April 23, 2009 / 4:26 PM / 8 years ago

UPDATE 2-Suncor sinks to net loss as_Petro-Canada deal nears

* Q1 net loss C$0.20 a share

* Operating profit C$0.24 a share vs forecast C$0.17

* Shares jump 3 percent (Recasts with CEO, analyst comments)

By Jeffrey Jones

CALGARY, Alberta, April 23 (Reuters) - Suncor Energy Inc (SU.TO), which is moving toward taking over Petro-Canada PCA.TO, sank into the red in the first quarter on a series one-time items, some related to shutting down work on a C$20.6 billion ($17 billion) oil sands expansion project.

Operating earnings fell 72 percent as oil prices skidded, but the result beat expectations, partly on strength in its refining and marketing division, Suncor said on Thursday.

Shares in Canada's second-largest oil sands producer climbed 84 Canadian cents, or nearly 3 percent, to C$40.41 on the Toronto Stock Exchange.

"People for the most part aren't too focused on the numbers right now, they're focused on the merger," FirstEnergy Capital Corp analyst William Lacey said. "But, that said, there were some positives -- the downstream was good and the operating costs were in line with what we thought."

Suncor released its results a day after announcing the management structure for the combined entity once its C$18.4 billion takeover of Petro-Canada is completed, likely in the third quarter, creating the country's biggest oil company.

Most of the top posts at the new firm, which will be dominant in the oil sands in Alberta and crude production off Canada's East Coast, will be filled by Suncor executives.

Suncor Chief Executive Rick George, who will keep that title in the new company, said no decisions had been made yet as to which assets will be divested after the deal closes.

The companies also run a large North American natural gas operation, refining and marketing networks in Canada and the United States, and an international oil exploration and production business.

"We are plowing through that. It will be a strict return-on-capital calculation and we'll look at all those opportunities and lay them all out," George told analysts.

"What I don't know is how those all stack up -- we've got a lot of work to do."

He said he is restricted as to what he can say about the fate of various holdings as Canada's Competition Bureau weighs the deal, which was launched last month.

The companies have said they are targeting C$1.3 billion in annual costs savings and reduced capital spending.

FIRST QUARTER

In the first quarter, Suncor lost a net C$189 million, or 20 Canadian cents a share, compared with a year-earlier profit of C$708 million, or 77 Canadian cents a share.

The result was hurt by the impact of the weaker Canadian dollar on its U.S.-dollar denominated debt, mark-to-market hedging losses and charges related to the deferral of its Voyageur oil sands expansion early this year.

Suncor was one of numerous oil sands developers that shelved projects due to oil prices that fell more than $100 a barrel from last year's highs and shaky financial markets.

Excluding one-time items, earnings fell to C$227 million, or 24 Canadian cents a share, from C$805 million or 87 Canadian cents a share.

Analysts, on average, had expected a profit of 17 cents a share, excluding items, according to Reuters Estimates.

Cash flow, an indicator of Suncor's ability to fund new projects, fell 59 percent to C$479 million.

Suncor's oil sands operations produced an average 278,000 barrels a day, up 12 percent. Combined oil and gas output was 314,500 barrels of oil equivalent a day, up 10 percent.

The refining and marketing division, which includes refineries and service stations in Ontario and Colorado, earned C$150 million, up 58 percent from a year earlier.

$1=$1.23 Canadian Additional reporting by Ajay Kamalakaran in Bangalore; Editing by Dan Lalor and Rob Wilson

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