| Record production and strong commodity prices contribute to solid 2006 financial results for Suncor Energy |
CALGARY, Jan. 25, 2007 (Canada NewsWire via COMTEX) -- All financial figuresare unaudited and in Canadian dollars unless notedotherwise. Certain prior period amounts have been restated to conform tothe current year's presentation. Certain financial measures referred toin this document, including return on capital employed and cash operatingcosts, are not prescribed by Canadian generally accepted accountingprinciples (GAAP). For a description of these measures, see "Non GAAPFinancial Measures" in this document. This document makes reference tobarrels of oil equivalent (boe). A boe conversion ratio of six thousandcubic feet of natural gas: one barrel of crude oil is based on an energyequivalency conversion method primarily applicable at the burner tip anddoes not represent a value equivalency at the wellhead. Accordingly, boemeasures may be misleading, particularly if used in isolation.CALGARY, Jan. 25 /CNW/ - Suncor Energy Inc. today reported 2006 net earnings of$2.971 billion ($6.47 per common share), an increase from $1.158 billion($2.54 per common share) in 2005. Excluding the effects of insurance proceeds,the reduction of federal and Alberta income tax rates and unrealized foreignexchange gains on the company's U.S. dollar denominated long-term debt, 2006 netearnings were $2.320 billion ($5.05 per common share) compared to $834 million($1.83 per common share) in 2005. Cash flow from operations in 2006 was $4.533billion compared to $2.476 billion in 2005.The increase in both net earnings and cash flow from operations primarilyreflects higher crude oil production and higher crude oil prices in 2006. In2005, Suncor's operational and financial performance was impacted by a fire thatcut production rates approximately in half for close to eight months, while in2006, Suncor also benefited from an expansion project that resulted in increasedproduction capacity."After a difficult year in 2005, we came back strong and went on to achieve arecord level of production in 2006," said Rick George, president and chiefexecutive officer. "The focus now is on the fundamentals - steady, safe andreliable operations as we continue to build the foundation for future growth."2006 Overview << - Combined oil sands and natural gas production in 2006 was 294,800 barrels of oil equivalent (boe) per day, compared to 206,100 boe per day in 2005. Oil sands production averaged 260,000 barrels per day (bpd) in 2006 (253,800 bpd of synthetic crude oil and 6,200 bpd of bitumen sold directly to the market), compared to 171,300 bpd in 2005. Natural gas production averaged 191 million cubic feet (mmcf) per day, compared to an average 190 mmcf per day in 2005. - Oil sands cash operating costs averaged $21.70 per barrel during 2006 compared to $24.55 per barrel in 2005. The decrease in 2006 was primarily due to fixed operating costs being spread over higher production volumes, as well as lower natural gas costs. - Suncor continued to make progress on the expansion of Upgrader 2. Engineering work on the project, which is expected to increase production capacity to 350,000 bpd in 2008, is substantially complete and construction is 69% complete. The project remains on schedule and within budget. - Average daily in-situ bitumen production from Suncor's Firebag facilities increased to 33,700 bpd from 19,100 bpd in 2005. - Plans for Suncor's next major stage of oil sands growth were also advanced in 2006 with receipt of regulatory approval for a planned third upgrader and extension of the Steepbank Mine, two key components in the company's plan to increase production to 500,000 to 550,000 bpd in 2010 to 2012. - In its U.S. downstream operations, Suncor completed modifications in June to the company's Commerce City (Denver) refining operation that enabled production of ultra low sulphur diesel fuel and the integration of up to 10,000 to 15,000 bpd of oil sands sour crude into the refinery's feedstock. - In Suncor's Canadian downstream operations, modifications were completed in July to enable the company's Sarnia refinery to meet ultra low sulphur diesel requirements. The second stage of this project, slated for completion in the fourth quarter of 2007, is planned to integrate up to 40,000 bpd of oil sands sour crude into the facility's feedstock and to improve the economic performance of the refinery. - While continuing to expand its integrated oil