RPT-UPDATE 3-Suncor reports rare loss, halts oil sands expansion

(Repeats to broaden distribution)

* 2009 Capital spending down to C$3 billion

* Q4 adjusted EPS C$0.46 vs C$0.73

* To wind down construction on Voyageur upgrader

* Shares drop 12 percent (Recasts to add comments, details. Changes dateline from Toronto)

By Scott Haggett

CALGARY, Alberta, Jan 20 (Reuters) - Suncor Energy Inc SU.TO reported its first quarterly net loss in 16 years on Tuesday, as it slashed capital spending and halted construction on a massive expansion of its Canadian oil sands operations to cope with plunging commodity prices.

Suncor, which said in October it planned to delay completion of a C$20.6 billion ($16.4 billion) expansion of its northern Alberta oil sands operation because of economic turmoil, has now decided to mothball the project until better times return. It chopped its 2009 capital spending budget by half to C$3 billion.

Canada’s second-largest oil sands producer is retrenching its operations as it looks to weather oil prices that have plunged from more than $147 a barrel in July to a recent $37.84.

Suncor joins a long list of oil companies that have set aside ambitious but expensive oil sands projects and cut spending until higher prices return. [ID:nN20393737]

“We just don’t know ... how long this trough lasts,” Rick George, Suncor’s chief executive, said on a conference call. “For prudence, we decided to cut back to a C$3 billion budget.”

The company reported a fourth-quarter net loss -- its first since the third quarter of 1992 -- of C$215 million, or 24 Canadian cents a share, down from a year-earlier profit of C$1.04 billion, or C$1.13 a share.

Excluding foreign exchange losses and other items, Suncor earned C$434 million, or 46 Canadian cents a share, in the quarter, compared with C$677 million, or 73 Canadian cents a share, in the year-prior period.

The operating profit beat the average analyst estimate of 44 Canadian cents per share, according to Reuters Estimates.

However the shares, already down by nearly half over the past year, fell further on Tuesday, dropping C$3.05 or 12 percent, to C$23.21 by early afternoon on the Toronto Stock Exchange.

“Their performance was down quarter over quarter but largely as expected in step with decreasing crude oil and natural gas prices,” said Chris Feltin, an analyst with Tristone Capital.


Suncor’s Voyageur expansion would have added 200,000 barrels per day of new synthetic crude production by 2013. The company was to add new thermal output from its Firebag project and another upgrader that converts tar-like bitumen stripped from the sand into refinery-ready crude, bringing total capacity to about 550,000 barrels a day.

The company no longer expects to complete Voyageur as one big project. Instead it may break it into separate projects and complete them when prices improve and the company can afford to go ahead.

“We will no longer be talking about Voyageur as a big C$20 billion project,” George said. “When we restart these, we’ll just restart them one project at a time.”

George also said Suncor may sign a long-term deal to process tar-like bitumen for other companies or find a joint-venture partner to take a stake in its upgraders, backing off a long-held insistence on independence even as other oil sands producers allied with U.S refiners to cut back on the expense of new upgraders.

However George said he would not deal away any of Suncor’s reserves to attract a partner.

“It makes sense to use other people’s money, a ton of sense,” said William Lacey, an analyst at FirstEnergy Capital.

Suncor’s cash flow -- a glimpse into an oil company’s ability to fund its projects -- fell 54 percent to C$551 million, or 59 Canadian cents a basic share, from C$1.2 billion, or C$1.30 a basic share.

Suncor’s combined oil sands and natural gas production for the fourth quarter was 279,400 barrels of oil equivalent per day, down from 290,700 a year earlier. Oil sands production averaged 243,800, compared with 252,500.