Energy - Oil
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Of Note:

Suncor Energy Inc. CEO disagrees with the doom-and-gloom notion that falling crude oil prices have rendered the
company's oil sands projects uneconomic.

"We don't really run future economics based on today's crude oil price."

The company has already spent one-third of the capital needed for Voyageur.

Sixty per cent of Suncor's 2009 budget will be spent on that project.

Completion of Voyageur's upgrader, which will process the raw bitumen into synthetic crude oil, has been pushed
back by a year.

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The Globe and Mail
Suncor defends oil sands as prices sag

October 30, 2008

The chief executive officer of Suncor Energy Inc. says he disagrees with the doom-and-gloom notion that falling crude oil prices have rendered the company's oil sands projects uneconomic.

"There seem to be a lot of misunderstandings and panic in the market," Rick George yesterday told an analyst conference call to discuss the company's third-quarter results, in which earnings rose to $815-million, from $627-million a year earlier.

Taking into consideration operating costs, the discount given to low-quality oil sands crude, the falling Canadian dollar and other factors, Mr. George said Suncor would be able to earn $28 on each barrel of oil at a West Texas Intermediate price of $60 (U.S.).

"This is not a case of us not being able to make money at $60," he said.

The December crude future contract closed at $67.50 per barrel yesterday on the New York Mercantile Exchange, a rebound from Tuesday's close of $63.22 but less than half its all-time high of $147 in July.

The rise in crude boosted the shares of many Canadian energy companies, with Suncor gaining more than 10 per cent on the Toronto Stock Exchange - but still a long way from its May peak of $73.10.

Mr. George said Suncor's Voyageur expansion, set for the end of 2012 at an expected cost of nearly $21-billion (Canadian), will require crude prices of $80 (U.S.) per barrel to get a 15-per-cent return on capital.

"But we still believe that to be very strong economics. We think we can deliver on it for sure," Mr. George said.

"We don't really run future economics based on today's crude oil price."

In response to those who insist Voyageur wouldn't be viable with crude at $80 per barrel, Mr. George said: "those people really haven't done their homework around what the economics are here."

Genuity Capital Markets analyst Philip Skolnick said a $60 oil price is "pretty close to being tight" for Suncor's steam-assisted gravity drainage production, and at least $70 a barrel would be more realistic.

Last week, Suncor said it would cut its targeted spending for 2009 by a third to around $6-billion (Canadian).

The company has already spent one-third of the capital needed for Voyageur. Sixty per cent of Suncor's 2009 budget will be spent on that project, which is targeted to produce 550,000 barrels of bitumen a day.

Completion of Voyageur's upgrader, which will process the raw bitumen into synthetic crude oil, has been pushed back by a year.

The rise in third-quarter profit to 87 cents per share, compared to last year's 68 cents per share, was largely thanks to high oil prices during the three months ended Sept. 30.

Cash flow from operations was $1.35-billion, compared to a year-ago $957-million.

Revenue was $8.9-billion, up from $4.8-billion a year ago.

Despite the strong results, Suncor called the third quarter "challenging," saying unscheduled maintenance curbed production volumes.

"We're very well aware that we have disappointed the market in 2008. We're planning to rectify that here over the coming months," Mr. George told the conference call.

UBS research analyst Andrew Potter said Suncor's results were in line with his estimates and its total production of 281,000 barrels per day "marginally exceeded" his expectations. Oil sands production during the quarter was 245,600 per day.

http://www.globeinvestor.com/servlet/story/GAM.20081030.RMAINTICKERSUNCOR30/GIStory/

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Rick George, chief executive officer of Suncor Energy Inc.
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