sands and downstream refining and marketing businesses, Suncor also made advances in its renewable energy strategy with the opening of Canada's largest ethanol plant and the commissioning of its third wind farm. Further investment in ethanol-based biofuels and a fourth wind farm are planned for 2007. - Maintaining a strong balance sheet remained a priority in 2006. Suncor's net debt (including cash and cash equivalents) at December 31, 2006 was $1.9 billion (approximately 0.4 times cash flow from operations). Year-end net debt in 2005 was $2.9 billion (approximately 1.2 times cash flow from operations). - Suncor achieved a company-wide return on capital employed of 40.6% in 2006 (excluding capitalized costs for major projects in progress), compared to 19.7% in 2005. >>Fourth Quarter 2006Suncor's net earnings for the fourth quarter of 2006 were $358 million ($0.78per common share) compared to $693 million ($1.52 per common share) in thefourth quarter of 2005. Excluding the effects of insurance proceeds andunrealized foreign exchange gains on the company's U.S. dollar denominatedlong-term debt, fourth quarter net earnings were $374 million ($0.81 per commonshare) compared to $599 million ($1.31 per common share) during the fourthquarter of 2005. Cash flow from operations for the fourth quarter of 2006 was$746 million, compared to $1.226 billion in the fourth quarter of 2005.The decrease in net earnings primarily reflects higher oil sands operating costsas a result of increased levels of maintenance activity and higher labourexpenses during the fourth quarter. Company-wide fourth quarter net earningswere also negatively impacted by lower earnings in the Natural Gas business andthe impact of maintenance activities in Suncor's downstream operations. Thedecrease in cash flow from operations in the fourth quarter of 2006 compared tothe fourth quarter of 2005 was due to the same factors that impacted netearnings during this period.Suncor's combined oil sands and natural gas production for the fourth quarterwas 301,100 boe per day, compared to 302,700 boe per day in the same period of2005. Natural gas production averaged 192 mmcf per day in the fourth quarter of2006, relatively steady compared to the 193 mmcf per day recorded in the fourthquarter of 2005. Oil sands production in the fourth quarter of 2006 averaged266,400 bpd, consisting of 256,700 bpd of synthetic crude oil and 9,700 bpd ofbitumen sold directly to the market. Oil sands production in the fourth quarterof 2005 averaged 267,700 bpd, consisting of 260,500 bpd of synthetic crude oiland 7,200 bpd of bitumen sold directly to the market.Fourth quarter 2006 oil sands cash operating costs were $25.65 per barrel,compared to $20.90 per barrel in the same period of 2005. Cash operating costsper barrel were higher in 2006 primarily as a result of the same factorsimpacting total oil sands operating costs, as noted above.In Suncor's Canadian downstream operations, a shutdown of the Sarnia refinery totie-in modified facilities was completed on December 22. The work, which beganin early September, was undertaken in stages to allow the facility to continueproduction at reduced rates.As part of the company's long-range planning, Suncor elected in late 2006 totransition to the Government of Alberta's generic bitumen-based royalty in 2009.OutlookSuncor's outlook provides management's targets for 2007 in certain key areas ofthe company's business. Outlook forecasts, which are updated quarterly, aresubject to change. << 2007 Full Year Outlook -------------------------------------------------- Oil Sands Production (bpd)(1) 260,000 to 270,000 Diesel 10% Sweet 42% Sour 43% Bitumen 5% Realization on crude sales basket WTI @ Cushing less Cdn$7.50 to $8.50 per barrel Cash operating costs(2) $21.50 to $22.50 per barrel -------------------------------------------------- Natural Gas Natural gas production(3) (mmcf equivalent per day) 215 to 220 1. The 2007 oil sands production target includes approximately 5% non-upgraded bitumen sold directly to the market. In 2006, the production target referred only to synthetic crude oil production. 