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Article Excerpt
CALGARY -- Suncor Energy Inc. today announced it set a new company record for oil production and recorded unaudited consolidated earnings for 2001 of $388 million ($1.63 per common share), up from $377 million in 2000 ($1.58 per common share). Cash flow from operations for 2001 was $831 million ($3.52 per common share), compared with $958 million ($4.11 per common share) in 2000. Suncor's daily average production rate was 156,600 barrels of oil equivalent (BOE), compared with 154,400 BOE per day the year before.
"The year 2001 was a landmark year for Suncor in that we completed Millennium, a project that is delivering increased production for Suncor and serves as a foundation for our long-term growth strategy," said Rick George, president and chief executive officer. "We delivered on our objective of doubling production capacity to 225,000 barrels per day by year end."
Suncor expects production at the oil sands plant to average about 210,000 barrels per day in 2002 as the new Millennium facilities are fully integrated with base operations. Project Millennium was a four-year expansion of Suncor's oil sands operation with a $3.4 billion capital cost.
The increase in production, combined with higher natural gas commodity prices and retail margins earlier in the year, contributed to the year-over- year increase in earnings. Suncor's cash flow declined from 2000 primarily as a result of the cost of Project Millennium start-up.
"With Project Millennium behind us, Suncor can focus on getting back to basics in 2002," said George. "We'll focus our efforts on strengthening our business by delivering steady, reliable production and reducing operating costs. And we'll also seek opportunities to debottleneck our oil sands operation and add additional oil production. The company's growth plans will also stay high on our agenda."
George said Suncor will continue construction of its Firebag In-Situ Oil Sands Project and further plans to expand its oil sands business up to 550,000 barrels per day over the next decade.
Another key priority for Suncor is to reduce its $3.1 billion debt. As part of that effort, Suncor has hedged 40 per cent of its 2002 production to mitigate the impact of an uncertain crude oil market on the company's ability to reduce debt.
> Operating Highlights during 2001 Oil Sands ---------
Oil Sands production hit a new record in 2001, averaging 123,200 barrels per day, up approximately eight per cent from 2000. Cash operating costs at Oil Sands increased during the year to $17.00 per barrel, including Project Millennium start-up costs.
> Natural Gas -----------
Suncor's Natural Gas business production averaged 33,400 BOE per day, down from 40,500 BOE per day in 2000. Although production decreased, a reflection of asset divestments in 2000, the business benefited from increased commodity prices that contributed to improved operational earnings.
Sunoco ------
Sunoco, Suncor's refining and marketing arm, recorded higher operational earnings in 2001 that reflected the higher margins from industrial/commercial sales channels, stronger retail natural gas margins, and continued growth in sales volume. Refining margins were lower compared to last year.
Fourth Quarter Results
Suncor's earnings for the fourth quarter 2001 were $26 million ($0.09 per common share), compared to $111 million ($0.47 per common share) in the fourth quarter of 2000.
Operational earnings in the fourth quarter were $71 million, compared to $108 million in the fourth quarter of 2000. This $37 million decrease in operational earnings reflects lower crude oil and natural gas prices, lower refining margins and a higher anticipated proportion of lower value (sour crude oil) production associated with the start-up of Project Millennium. Prices and margins remained volatile in light of weakening demand coinciding with the global economic slowdown, events of September 11 and warmer weather. Partially offsetting these factors were lower crude oil hedging losses and higher oil production.
Operational cash flow was $242 million, compared with $236 million last year. Revenues in the fourth quarter of 2001 were $883 million, compared to $927 million in the fourth quarter of 2000.
> Oil Sands ---------
For the fourth quarter of 2001, Oil Sands recorded earnings of $37 million, down from fourth quarter 2000 earnings of $68 million. Operational earnings were $86 million, before the impact of start-up expenses associated with Project Millennium, compared to operational earnings of $71 million in the same period in 2000. The $15 million increase in operational earnings primarily reflects higher sales volumes from the Project Millennium facilities and lower hedging losses. The expenses associated with the start-up of Project Millennium have been excluded from operational earnings. If the incremental start-up volumes had been excluded from the determination of operational earnings, it is estimated that operational earnings would have been lower compared to the fourth quarter of 2000. Partially offsetting the above favourable factors were lower commodity prices and the sale of proportionately more lower-value sour oil products.
Oil Sands production during the fourth quarter averaged 153,000 barrels of oil per day, compared to 110,000 barrels per day during the same period in 2000. The production increase was the result of Project Millennium start-up volumes, offset by production losses in October that occurred as a result of an unscheduled seven-day maintenance shutdown.
Base plant cash operating costs for the fourth quarter were $9.35 per barrel, before start-up expenses associated with Project Millennium. Not all of the expenses associated with the additional volumes from Millennium are included in the $9.35 per barrel cash cost. As a result, the $9.35 per barrel cash cost is not indicative of cash costs in the future.
> Natural Gas -----------
Natural Gas reported $12 million in earnings for the fourth quarter of 2001, compared with $31 million in the same period in 2000. Operational earnings in the fourth quarter of 2001 declined to $8 million, compared to $31 million for the fourth quarter of 2000. Gas prices in the fourth quarter averaged $3.10 per thousand cubic feet, 61 per cent lower than in the fourth quarter of 2000. Although production was three per cent lower in the fourth quarter of 2001, compared to the fourth quarter of 2000, Natural Gas exited December with a production rate that was slightly higher than the previous year.
Finding and development costs (excluding acquisitions) for the five-year period ended 2001 were $11.30 per BOE, compared to $7.70 per BOE for the --- five-year period ending 2000. Natural Gas activities over the last two years have been directed towards bringing non-producing reserves to the producing stage in support of the business's 2002 production goal of an average of 180 to 190 mmcf per day.
Sunoco ------
Sunoco had breakeven earnings in the fourth quarter of 2001, compared to earnings of $23 million in the fourth quarter of 2000. Operational earnings were breakeven for the fourth quarter of 2001, compared to operational earnings of $17 million in the fourth quarter 2000. The Rack-Back business had an operational loss of $8 million in the quarter, compared to operational earnings of $16 million in the fourth quarter of 2000, reflecting a 36...
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