The recent floods in southern Alberta and interruptions in operations in Syria and Libya caused Suncor Energy, one of the biggest resource companies in Canada, to lose money in the second quarter of 2013. Because of the service interruptions in Canada and in these two countries, the revenue from oil production dropped around 30 per cent.
Production in Alberta resumed on July 16th, but the oil company is still having problems in Libya that may reflect on the third quarter results. The company announced, in the second quarter results report, “the company’s expectation that recent labour issues impacting terminal operations in Libya may reduce production and liftings in the third quarter of 2013”.
Suncor doesn’t disclosure the weight of each area in its total revenue. The total of international revenues in the period decreased from $186 million to $115 million. The company ceased recording all production and revenue from its Syrian assets in the fourth quarter of 2011.
The interruption in services at ports and fields in Libya, caused by striking and jobless people demanding work, is the worst since the civil war in 2011, according to international agency news. Suncor operates the Ras Lanuf terminal in Libya in a joint venture with Libya’s state National Oil Corporation (NOC). The company’s activity in that country had already been affected before, during the change in Libya’s political regime in 2011. In 2012, however, the firm announced a “gradual return”.
Due to the unrest in Syria, Suncor was forced, despite its contractual obligations, to suspend its operations “indefinitely”, according to its quarterly report. The company explained, “in both countries, we continue to monitor the situation very closely, and our top priority continues to be ensuring the safety of our employees.”
As a consequence of the floods in southern Alberta, Suncor had to reduce production by 3,000 million barrels because of the precautionary shutdown of the Enbridge pipeline within the Fort McMurray region. The environmental catastrophe forced the government to declare a total of 32 states of local emergency. Estimates suggest damage between $3-5 billion.
Conservative management
Instead of investing in new oil fields, Suncor is hoping to optimize their revenues from existing ones. This conservative style of management has been adopted since last year, when Steve Williams became the new president of the company. In the report the company highlights its focus on “discreet growth through low-cost investments in optimizing existing assets”.
One example is Joslyn mine, a project shared with the French Total SA. During the conference call to publish the results, Williams said the company won’t make a decision for this project until 2017. This is the “best case” scenario. He said the project, called Voyager upgrading, converts tar-like bitumen into a light and synthetic oil.
One of the company’s priorities is the controversial Keystone South pipeline, a proposed 1,179-mile oil pipeline beginning in Hardisty, Alberta, and extending south to Steele City, Nebraska. The company expects to start shipping by early 2014.
Revenue from operations ($millions) | Infographics
Marcos Piellusch, a Brazilian business professor, points out that, although the revenue from operations decreased, the total revenue is “stabilized”. There was, however, a growth of some expenses, such as transportation and financial ones, and a decrease in the use of equipment. “If this remains, the company can have a decrease in its revenue and in the main results”.
Suncor did not respond to requests for comment. The company states, by email, that “we wouldn’t typically provide any more detail than what has been provided publicly in our Q2 (second quarter report) and news release”.
