Suncor says end of Alberta oil quotas a "positive signal" as it reports $302M loss

CALGARY — The Alberta government's decision to end its oil production curtailment program in December after almost two years is "a very positive signal" for oilsands and refining giant Suncor Energy Inc., CEO Mark Little said Thursday.

The end of the quota system imposed to support oil prices will allow Suncor freedom to make better decisions as it recovers from nine months marked by low oil prices, the COVID-19 pandemic disruptions in retail fuel sales and a fire in August that hurt production at its base oilsands mining operations, Little said on a conference call.

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"The indication is that the government does not plan to resume production limits and this is a very positive signal for us and we're really looking forward to this being a fully unencumbered market," said Little on the call.

"We will be agile and disciplined as we consider the impact of these changes on our production plans for Fort Hills."

Production at the 194,000-barrel-per-day Fort Hills oilsands mine had been throttled back because of the quotas to allow room for more profitable oil streams. Early this year, Suncor shut down one of the mine's two production trains because of low oil prices.

The train was restarted in September and Little said it is on track to achieve overall production of between 120,000 and 130,000 bpd in the current quarter, with growth beyond that to be ramped up gradually to ensure cost savings are retained.

In the wake of a proposed merger of oilsands rivals Husky Energy Inc. and Cenovus Energy Inc., Little said Suncor is more concerned with improving operational performance and strengthening its balance sheet than taking on debt to grow by buying other companies.

"I can't overstate it enough — we did not cut our capital budget, operating costs and reduce our dividend to leverage up our balance sheet to do M and A," he said.

The company, which announced in early October it will cut as many as 1,930 jobs over 18 months to reduce total staff by 10 to 15 per cent, said it is on track to achieve its $1-billion operating cost reduction target by the end of 2020.

Suncor announced this week it plans to move its Petro-Canada refining and retail branch head office to Calgary from southern Ontario next year. On the call, Little said some of the 700 associated jobs will be lost as part of its overall workforce reductions.

Suncor reported a third-quarter operating loss of $302 million as revenue fell 34 per cent to $6.5 billion compared with the same period of 2019, when it earned $1.114 billion on revenue of $9.9 billion.

It said oil and gas production fell to 616,000 barrels of oil equivalent per day in the third quarter from 762,000 boepd in the year-earlier period, while refinery output fell to 399,700 barrels per day or 87 per cent utilization from 463,700 bpd or 100 per cent.

Suncor had an operating loss of $1.489 billion in the second quarter and production was 655,500 boe/d.

This report by The Canadian Press was first published Oct. 29, 2020.

Companies in this story: (TSX:SU, TSX:CVE, TSX:HSE)

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