Suncor surges on Q2 oil sands production strength; BMO upgrades on ‘big beat’

Suncor Energy (NYSE:SU) +5.4% in Wednesday’s trading after comfortably beating Q2 adjusted earnings estimates, helped by higher oil prices and more oil sands production, and saying it could top its FY 2024 guidance on oil production and refinery throughput.

Suncor (SU) reported Q2 adjusted earnings rose to C$1.62B, or C$1.27/share, from from C$1.52B, or C$0.96/share, in the year-earlier quarter and ahead of the C$1.10 analyst consensus estimate by FactSet, while generating C$3.4B of funds from operations, up 7% from C$3.17B a year ago.

Q2 total oil sands bitumen production rose 2.5% Y/Y to 834,400 bbl/day, primarily due to the Suncor’s (SU) increased working interest in Fort Hills, in addition to record Q2 gross bitumen production at Fort Hills and record quarterly production at Firebag, partially offset by lower production at Oil Sands Base from planned turnaround and maintenance activities.

Q2 refinery crude throughput increased 9.2% Y/Y to 430,500 bbl/day, with utilization rising to 92% despite turnarounds at several of the company’s refineries.

Suncor (SU) is tracking above the high end of its forecast for FY 2024 oil production, refining throughout and refined product sales, CEO Rich Kruger said on the company’s earnings conference call; Suncor had said it expects oil output of 770K-810K bbl/day this year.

“The sun is shining on this company and we plan to make hay in the second half of the year,” Kruger said on the call, according to Reuters, adding that every segment of Suncor’s (SU) business operated at lower absolute costs in H1 2024 compared to the same period last year.

BMO Capital upgrades shares to Outperform from Market Perform, saying Q2 results were much better than anticipated, with a “big beat” on cash flow from operations due primarily to stronger oil sands production, noting Suncor (SU) was ahead of schedule with the completion of its heavy turnaround activities.

“That said, the second half of the year may be a little bumpy as Suncor progresses with the Fort Hills mine pit transition and further Base Plant maintenance,” BMO’s Randy Ollenberger writes.