2. Cash operating cost estimates are based on the following assumptions: i) production of 260,000 to 270,000 bpd; ii) a production sales mix as described in the chart above; and iii) a natural gas price of US$7.60 per thousand cubic feet (mcf) at Henry Hub. Cash operating costs per barrel are not prescribed by Generally Accepted Accounting Principles (GAAP). This non-GAAP financial measure does not have any standardized meaning and therefore is unlikely to be comparable to similar measures presented by other companies. Suncor includes this non-GAAP financial measure because investors may use this information to analyze operating performance. This information should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. See "Non-GAAP Financial Measures". 3. The 2007 production target includes natural gas liquids (NGL) and crude oil converted into mmcf equivalent at a ratio of one barrel of NGL/crude oil: six thousand cubic feet of natural gas. This mmcf equivalent may be misleading, particularly if used in isolation. A conversion ratio of one barrel of NGL/crude oil: 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. Factors that could potentially impact Suncor's financial performanceinclude: - Crude oil hedges. Suncor has hedging agreements for 60,000 bpd in 2007. These costless collar hedges have an average floor of approximately US$51.64 per barrel while allowing participation in higher crude oil prices with an average ceiling of approximately US$93.26 per barrel. The company will consider future costless collars up to 30% of annual planned crude oil production if strategic opportunities are available. - Scheduled tie-ins of modified facilities at Suncor's oil sands operation are planned during 2007. Upgrader 2 is expected to be shut down for approximately 50 days in the second quarter while this work is under way. During the outage, Upgrader 1 is expected to continue normal production. Although this shutdown is reflected in operational targets for the year, production estimates could be impacted if the work takes longer than planned or is impacted by labour or material supply issues. The tie-in work is required to enable production capacity to be increased to a planned 350,000 bpd in 2008. - Scheduled tie-ins of modified facilities at Suncor's refineries. Suncor plans to begin a shutdown of the Sarnia refinery in the third quarter of 2007 (with completion scheduled in the fourth quarter of 2007) to tie-in modified facilities that are expected to enable the facility to process up to 40,000 bpd of oil sands sour crude. >>Further discussion of the risks, uncertainties and other factors that couldaffect these plans, and any actual results, is included in Suncor's annualreport to shareholders and other documents filed with regulatory authorities.Net Earnings ComponentsThis table sets forth some of the factors impacting Suncor's net earnings. Forcomparability purposes, readers should rely on the reported net earnings thatare presented in the company's consolidated financial statements and notes inaccordance with Canadian GAAP. The company's fourth quarter financial statements(unaudited) can be obtained at www.suncor.com or by calling 1-800-558-9071 << Years ended ($ millions after tax) Fourth Quarter December 31 (unaudited) 2006 2005 2006 2005 -------------------------------------------------- Net earnings before the following items 374 603 2 333 838 Firebag Stage 2 start-up costs - (4) (13) (4) Oil Sands fire accrued insurance proceeds(1) 27 98 232 293 Impact of income tax rate reductions on opening future income tax liabilities(2) - - 419 - Unrealized foreign exchange gain (loss) on U.S. dollar denominated long-term debt (43) (4) - 31 -------------------------------------------------- Net earnings as reported 358 693 2 971 1 158 -------------------------------------------------- Net earnings per share attributable to common shareholders as reported $0.78 $1.52 $6.47 $2.54 -------------------------------------------------- (1) Net accrued property loss and business interruption proceeds net of income taxes and Alberta Crown Royalties. (2) Impacts of the Federal and Alberta income tax rate changes enacted in the second quarter of 2006. >>Non GAAP Financial MeasuresSuncor includes cash and total operating cost per barrel data, return on capitalemployed (ROCE) and cash flow from operations because investors may use thisinformation to analyze operating performance, leverage and liquidity. Theadditional information may not be comparable to similar measures presented byother companies and should not be considered in isolation or as a substitute formeasures of performance prepared in accordance with generally acceptedaccounting principles. Cash flow from operations is expressed before changes innon-cash working capital. A reconciliation of net earnings to cash flow