Canadian oil company Suncor (NYSE:SU) today reported quarterly earnings of $815 million ($0.87 EPS), compared with analysts’ estimates for EPS of $0.95. Higher prices for the company’s synfuel production contributed to the increase, which would have been higher if costs could have been contained.
Cost is the story in the oil sands play these days. Operating costs perbarrel for the third quarter reached $34.00, compared with $25.10 forthe same period a year ago. Higher natural gas costs were the mainculprit, and it would be foolish to think that this cost will declineanytime soon.
Suncor also cut its production forecast to an average of 235,000 b/d,and raised its operating costs to $36.50/b. If crude prices fall below$60/b, it gets pretty dicey trying to make money from mining the oilsands.
Investors seem happy though. Suncor’s share price is up more than 13%today to $22.34 in early trading. That’s still nearly 70% belowSuncor’s 52-week high.
October 29, 2008