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CALGARY, Alberta (Reuters) - Shares of Suncor Energy Inc (SU.TO) fell nearly 6 percent on Wednesday after Canada's largest oil and gas producer reported a unexpected fourth-quarter loss from a C$1.49 billion ($1.49 billion) writedown of an upgrader project.
The writedown of its long-delayed Voyageur upgrader, which would convert oil sands bitumen into refinery-ready synthetic crude, pushed Suncor to a C$562 million fourth-quarter loss while its operating earnings were below expectations.
The company conceded the project, planned for nearly a decade, may not be viable as massive volumes of light oil from North Dakota's Bakken field and elsewhere compete sales with synthetic crude.
"Our view of the project has changed substantially as we've been developing the project," Steve Williams, Suncor's chief executive, said on a conference call.
With the rise in U.S. oil production, massive, expensive upgraders, once considered key to the profitability of oil sands projects, may no longer be needed once new pipeline are built to take heavy oil to refiners on the gulf coast and elsewhere.
"As long as you get access to the market it just doesn't make sense to build an upgrader," said Kyle Preston, an analyst with National Bank Financial.
While it has not formally canceled the project - a final decision is expected by the end of March - analysts said walking away from Voyageur would free up cash that could be returned to investors, supporting the company's sagging share price.
"With the projects economics widely known to be challenged, and although not definitively shelved, we believe that investors will view the announcement as a positive," Andrew Potter, an analyst with CIBC World Markets, said in a research note. "We continue to believe that, once the project is officially deferred, it will free up immense capital slated to be returned to shareholders."
Shares of the company, which have dropped 1.5 percent over the past 12 months, were down C$1.81 at C$C$32.57 by midday on the Toronto Stock Exchange after earlier touching C$32.41.
($1 = $1.00 Canadian)
Reporting by Scott Haggett and Euan Rocha; Editing by Bernard Orr