* Excluding items, EPS C$0.21 vs expectations of C$0.41
* Q4 production averaged 638,200 boed
* Expects 2010 production of 644,000 boed
* Shares down 3 pct (Recasts with details and comments and updated shares. Changes dateline, previous TORONTO)
By Scott Haggett and Euan Rocha
CALGARY/TORONTO, Feb 2 (Reuters) - Suncor Energy Inc (SU.TO), Canada’s largest energy company, reported a much weaker than expected quarterly profit on Tuesday as it works to speed the integration of the company following last year’s C$22.7 billion ($21.4 billion) purchase of rival Petro-Canada.
Suncor Chief Executive Rick George said the company will spend much of the year cleaning up its operations following the Petro-Canada acquisition, the largest ever by a Canadian oil and gas company, and completing an asset-sale program that has already raised C$517 million.
“Divestments are a big piece of work in 2010,” George said on a conference call. “The natural gas divestments are getting a high level of interest from potential buyers ... and we are very much on target in terms of reaching our objective of C$1.5 billion to C$2 billion (in sales) of North American gas assets by the end of the year.”
George said blending the two companies will save C$400 million a year in operating costs, C$100 million more than the company had expected.
The takeover, however, didn’t help Suncor’s fourth-quarter profit, which came in well below the expectations of analysts.
The company posted net income of C$457 million, or 29 Canadian cents a share, compared with a year-earlier loss of C$215 million, or 24 Canadian cents a share.
But operating earnings, which exclude special charges, were much lower than the average analyst forecast of 41 Canadian cents per share as compiled by Thomson Reuters I/B/E/S. Suncor said its operating income was just C$323 million, or 21 Canadian cents a share, although that was up 23-fold from the C$14 million, or 2 Canadian cents a share, the company reported for the fourth quarter of 2008.
“We’re not happy with the results achieved,” Bart Demosky, Suncor’s chief financial officer, said on the conference call. “Certainly our operating earnings could have been higher.”
Analysts said the company’s costs and royalty payments were higher than expected and production weaker than thought as Suncor integrated Petro-Canada’s operations.
“We were expecting the fourth quarter to have a little bit of noise but not that much,” said Phil Skolnick, an analyst with Genuity Capital Markets.
Suncor shares were down C$1.04, or 3 percent, at C$33.80 at midday on Tuesday on the Toronto Stock Exchange.
Suncor said quarterly output from its oil sands operations in northern Alberta rose 14 percent to an average 278,900 barrels of oil equivalent per day. However a December fire at an upgrader, which converts tarry bitumen into refinery-ready synthetic crude, cut its output by 30,000 barrels per during the quarter.
George said that repairs to the plant at its massive Fort McMurray operations, are now complete, and the restarting of the upgrader, which can produce up to 175,000 barrels per day, has begun.
The company said its total production during the quarter averaged 638,200 barrels of oil equivalent a day, almost double its year-before output as it added Petro-Canada’s oil and gas.
Suncor forecast 2010 production of 644,000 barrels of oil equivalent per day, before planned asset divestitures. However the company said it will hang onto to properties in Syria and Libya that were widely expected to be sold.
George also said that Suncor has been approached by companies interested buying a stake in its planned Voyageur oil sands upgrader, preparations for which were mothballed in 2008 after oil prices plunged.
“We’ve been talking to a number of players,” he said. “I’m not going to identify who those are but, absolutely, there has been some interest there.”
However the company hasn’t decided when it will resume construction of the upgrader as it concentrates its capital on boosting its supply of bitumen by expanding its Firebag thermal operations near Fort McMurray.
$1=$1.06 Canadian Additional reporting by Sakthi Prasad; editing by Peter Galloway