CALGARY, Alberta (Reuters) - The new chief executive of Suncor Energy Inc, Canada’s No. 1 integrated oil producer and refiner, said on Wednesday the company is revisiting plans for a massive expansion of its oil sands operations as looks to increase profits.
Suncor, which late on Tuesday reported a better-than-expected 28 percent jump in second-quarter profit, will no longer commit to an ambitious growth program that would see production nearly double by the beginning of the next decade.
“I‘m not focused on getting to a million barrels a day of production by 2020,” Steve Williams, who replaced Rick George as Suncor’s CEO earlier this year, said on a conference call. “That said, I have no doubt we will eventually get to that level of production and beyond. But what I am focused on is achieving strong returns for our shareholders. Growth for the sake of growth doesn’t interest me much.”
Suncor is the dominant producer in the oil sands of northern Alberta, the world’s third-largest storehouse of crude oil. It plans to increase its lead over competitors with two new oil sands mines and an upgrader to convert bitumen wrested from the sands into synthetic crude oil, to be built as part of a joint venture with French oil major Total SA.
But those plans have not been entirely welcomed by shareholders concerned about a return to the massive cost overruns that plagued the industry before the 2008 financial crisis. Suncor shares have fallen by nearly a quarter over the past 12 months in part because of concerns that its expansion plans will squeeze profits.
Now, Williams said, the partners will examine the economics of each of the planned growth projects before looking for spending approvals from their boards of directors in 2013. During that process, the joint venture may decide not to ahead with one or more of the projects.
“They will be individual projects and individual board approvals,” he said. “In principle, there is the opportunity to not progress these projects.”
For the second quarter, Suncor’s operating profit, which excludes most one-time items, rose 28 percent from the second quarter of 2011 to C$1.26 billion, or 81 Canadian cents a share, from C$980 million, or 62 Canadian cents a share.
The result beat the average analyst estimate of 72 Canadian cents for the measure, according to Thomson Reuters I/B/E/S.
Suncor, which also has conventional oil and gas operations in Canada, North Africa and the North Sea, as well as refineries in Canada and the United States, said its cash flow rose 18 percent to C$2.34 billion.
It reported a net income of C$333 million, or 21 Canadian cents a share, down 40 percent from C$562 million, or 36 Canadian cents, in the year-before quarter as it wrote down the value of its Syrian operations by C$694 million. It was forced to abandon the operations because of international sanctions against Syria.
Suncor’s total upstream production rose 18 percent to 542,400 barrels of oil equivalent per day (boepd) from 460,000 boepd a year earlier.
Suncor shares were up 50 Canadian cents at C$30.26 at midday on Wednesday on the Toronto Stock Exchange.
Additional reporting by Sakthi Prasad; Editing by Peter Galloway