CALGARY, Alberta (Reuters) - Suncor Energy Inc’s (SU.TO) first-quarter profit climbed 23 percent due to record crude prices, but Canada’s biggest oil producer and refiner by market value trimmed its production target for the year as oil sands output lagged expectations.
Suncor, which has launched a C$20.6 billion ($20.3 billion) expansion of its oil sands operation, said severely cold weather and a government order to cap production at one site to control sulfur emissions limited volumes in the quarter.
The biggest problems were with the plant that extracts tar-like bitumen from the oil sands, rather than mining or steam-driven production, Chief Executive Rick George said.
Among other hiccups, the plant lost steam supply on a couple of occasions due to power outages, and in frigid weather it takes longer to restart operations, George said.
“We have a plan in place to correct these issues. You will not see a lot of this in the second quarter — April has not been a month that has seen a huge increase in volumes either,” he told analysts.
In addition, 30 days of scheduled maintenance on one oil sands upgrading unit starting in mid-May will keep synthetic oil output at 200,000 barrels a day.
“So this will be very much a year for Suncor where the third and fourth quarter will be key quarters,” George said.
For the year, the company — which also runs refineries and gas stations in Ontario and Colorado — now expects oil sands output to average 275,000 to 285,000 barrels a day, down from the last target of 275,000-300,000 barrels a day.
In the quarter, Suncor earned C$708 million, or C$1.53 a share, up from year-earlier C$576 million, or C$1.25 a share.
Excluding one-time items, net income was C$788 million, or C$1.70 a share, up from C$567 million, or C$1.23 a share. Analysts had expected, on average, C$1.60 a share, according to Reuters Estimates.
Cash flow, an indicator of its ability to pay for projects, rose 41 percent to C$1.16 billion from C$825 million.
Suncor and rivals developing Alberta’s vast oil sands deposits are benefiting from crude prices that have surged by more than two-thirds since the first quarter of 2007, averaging $97.82 a barrel.
In January, the company launched a massive expansion of its Fort McMurray, Alberta, oil sands operations designed to boost production to 550,000 barrels a day by 2012.
That comes on the heels of the current expansion, which is due to be done in June, allowing it to boost output to 350,000 barrels a day.
First-quarter oil sands production averaged 248,000 barrels a day, flat with a year earlier. Natural gas output rose about 10 percent to 229 million cubic feet a day.
Suncor stock fell C$1.72, or 1.5 percent, to C$114.28 on the Toronto Stock Exchange. The shares have gained about 6 percent this year.
“Rick (George) came out last year and said it was important to meet the goals, it was important to execute on things, and to have the guidance come down in the first quarter obviously is a bit of a headwind,” FirstEnergy Capital Corp analyst William Lacey said.
“But there are a lot of moving parts in this organization and there are going to be ups and downs as a result.”
Meanwhile, George said refineries in the United States are becoming cheaper as profit margins shrink, but the company is not rushing to make an acquisition.
“We’re coming back down in the range where it’s getting more interesting for us, but it’s still about the right assets, it’s still about price,” he said.
Additional reporting by Scott Anderson; editing by Rob Wilson