Suncor swings to profit, but fresh COVID-19 wave and lockdowns disrupt work at plants

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Alberta most infected jurisdiction in North America on per capita basis — and Fort McMurray province’s hardest hit region

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CALGARY — Suncor Energy Inc. will delay work at a key upgrader at its oilsands base plant as Alberta’s dangerous third wave of the COVID-19 pandemic continues to spread across the province and the oilsands region.

“Currently the third wave of the pandemic in Canada is significantly impacting the region of Fort McMurray. Given this situation, and with Syncrude in the middle of a scheduled turnaround, we have delayed the start of our U2 (Upgrader 2) turnaround at base plant until at least June,” Suncor president and CEO Mark Little said Tuesday, adding the delay to the work will ensure there’s no overlap between the maintenance of Suncor and the Syncrude plant, which it operates on behalf of its joint venture partners. “We will see when this gets finalized,” he said.

Little said the company has made multiple changes to “operate in a COVID world” over the past year, including the recent implementation of rapid testing, which has since been rolled out across the oilsands industry.

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“We also continue to work with the community of Fort McMurray and with governments and other industry players to accelerate rapid testing and now vaccinations in the region,” Little said.

Rising coronavirus cases has made Alberta the most infected jurisdiction in North America on a per capita basis, and the Fort McMurray region is the hardest hit within the province, with 1,400 cases currently in the region of roughly 72,000 people.

On April 30, the Alberta government listed 14 oilsands camps and production facilities as the site of COVID-19 outbreaks as an indication that transmission within the facility has occurred.

Those sites include Suncor’s base plant, Firebag project, Fort Hills oilsands mine and Mackay River project as well as Syncrude’s Aurora and Mildred Lake sites, which Suncor now operates.

Heavy hauler trucks unload into a crusher at the Fort Hills oilsands project.
Heavy hauler trucks unload into a crusher at the Fort Hills oilsands project. Photo by Vincent McDermott/Fort McMurray Today/Postmedia Network files

The third wave of the COVID-19 pandemic is affecting both Suncor’s upstream operations and how it markets the refined products like gasolinefrom its downstream operations, as the integrated oil giant is targeting more sales to the U.S., where COVID-19 case counts have been falling.

“When you look at it, I think what you’re seeing is a strengthening of U.S. demand as everyone is coming out of lockdowns and in Canada, our demand is off, in gasoline it’s off something like 6 per cent in Western Canada and 17 per cent in Eastern Canada,” Little said.

“We’re going into some of the most extreme lockdowns that we’ve had during the entire COVID, so you are starting to get to some degree a bifurcated market,” he said, adding that Suncor is currently trying to market more of its products into the U.S. given the greater demand for oil products stateside.

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Despite falling gasoline demand in Canada, where most of Suncor’s operations, refineries and fuel stations are located, the company posted better than expected revenue and profit figures for the first quarter of 2021 on Tuesday.

Suncor recorded net earnings of $821 million in the quarter — a dramatic reversal from the $3.5 billion net loss it posted a year earlier at the beginning of the COVID-19 pandemic, when the first wave caused a collapse in North America gasoline, diesel and jet fuel demand.

The company also reduced its total debt by $1.1 billion in the first quarter and bought back $300 million of it own shares, or roughly 1 per cent of its total float. Financial analysts covering the company believe Suncor is poised to make further progress over the course of 2021, when most oil companies are expected to rebound from lows experienced last year.

“We forecast the company exiting 2021 with net debt of $10.8 billion, down from $15 billion at year-end 2020,” National Bank Financial analyst Travis Wood wrote in a Tuesday research note.

Suncor also boosted oil output 6 per cent in the quarter to 785,900 barrels of oil equivalent per day, up from 739,800 boepd during the same period last year.

The company reduced its oilsands operating costs 20 per cent in the last year to $23.30 per barrel, Eight Capital analyst Phil Skolnick said in a research note.

Skolnick has a $31 price target on Suncor’s shares, which were trading nearly 1 per cent higher to $27.19 on Tuesday.

Financial Post

• Email: gmorgan@nationalpost.com | Twitter:

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