of
its experience and its perception of historical trends, including:
expectations and assumptions concerning the accuracy of reserves and
resources estimates; commodity prices and interest and foreign
exchange rates; capital efficiencies and cost savings; applicable
royalty rates and tax laws; future production rates; the sufficiency
of budgeted capital expenditures in carrying out planned activities;
the availability and cost of labour and services; and the receipt, in
a timely manner, of regulatory and third-party approvals. All
statements and other information that address expectations or
projections about the future, and other statements and information
about Suncor's strategy for growth, expected and future expenditures,
commodity prices, costs, schedules, production volumes, operating and
financial results and expected impact of future commitments are
forward-looking statements. Some of the forward-looking statements
and information may be identified by words like "expected",
"guidance", "plans", "outlook", "continue", "focus", "could",
"potentially" and similar expressions. 
Forward-looking statements in this news release include references to
the following expectations and plans: Suncor's $7.3 billion capital
and exploration budget for 2013; with respect to the Fort Hills
mining project, a decision around sanction will be made by the
partners in the second half of 2013; Suncor and its partner will work
towards a decision on the Voyageur upgrader project by the end of the
first quarter of 2013; the economic outlook for the Voyageur upgrader
project is challenged; the Firebag project will come in 15% under
budget and bitumen production from the Firebag complex will reach
production capacity of 180,000 bbls/d over the next year; the first
two of four new storage tanks in Hardisty, Alberta will connect to
the Enbridge mainline pipeline in 2013; Suncor's share of capital for
the Hebron project will be approximately $3.2 billion, the estimated
gross oil production capacity for Hebron will be 150,000 bbls/d and
that first oil is expected in late 2017; the third drill centre for
Terra Nova is expected to be reconnected in the third quarter of
2013, when damaged flowlines can be replaced; the company's
assessment of asset impairment in Syria and for its Voyageur
upgrader; and Suncor will be able to successfully defend its original
filing position relating to the Buzzard derivative contracts and that
no increased income tax payable ultimately should result from CRA's
actions. 
Forward-looking statements and information are not guarantees of
future performance and involve a number of risks and uncertainties,
some that are similar to other oil and gas companies and some that
are unique to Suncor. Suncor's actual results may differ materially
from those expressed or implied by its forward-looking statements, so
readers are cautioned not to place undue reliance on them. 
Additional risks, uncertainties and other factors that could
influence financial and operating performance of all of Suncor's
operating segments and activities include, but are not limited to,
changes in general economic, market and business conditions, such as
commodity prices, interest rates and currency exchange rates;
fluctuations in supply and demand for Suncor's products; the
successful and timely implementation of capital projects, including
growth projects and regulatory projects; competitive actions of other
companies, including increased competition from other oil and gas
companies or from companies that provide alternative sources of
energy; labour and material shortages; actions by government
authorities, including the imposition of taxes or changes to fees and
royalties, and changes in environmental and other regulations; the
ability and willingness of parties with whom we have material
relationships to perform their obligations to us; the occurrence of
unexpected events such as fires, equipment failures and other similar
events affecting Suncor or other parties whose operations or assets
directly or indirectly affect Suncor; the potential for security
breaches of Suncor's information systems by computer hackers or cyber
terrorists, and the unavailability or failure of such systems to
perform as anticipated as a result of such breaches; our ability to
find new oil and gas reserves that can be developed economically; the
accuracy of Suncor's reserves, resources and future production
estimates; market instability affecting Suncor's ability to borrow in
the capital debt markets at acceptable rates; maintaining an optimal
debt to cash flow ratio; the success of the company's risk management
activities using derivatives and other financial instruments; the
cost of compliance with current and future environmental laws; risks
and uncertainties associated with closing a transaction for the
purchase or sale of an oil and gas property, including estimates of
the final consideration to be paid or received, the ability of
counterparties to comply with their obligations in a timely manner
and the receipt of any required regulatory or other third-party
approvals outside of Suncor's control that are customary to
transactions of this nature; and the accuracy of cost estimates, some
of which are provided at the conceptual or other preliminary stage of
projects and prior to commencement or conception of the detailed
engineering that is needed to reduce the margin of error and increase
the level of accuracy. The foregoing important factors are not
exhaustive. 
The Report to Shareholders and Suncor's Annual Information Form/Form
40-F dated March 1, 2012, Annual Report to Shareholders and other
documents it files from time to time with securities regulatory
authorities describe the risks, uncertainties, material assumptions
and other factors that could influence actual results and such
factors are incorporated herein by reference. Copies of these
documents are available without charge from Suncor at 150 6th Avenue
S.W., Calgary, Alberta T2P 3E3, by calling 1-800-558-9071, or by
email request to info@suncor.com or by referring to the company's
profile on SEDAR at www.sedar.com or EDGAR at www.sec.gov. Except as
required by applicable securities laws, Suncor disclaims any
intention or obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. 
Certain natural gas volumes have been converted to barrels of oil
equivalent (boe) on the basis of one barrel to six thousand cubic
feet. Any figure presented in boe may be misleading, particularly if
used in isolation. A conversion ratio of one bbl of crude oil or
natural gas liquids to six thousand cubic feet of natural gas is
based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of
crude oil as compared to natural gas is significantly different from
the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis
may be misleading as an indication of value. 
Suncor Energy is Canada's premier integrated energy company. Suncor's
operations include oil sands development and upgrading, conventional
and offshore oil and gas production, petroleum refining, and product
marketing under the Petro-Canada brand. While working to responsibly
develop petroleum resources, Suncor is also developing a growing
renewable energy portfolio. Suncor's common shares (symbol: SU) are
listed on the Toronto and New York stock exchanges. 
For more information about Suncor Energy please visit our web site at
www.suncor.com or follow us on Twitter @SuncorEnergy. 
A full copy of the Report to Shareholders and the financial
statements and notes (unaudited) can be downloaded at
www.suncor.com/financialreporting or www.sedar.com or by calling
1-800-558-9071 toll-free in North America. 
To listen to the conference call discussing Suncor's fourth quarter
results, visit www.suncor.com/webcasts. 
Contacts:
Investor inquiries:
800-558-9071
invest@suncor.com 
Media inquiries:
403-296-4000
media@suncor.com
 
 
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