May 3, 2011 / 4:25 PM / in 7 years

UPDATE 3-Suncor posts higher profit, shares fall

* Oper profit up four-fold to C$1.48 bln or C$0.94/shr

* Surpasses C$0.77/shr expectations

* Cash flow up 113 pct at C$2.39 bln or C$1.52/shr

* Production up 6.6 pct

* Shares drop 5.6 pct in Toronto (Adds comment, closing share price.)

By Scott Haggett

CALGARY, Alberta, May 3 (Reuters) - Suncor Energy Inc SU.TO, Canada’s biggest oil and gas company, said on Tuesday its quarterly operating profit rose four-fold, surging past expectations on strong oil prices and higher production, but its shares fell as crude prices retreated.

Suncor, Canada’s dominant oil sands producer, said operating income, which excludes unusual items, rose to C$1.48 billion ($1.55 billion), or 94 Canadian cents a share, in the first quarter. That was up from C$370 million, or 24 Canadian cents, in the year-before quarter and well ahead of the average analyst forecast of 77 Canadian cents.

The rise came on higher oil sands production and much better returns from the company’s refineries in Canada and the United States.

Despite the solid results, Suncor shares fell C$2.46, or 5.6 percent, to C$41.55 at on Tuesday as oil and other commodity prices tumbled. It posted the biggest drop among Canada’s large oil and gas companies on the Toronto Stock Exchange, which saw the composite index tumble more than 240 points as commodity prices sagged.

“They were good results,” said Phil Skolnick, an analyst at Canaccord Genuity, “It could be because (oil prices are) off a bit.”

Skolnick said the start of a six-week maintenance turnaround at one of the upgraders at Suncor’s oil sands operations near Fort McMurray in northern Alberta could also be behind the share-price drop. The shutdown of the facility will cut output by about 215,000 barrels a day.

It was a rough day for most North American energy stocks as oil prices fell 3 percent. Michael Dunn, an analyst at FirstEnergy Capital, said Suncor may have taken the biggest hit because it is the biggest company.

“Energy names are off today in North America and Suncor is the largest in Canada,” he said. “And if a U.S. fund is dumping energy (stocks) they are selling it. But ... that’s a default reason when you can’t point to anything else.”

Others looked to the turmoil in North Africa and the Middle East. Suncor shut its Libyan operations in February and with unrest spreading in Syria, the company’s profitable natural-gas production there could be at risk, an analyst said.

“Overall, it was a pretty solid operational performance in the first quarter,” said Chris Feltin, an analyst at Macquarie Capital Markets. “Maybe what the market is looking at is the uncertainty in terms of how long Libya is going to be offline ... and is Syria potentially next.”

Suncor hasn’t written down the value of its Libyan assets, which produced nearly 35,000 bpd in the fourth quarter and are worth about C$900 million, but it said it may have to take the step.

“If the situation in Libya persists or were to worsen, certainly there is a potential that the assets will become impaired,” Bart Demosky, the company’s chief financial officer, said on a conference call.

HIGHER PRODUCTION

Suncor said net earnings, including unusual items, rose 32 percent to C$1.03 billion, or 65 Canadian cents a share, from C$779 million, or 50 Canadian cents.

Natural gas prices NGc1 averaged $4.19 per million British thermal units (mmBtu) in the January-March period, down 19 percent from last year. U.S. crude prices CLc1, meanwhile, soared by about 20 percent to average $94.60 a barrel.

Cash flow, a glimpse into the company’s ability to fund development, more than doubled to C$2.39 billion, or C$1.52 a share.

Upstream production rose 6.5 percent to 601,300 barrels of oil equivalent a day. Crude oil production, as a percentage of total production, increased to 87 percent from 77 percent.

Oil sands production was 322,100 barrel per day, a 59 percent increase from the first quarter of 2010.

Suncor, which is expanding its oil sands production and processing operations as part of a joint venture with France’s Total SA TOTF.PA, said it had seen higher oil sands production volumes, higher margins for refined products in downstream refining operations and higher realized prices in upstream operations.

$1=$0.95 Canadian Additional reporting by Aftab Ahmed; editing by Peter Galloway and Rob Wilson

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