fromoperations is provided in the schedules of segmented data, which are an integralpart of the company's fourth quarter financial statements.The following table outlines the reconciliation of oil sands cash and totaloperating costs to expenses included in the schedules of segmented data in thecompany's fourth quarter 2006 financial statements. << Oil Sands Operating Costs - Total Operations Fourth Quarter 2006 2005 $ millions $/barrel $ millions $/barrel Operating, selling and general expenses 675 466 Less: natural gas costs and inventory changes (113) (80) Less: non-monetary transactions (22) - Accretion of asset retirement obligations 7 6 Taxes other than income taxes 8 7 -------------------------------------------------- Cash costs 555 22.65 399 16.20 Natural gas 74 3.00 115 4.65 Imported bitumen (net of other reported product purchases) - - 1 0.05 -------------------------------------------------- Total cash operating costs A 629 25.65 515 20.90 -------------------------------------------------- In-situ (Firebag) start-up costs B - - 7 0.30 -------------------------------------------------- Total cash operating costs after start-up costs A+B 629 25.65 522 21.20 Depreciation, depletion and amortization 104 4.25 89 3.60 -------------------------------------------------- Total operating costs 733 29.90 611 24.80 -------------------------------------------------- Production (thousands of barrels per day) 266.4 267.7 -------------------------------------------------- -------------------------------------------------- Oil Sands Operating Costs - Total Operations Years ended December 31 2006 2005 $ millions $/barrel $ millions $/barrel Operating, selling and general expenses 2 149 1 432 Less: natural gas costs and inventory changes (312) (258) Less: non-monetary transactions (126) - Accretion of asset retirement obligations 28 24 Taxes other than income taxes 36 29 -------------------------------------------------- Cash costs 1 776 18.70 1 227 19.60 Natural gas 276 2.90 307 4.90 Imported bitumen (net of other reported product purchases) 6 0.10 2 0.05 -------------------------------------------------- Total cash operating costs A 2 057 21.70 1 536 24.55 -------------------------------------------------- In-situ (Firebag) start-up costs B 21 0.20 7 0.10 -------------------------------------------------- Total cash operating costs after start-up costs A+B 2 078 21.90 1 543 24.65 Depreciation, depletion and amortization 385 4.05 330 5.30 -------------------------------------------------- Total operating costs 2 463 25.95 1 873 29.95 -------------------------------------------------- Production (thousands of barrels per day) 260.0 171.3 -------------------------------------------------- -------------------------------------------------- Oil Sands Operating Costs - In-situ Bitumen Production Only Fourth Quarter 2006 2005(1) $ millions $/barrel $ millions $/barrel Operating, selling and general expenses 57 49 Less: natural gas costs and inventory changes (32) (33) Taxes other than income taxes 1 - -------------------------------------------------- Cash costs 26 8.05 16 6.70 Natural gas 32 9.90 33 13.80 -------------------------------------------------- Cash operating costs A 58 17.95 49 20.50 -------------------------------------------------- In-situ (Firebag) start-up costs B - - 7 2.90 -------------------------------------------------- Total cash operating costs after start-up costs A+B 58 17.95 56 23.40 Depreciation, depletion and amortization 20 6.20 11 4.60 -------------------------------------------------- Total operating costs 78 24.15 67 28.00 -------------------------------------------------- Production (thousands of barrels per day) 35.1 26.0 -------------------------------------------------- -------------------------------------------------- Oil Sands Operating Costs - In-situ Bitumen Production Only Years ended December 31 2006 2005(1) $ millions $/barrel $ millions $/barrel Operating, selling and general expenses 209 155 Less: natural gas costs and inventory changes (103) (91) Taxes other than income taxes 4 - -------------------------------------------------- Cash costs 110 8.95 64 9.15 Natural gas 103 8.35 91 13.05 -------------------------------------------------- Cash operating costs A 213 17.30 155 22.20 -------------------------------------------------- In-situ (Firebag) start-up costs B 21 1.70 7 1.00 -------------------------------------------------- Total cash operating costs after start-up costs A+B 234 19.00 