Back in October, I argued that Suncor Energy
Well, with today's earnings release, the pace of the firm's Voyageur expansion has now slowed to the point where you'd need a stop-motion camera to perceive the progress. Capital spending for 2009 has been cut in half from October's $6 billion level, and construction at both Voyaguer and Firebag is being halted.
As I've documented, all sorts of oil-sands plans are getting canned. From Petro-Canada
2008 was no picnic for Suncor. Daily oil sands production came in lower, while cash costs crept higher, leading to a big dropoff in return on capital. Some maintenance was planned, but there was unplanned downtime as well, caused by such hiccups as a facility fire in November. Also, after commodity prices went into freefall, Suncor was not only hurt in terms of revenue, but was also left holding the bag on higher-priced inventories.
As we look to 2009, there's at least one bright spot. Cash costs ought to recede, thanks to lower natural gas prices and fewer third-party bitumen purchases. Production is also ramping to the 300,000-barrel-per-day level, which will spread those costs over a greater number of barrels. Of course, it's hard to be enthusiastic when Suncor will be earning so much less on its barrels sold. But given the firm's cost guidance, the oil sands operations still appear to be economical, even at today's oil prices.