Suncor Energy Inc., Canada’s largest energy company by market value, reported its first quarterly loss in 3 1/2 years after a charge of C$1.49 billion ($1.5 billion) related to its Voyageur oil project in the province of Alberta, which may face cancellation.
The net loss in the fourth quarter was C$562 million, or 37 cents a share, the biggest in at least two decades, compared with net income of C$1.43 billion, or 91 cents, a year ago, the Calgary-based company said yesterday in a statement that also disclosed it faces a possible C$1.2 billion tax bill. Operating earnings fell 30 percent to C$1 billion.
“The market has substantially changed as we’ve been developing the Voyageur project,” said Chief Executive Officer Steve Williams during a conference call today. “We’re working diligently with joint venture partner” to determine the project’s future. A decision will be made on the project before the end of the first quarter, he said.
The Voyageur upgrader project, being built by Suncor and France’s Total SA, will process about 269,000 barrels a day of bitumen from the Fort Hills and Joslyn mines, according to Total E&P Canada Ltd.’s website. The plant will use the heavy bitumen to produce 218,000 barrels a day of synthetic crude oil. Construction of the plant began in January 2012, according to the website.
Suncor’s Williams has been evaluating expansion plans since taking over from predecessor Rick George last year. The company is looking to reduce costs amid an expansion, including its oil-sands operations that may boost output to 1 million barrels a day by 2020.
The shares fell 5.2 percent to C$32.60 at the close in Toronto.
“Financial results were short of expectations,” said Randy Ollenberger, an analyst at BMO Capital Markets, in a note. Profit from the refining operations was held back by higher costs while oil sands operations were affected by upgrader operational constraints, he said.
The newer of two units at Suncor’s Fort McMurray upgrader in Alberta is operating unreliably, Williams said in the conference call. A “minor event” related to hardware at Unit 2 caused shut-downs for unplanned maintenance in December, he said.
Suncor plans to delay development of its Fort Hills oil-sands project north of Fort McMurray in Alberta and was still evaluating costs for the planned Voyageur upgrader project, Williams said in November.
The Voyageur project “is likely to struggle to generate economic returns,” George Toriola, a UBS analyst, said in a note before the earnings.
Voyageur partners have been considering options for the project, including the implications of cancellation or indefinite deferral, the company said. The partners may decide on the project by March 31, according to the statement.
Suncor in December reduced its annual capital spending plan to C$7.3 billion for 2013 from an estimate of C$7.5 billion on Nov. 1. Cenovus Energy Inc., which is also an oil-sands developer, said on Dec. 12 that cash flow this year will be as low as C$3.1 billion, compared with 2012 guidance of C$3.7 billion, because of lower prices.
The price of Canadian heavy crude, produced at oil-sands operations such as Suncor’s Millennium mining site, declined 25 percent to an average of $61.32 a barrel in the fourth quarter from a year ago, according to data compiled by Bloomberg.
Suncor received a letter last month related to income tax treatment of realized losses in 2007 “on the settlement of the Buzzard derivative contracts,” the company said. The Canada Revenue Agency may issue a notice of reassessment to increase the amount payable by about C$1.2 billion, Suncor said, adding that it disagrees with the agency and plans a response.
Suncor operates four refineries in North America in Alberta, Ontario, Quebec and Colorado that produce fuels, solvents and petrochemicals, according to the company’s website.