Suncor coy about the future of Fort Hills, Joslyn and Voyageur projects
CEO says company continues to vet economics of the projects
Suncor Energy Inc. released its 2012 second quarter results Tuesday night. But during a Wednesday morning teleconference to discuss those results, analysts were more interested in what the company intends to do rather than what it just did.
And as Suncor Energy Inc. posted a relatively strong second quarter in 2012, with revenues of $1.258 billion and production averaging 542,400 barrels per day (the company’s revenue and average production in Q2 2011 were $980 million and 460,000 bpd, respectively), analysts quizzed president and CEO Steve Williams repeatedly about the future of the Fort Hills and Joslyn North mining projects, as well as the Voyageur upgrader.
These projects are all part of a joint venture with Total E & P Canada. Suncor has a 40.8 per cent interest in the Fort Hills project and 36.75 per cent interest in the Joslyn project. The two companies also jointly own the proposed Voyageur upgrader, which would pump out 200,000 barrels per day of synthetic crude, diesel and diluent.
These are big projects. They represent a lot of jobs for Albertans and Canadians, and a lot of new production for Suncor. But the company is being coy as to when the projects might get sanctioned. And the answers Williams gave to questions on the topic this morning raises questions about whether they will be sanctioned at all.
What we do know is Suncor says it will present a development plan in 2013 for each of the projects to its board of directors for a sanctioning decision. But Total must also approve the three projects for them to go ahead.
Williams wouldn’t give a more definitive timeline on when Suncor will be making a decision, other than to say the plan is to do so in the middle of 2013.
“We’re reviewing the scope and the profitability of [the] projects as we speak,” he said. “But they are individual projects and there is the opportunity to not progress those projects.”
That doesn’t sound like a ringing endorsement for Fort Hills, Joslyn or Voyageur. And the future of these capital-intensive projects certainly isn’t being helped by volatile oil prices and a surge in light sweet crude production in the lower 48.
When Credit Suisse analyst Brian Dutton asked Williams whether Fort Hills, Joslyn and Voyageur are not economically viable in the current market, Williams had this to say:
We’re looking at how we get the best economics for those projects. We’re making sure the projects are not schedule driven. Normally when projects are schedule driven it means you incur extra costs to hit a date. So instead of saying, ‘Here is a very specific date we are going to guarantee production’, what I’m saying is we’ll spend the money in the best way to maximize the returns on those projects. It’s very much about improving returns on those projects.