It has been about a month since the last earnings report for Suncor Energy (SU). Shares have lost about 3.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Suncor Energy due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Suncor Energy reported third-quarter 2024 adjusted earnings of $1.08 per share, which beat the Zacks Consensus Estimate of 88 cents. This outperformance can be attributed to higher production from its oil sands, strong refining performance and efficient cost management. However, the bottom line declined from the year-ago quarter’s reported figure of $1.13, due to lower realized crude oil prices and refined product realizations.
Operating revenues of $9.6 billion beat the Zacks Consensus Estimate by 11.7%. The top line also increased approximately 1.6% year over year.
Suncor Energy’s board of directors declared a quarterly dividend of 57 Canadian cents per share for its common shareholders of record as of Dec. 3, 2024. The payout, which represents a 5% sequential increase, will be payable on Dec. 24.
Alberta-based integrated energy company distributed a total of C$1.5 billion to its shareholders, including C$800 million in share repurchases and C$700 million in dividends in the third quarter. The company generated C$3.8 billion in adjusted funds from operations and C$2.2 billion in free cash flow in the quarter.
In the reported quarter, the company reached a record-high refining throughput of 488,000 barrels per day (bbls/d), achieving 105% overall utilization. Refined product sales also set a new milestone, totaling 612,000 bbls/d, marking the third consecutive quarter of record sales.
On the other hand, SU’s Upstream production totaled 829,000 bbls/d with 99% upgrader utilization, representing the best third-quarter performance to date.
Additionally, SU achieved its C$8 billion net debt target, generating a return of 100% of excess funds to the company’s shareholders.
The company’s E&P volume (international, offshore and natural gas) increased 18.5% to 52,600 barrels of oil equivalent per day (boe/d) from 44,400 boe/d in the year-ago quarter due to the addition of production from Terra Nova and increased production at Hebron. However, the figure missed the consensus estimate of 55,000 boe/d.
Operating earnings totaled C$1.88 billion compared with C$1.98 billion in the year-ago quarter.
Operating cost per barrel decreased to C$25.75 from C$29.15 in the corresponding period of 2023. Total oil sands bitumen production rose to 776,000 bbls/d in the third quarter of 2024, up from 646,100 bbls/d in the previous year. This growth was mainly driven by the company’s higher working interest in Fort Hills and strong performance from its mining operations. Moreover, the figure exceeded the consensus estimate of 748,000 bbls/d.
Non-upgraded bitumen production rose to 262,200 boe/d from 176,800 boe/d in the previous year. This growth was driven by the acquisition of Fort Hills and continued strong production at Firebag. Additionally, the figure surpassed the consensus estimate of 241,000 boe/d.
Net SCO and diesel production increased to 513,800 boe/d from 469,300 boe/d a year earlier. Additionally, the number surpassed the consensus estimate of 506,000 boe/d.
Fort Hills reported an average third-quarter volume of 166,000 barrels per day (bpd), higher than the year-ago quarter’s level of 86,100 bpd. The cash operating cost per barrel decreased to C$30.4 from C$43.4 in the prior-year period, due to higher overall production volumes.
Oil Sands Base upgrader utilization reached 94% in the third quarter, while Syncrude achieved a record 104%, compared with 83% and 97%, respectively, in the prior-year quarter. This significant improvement highlights enhanced operational efficiency and capacity utilization across both assets.
Downstream: Adjusted operating earnings from the unit decreased to C$484 million from the year-ago quarter’s reported figure of C$1,277 million. The decline in adjusted operating earnings was due to lower benchmark crack spreads and a first-in, first-out (FIFO) inventory valuation loss in the third quarter of 2024.
Refined product sales totaled 612,300 bpd, up from the prior-year quarter’s level of 574,100 bpd. This growth was driven by strong refinery output, effective use of the company’s extensive domestic sales network and the impact of restart activities at the Commerce City refinery. The figure also surpassed the consensus estimate of 567,000 bpd.
Refinery crude throughput totaled 487,600 bpd compared with 463,200 bpd in the year-ago period. The number also surpassed the consensus estimate of 450,000 bpd.
Refinery utilization was 105% compared with 99% a year ago. This increase in refinery crude throughput was due to strong utilization rates across all refineries in the quarter under review.
Total expenses decreased 1.3% to C$10.4 billion from the prior-year quarter.
Cash flow from operating activities amounted to C$4.3 billion, up from the prior-year quarter’s level of C$4.2 billion.Suncor Energy incurred capital expenditures worth C$4.9 billion in the third quarter of 2024.
As of Sept. 30, 2024, the company had cash and cash equivalents of C$3 billion and long-term debt of C$11 billion. Its total debt to total capital was 19.6%.
Guidance
SU expects production in the range of 770,000-810,000 boe/d for 2024. Oil Sands operations yield is anticipated in the band of 430,000-460,000 bbls/d, while the same for Fort Hills is predicted in the 155,000-165,000 bbls/d range. Syncrude and Exploration and Production operations yield is expected in the range of 175,000-190,000 bpd and 45,000-55,000 boe/d, respectively. Similarly, the company expects cash operating costs for its Oil Sands operations in the range of C$28-C$31 per barrel. Specifically, cash operating costs for Fort Hills are expected in the band of C$33-C$36 per barrel, while costs for Syncrude are anticipated in the range of C$35-C$38 per barrel.
The company expects refinery throughput to be between 430,000 bpd and 445,000 bpd, refinery utilization in the band of 92-96% and refined product sales in the range of 550,000-580,000 barrels per day.
SU expects its total capital expenditures for 2024 to be between C$6.30 billion and C$6.50 billion, with the following breakdown:
Economic investment is expected to be between C$2.90 billion and C$2.97 billion, which includes C$0.70 billion for exploration and production, C$0.35 billion to C$0.37 billion for situ well pads, and C$1.85-C$1.90 billion for other economic investments.
Asset sustainment and maintenance capital expenditures are expected to range from C$3.40 billion to C$3.54 billion, including C$2.37-C$2.42 billion for oil sands, C$0.96-C$1.04 billion for downstream operations and approximately C$0.08 billion for corporate-related expenses.
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 11.28% due to these changes.
Currently, Suncor Energy has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Suncor Energy has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Suncor Energy is part of the Zacks Oil and Gas - Integrated - Canadian industry. Over the past month, Imperial Oil (IMO), a stock from the same industry, has gained 0.6%. The company reported its results for the quarter ended September 2024 more than a month ago.
Imperial Oil reported revenues of $9.72 billion in the last reported quarter, representing a year-over-year change of -6.3%. EPS of $1.71 for the same period compares with $2.06 a year ago.
Imperial Oil is expected to post earnings of $1.37 per share for the current quarter, representing a year-over-year change of -24.3%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.5%.
Imperial Oil has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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