Suncor delays oil sands mine start-up

Suncor Energy Inc. has pushed back the potential start-up date on the lesser of its two undeveloped oil-sands mines into the next decade, saying it wants to avoid launching two new mines at the same time.

Steve Williams, chief executive officer of Canada’s largest energy concern, said the company will not make a decision on whether to proceed with its Joslyn mine – a project it shares with France’s Total SA– until at least 2017. This means it will not start producing bitumen at the proposed oil-sands mine until at least 2021 or 2022, Mr. Williams said on the company’s second-quarter conference call Thursday. This is the “best case” scenario, he said.

Mr. Williams immediately turned Suncor into a more cautious company when he took over as CEO in 2012. The company had already put Joslyn lower on its priority list compared with other options like the proposed and delayed Fort Hills mine, but had been vague about a timeline. Shoving it back further means Suncor will be able to focus on the Fort Hills project – assuming the joint venture goes ahead – without the distraction of launching another major project at the same time.

“Joslyn is at minimum – it’s moving backwards,” Mr. Williams said. “I don’t see us running two mines in parallel in terms of the execution phase for any significant time.”

Suncor cut its spending plans to $7-billion from $7.3-billion in 2013 because delayed projects meant delayed spending across the company, as well as better performance, it said in its earnings statement.

“This should bode well for the stock,” Canaccord Genuity analyst Phil Skolnick said in a research note. The reduced spending came as a surprise to Mr. Skolnick.

Mr. Williams expects Suncor and Total to make a final decision on whether to proceed with Fort Hills, a mine the Canadian company considers better than Joslyn, later this year. Suncor expects to allocate no more than 15 per cent of its annual budget to constructing Fort Hills, which it shares with Total and Teck Resources Ltd., Mr. Williams said.

Mr. Williams was enthusastic about the company’s North American transportation prospects, even as the energy industry frets about a pipeline crunch in North America. Access to markets, he said, is not an issue for Suncor, and it will be able to ship more than 600,000 barrels a day to its refineries and other markets buying oil at global prices. Suncor, he said, is a “significant” potential shipper on TransCanada Corp.’s so-called Energy East pipeline, which could reach New Brunswick.

Suncor earned $680-million or 45 cents per share in the second quarter, up from $324-million or 21 cents per share in the same period last year.

Its operating earnings totalled $934-million or 62 cents per share, down from $1.25-billion or 80 cents per share in the second quarter of 2012. The company attributed the dent in its earnings to planned maintenance in the oil sands and refining and marketing divisions, as well as pipeline constraints caused by the floods that swept Alberta in June.

Cash flow, which the market uses to gauge a company’s ability to finance growth, dropped to $2.25-billion from $2.35-billion, with Suncor saying the same problems that plagued its operating earnings hit its cash-flow results.