CALGARY, Alberta (Reuters) - Suncor Energy Inc (SU.TO), Canada’s No. 2 oil sands producer, said on Thursday that record crude prices boosted second-quarter profit by 12 percent, even as production fell and it lowered its output targets.
Suncor said net income rose to C$829 million ($820.7 million), or 89 Canadian cents a share, from C$738 million, or 80 Canadian cents, a year earlier.
Excluding one-time items, Suncor’s operating profit climbed 35 percent to C$821 million, or 88 Canadian cents a share, from C$607 million, or 66 Canadian cents.
The operating profit surpassed analysts’ average forecast of 79 Canadian cents a share, according to Reuters Estimates.
Despite the higher than expected profit, which came as oil prices nearly doubled from the second-quarter of 2007, it was the lagging performance of the company’s massive oil sands projects that captured attention and prompted an apology from the company’s chief executive.
“We are not very happy with the production,” CEO Rick George said on a conference call. “We do know we have disappointed. What I would say about it is this is temporary.”
Suncor’s oil sands project produced 174,600 barrels of oil a day in the quarter, down 14 percent from a year earlier as a maintenance shutdown dragged on longer than expected.
The weak performance prompted the company to cut its annual production forecast from its oil sands operations for the second time this year. It moved the target down to an average output of 240,000 to 250,000 barrels a day for 2008 from a previous forecast of 275,000 to 285,000 bpd.
“Even that’s not absolutely in the bag,” said William Lacey, an analyst at FirstEnergy Capital. “The company said July (production) is going to be weak and they are expecting to produce 300,000 (bpd) by year-end.... They’ll have to get some pretty strong numbers out of the second half just to hit their range.”
The weak output in the second quarter also pushed up costs. The company said operating costs in the period were C$50.85 a barrel, 56 percent higher than a year earlier. It’s now forecasting operating costs to average C$35 to C$36 a barrel.
Suncor is working to expand its output to 350,000 bpd by the second half of next year, while its C$20.6 billion Voyageur project will add a further 200,000 bpd by 2012.
Suncor’s natural gas business produced 226 million cubic feet a day in the quarter, compared with 209 mmcf a day a year earlier.
Based on the strong performance of its natural gas operations in the first half of the year, the company raised its annual production outlook to an average of about 210 mmcf to 220 mmcf a day.
Suncor also owns refineries in Sarnia, Ontario, and Denver, Colorado, and has publicly mulled acquiring more. However George said he’s not yet ready to buy due to weak results from the sector.
“We continue to look at downstream assets,” George said. “For us it’s a very patient game.... We continue to look at individual assets; we’re not very interested in companies at the present time.”
Suncor shares fell 74 Canadian cents to C$52.91 on the Toronto Stock Exchange. The shares have risen 11 percent over the past 12 months.
Additional reporting by Dhanya Skariachan; editing by Rob Wilson