Last week, I declared it was "game on" in the Canadian oil sands. From Imperial Oil
In terms of oil sands production, Suncor's fourth quarter was a bit of a disappointment. Things were going well in November, with average volumes bubbling up to 314,000 barrels per day. But then a fire hit one of the firm's two bitumen upgraders in December, dragging the full-year average down to the low end of the company's target of 290,000 to 305,000 barrels per day. For the year, operating earnings fell by more than half, and return on capital employed collapsed to 2.6%.
Of course, anyone following Suncor for any length of time knows that progress is always a bumpy process. If the oil sands were abundant and easy to extract, well that wouldn't be quite fair, now would it? This is a tough line of work, and Suncor is one of the best in the business, despite its pretty meager 2009 results.
Suncor's long-term objective is to safely grow oil sands capacity 10% to 12% per year through 2020, while reducing its environmental footprint at the same time. The firm clearly has its work cut out for it. Let's see what it's planning for 2010, and how this advances the firm's long-term goals.
In November, the 2010 budget was set at $5.2 billion, with 27% earmarked for growth capital. Atop the growth pile is Firebag Stage 3, an in-situ project whose expansion was put on hold last year. In-situ extraction appears to be one of the key ways to reduce emissions from oil sands operations, so this project seems like a natural one to focus on.
So, too, does Suncor's plan to divest additional assets outside of the oil sands, on top of the recent sale to Noble Energy
I'm happy to see Suncor so focused on the oil sands. Even after a large merger, the company hasn't lost its bearings. This should bear fruit for shareholders in the years ahead.