The new CEO of Suncor Energy Inc. says he doesn’t want the Alberta government to carry through on its threat to cut off shipments of oil and refined products to B.C. if its western neighbour continues to interfere with pipeline growth.
Following the company’s annual meeting in Calgary on May 2, Mark Little said any such action resulting from the proclamation of Bill 12 by the new United Conservative government this week would create a barrier between Suncor’s refinery assets in the Edmonton area and its customers in British Columbia.
He said Suncor is using the Trans Mountain pipeline to the West Coast now to bring gasoline and diesel to the B.C. market and it supports pipeline expansion so that it can grow that market.
“We’re hoping that through the government’s negotiations this can get sorted out, because the last thing we want to do is have an impediment in serving our customers,” he said.
He added he views the Alberta bill as “a fairly significant intervention into a market to try to resolve a dispute.”
Earlier in the day, Little told analysts on a conference call that Suncor remains opposed to another Alberta market intervention, its oil production curtailments, in spite of their “slightly positive” impact on first-quarter financial results.
The results show the value of Suncor’s integrated business model and extensive pipeline contracts at a time of turmoil in the industry, he said.
“In the fourth quarter of 2018, there were low benchmark prices with wide heavy and light crude oil differentials. Whereas, in the first quarter of 2019, there were higher benchmark prices and narrow differentials,” Little said.
“Both quarters, we were able to generate significant funds from operations.”
Little officially took over as chief executive from Steve Williams at the annual meeting in downtown Calgary. Williams was given a standing ovation by shareholders after a speech about the company’s accomplishments during his seven years as CEO.
Alberta’s decision to impose quotas on its biggest oil producers was designed to free up pipeline space and draw down crude storage after price discounts on western Canadian oil spiked last autumn.
The move is supported by oilsands producers like Cenovus Energy Inc., whose CEO pointed out last week the resulting higher prices have helped boost royalties to Alberta’s treasury.
But it’s opposed by rivals such as Imperial Oil Ltd. and Husky Energy Inc. who note that crude-by-rail exports plunged to 131,000 barrels per day in February from an all-time high of 354,000 bpd in December _ which means oil export capacity was actually reduced.
Both points are accurate, said Little, but he added the confusion means Suncor and others are reluctant to spend money on new projects.
The UCP government has supported curtailments brought in by the NDP and favours gradually reducing the cuts over the coming year.
Suncor said its quota strategy involved maximizing highly profitable upgraded synthetic crude oil volumes, while throttling back lower-margin mined raw bitumen, a move that has temporarily increased its operating costs per barrel.
The company said average realized bitumen prices jumped to $62.92 per barrel at Fort Hills in the first quarter, up from $30.57 in the fourth quarter of 2018, as oil price discounts eased.
The Calgary-based oilsands producer and refining giant reported net income for the first three months of the year that beat analyst expectations thanks to higher oil prices, record downstream results, growing oilsands production and a $264-million after-tax insurance gain on its assets in Libya.
Net earnings were $1.47 billion or 93 cents per share in the quarter, up from $789 million or 48 cents in the same period of 2018.
Its operating profit came to $1.2 billion, compared with $985 million in the first quarter of 2018.
It had total oilsands production of 657,000 barrels per day in the first quarter, compared with 572,000 bpd a year earlier, thanks to gains at the expanded Fort Hills oilsands mine and higher contributions from the Syncrude mine and upgrader, in which it has a 58.7 per cent stake.
The company says refining and marketing delivered record operating earnings of $1 billion, up from $789 million in the first quarter of 2018.
Suncor said production from its East Coast offshore Hebron project increased to 18,300 bpd (net to Suncor) and is continuing to grow following the completion of a fifth production well in the first quarter.
It said first oil was achieved ahead of schedule in the quarter at the Oda project offshore Norway, in which it has a 30 per cent stake.