162 23.20 Depreciation, depletion and amortization 68 5.55 34 4.90 -------------------------------------------------- Total operating costs 302 24.55 196 28.10 -------------------------------------------------- Production (thousands of barrels per day) 33.7 19.1 -------------------------------------------------- -------------------------------------------------- (1) Firebag start-up costs have not been seperately identified in past quarterly Reports to Shareholders. We have segregated these costs for comparable information purposes to provide additional detail to the individual components of cash costs. >>Return on Capital EmployedNet earnings adjusted for after-tax financing expenses (2006 - $26 million;2005 - income of $16 million) for the twelve month period ended (2006 - $2.997billion; 2005 - $1.142 billion); divided by average capital employed (2006 -$7.379 billion; 2005 - $5.786 billion). Average capital employed is the sum ofshareholders' equity and short-term debt plus long-term debt less cash and cashequivalents, at the beginning and end of the year, divided by two, less averageannual capitalized costs related to major projects in progress (as applicable).For more detail on how ROCE is calculated, see page 56 of Suncor's 2005 AnnualReport. << Reconciliation of cash flow from operations on a per share basis (unaudited) Fourth Quarter Years ended December 31 2006 2005 2006 2005 -------------------------------------------------- Cash flow from operations ($ millions) A 746 1 226 4 533 2 476 Weighted average number of common shares outstanding - basic (millions of shares) B 460 457 459 456 Cash flow from operations - basic (per share) A/B 1.62 2.68 9.87 5.43 -------------------------------------------------- >>Suncor Energy Inc. is an integrated energy company headquartered in Calgary,Alberta. Suncor's oil sands business, located near Fort McMurray, Alberta,extracts and upgrades oil sands and markets refinery feedstock and diesel fuel,while operations throughout Western Canada produce natural gas. Suncor operatesa refining and marketing business in Ontario with retail distribution under theSunoco brand. U.S.A. downstream assets include refining operations in Coloradoand retail sales in the Denver area under the Phillips 66 brand. Suncor's commonshares (symbol: SU) are listed on the Toronto and New York stock exchanges.Suncor Energy (U.S.A.) Inc. is an authorized licensee of the Phillips 66 brandand marks in the state of Colorado. Sunoco in Canada is separate and unrelatedto Sunoco in the United States, which is owned by Sunoco, Inc. of Philadelphia.This document contains forward-looking statements that address goals,expectations or projections about the future. These statements are based onSuncor's current goals, expectations, estimates, projections and assumptions, aswell as its current budgets and plans for capital expenditures. Some of theforward-looking statements may be identified by words like "planned", outlook","target", "expect", "intends", "will consider", "could", "may", "slated","scheduled" and similar expressions. These statements are not guarantees offuture performance. Actual results could differ materially, as a result offactors, risks and uncertainties, known and unknown, to which Suncor's businessis subject. These could include: changes in general economic, market andbusiness conditions; potential labour and material supply issues; fluctuationsin supply and demand for Suncor's products; fluctuations in commodity prices andcurrency exchange rates; the impact of stakeholder consultation; the regulatoryprocess; technical issues; environmental issues; technological capabilities; newlegislation; the occurrence of unexpected events; Suncor's capability to executeand implement its future plans; and changes in current plans. Further discussionof the risks, uncertainties and other factors that could affect these plans, andany actual results, is included in Suncor's annual report to shareholders,Annual Information Form/Form 40-F and other documents filed with regulatoryauthorities. Suncor disclaims any intentions or obligations to update or reuseany forward-looking statements whether as a result of new information, futureevents or otherwise.SOURCE: Suncor Energy Inc.CONTACT: Investor inquiries: John Rogers, tel: (403) 269-8670; Media inquiries: Brad Bellows, tel: (403) 269-8717Copyright (C) 2007 CNW Group. All rights reserved. |
Suncor Energy Inc.
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