Oil sands sultan Suncor Energy (NYSE: SU ) reported its quarterly results today, and they were decidedly mixed. Oil sands production was up a bit less than 3%, and price realizations were stellar. The latter effect was largely responsible for the 40% jump in cash flow from operations and the 28% lift in per-share earnings.
Operationally, things didn't run so smoothly, with unplanned maintenance work in both the company's extraction and upgrading operations. There were also hydrogen-facility hiccups. These slip-ups have forced Suncor to reduce full-year production guidance modestly. That reduction, in turn, drives up the per-barrel operating cost forecast.
Don't take this smattering of small snafus as a sign that Suncor is subpar. Oil sands mining and upgrading has more in common with the operations of a Freeport-McMoRan (NYSE: FCX ) or a Barrick Gold (NYSE: ABX ) than those of a ConocoPhillips (NYSE: COP ) . If you follow the miners, you know that nothing ever goes quite as planned.
Probably more notable than any element of these quarterly results is last week's announcement that Suncor is slashing its 2009 capital budget. Such moves began with Chesapeake Energy's (NYSE: CHK ) cautionary cut -- and other E&P companies like Petrohawk Energy (NYSE: HK ) have also pared back. Suncor will spend $6 billion in 2009, which is down 20% from this year's budget and represents a reduction by at least one third from the original plan.
I questioned the viability of Petro-Canada and Teck Cominco's (NYSE: TCK ) Fort Hills project back in September. It now looks even less likely that the project's upgrader will be built any time soon. In contrast, Suncor's massive Voyageur project has had its completion date pushed back one year. About one quarter of the roughly $20 billion budget has been spent. This bad boy will get built.
In short, Suncor can be slowed, but it can't be stopped.