Americas News
Suncor Boosts Output in the Canadian Oil Sands as US Production Heads Towards a 500,000 bpd Increase
The Organization of Petroleum Exporting Countries (OPEC) production cutback agreement, combined with an increased stake in an upgrader, is being credited for Canada's largest energy company, Suncor Energy Inc., achieving a record fourth quarter production rate.
The news of boosted output from the oil sands accompanies a prediction south of the border from analyst Daniel Yergin, who thinks U.S. production will rise by over 500,000 barrels per day (bpd) this year.
Suncor revealed in an earnings report that it pumped 738,500 barrels of oil in Q4 2016, up from 582,900 in the previous quarter; Bloomberg notes that the company has slashed costs to withstand the industry downturn "and is now benefiting from a 76 percent rebound in oil prices over the past year as [OPEC] and other major exporters curtail production."
The rise in output came after Suncor acquired Canadian Oil Sands Ltd. in 2016; this increased its stake in the Syncrude oil mine and upgrader, which processes bitumen into light crude and in turn enabled Suncor to boost utilization of the unit to 102 percent of nominal capacity (compared to 73 percent last year).
Although Suncor doesn't plan any further significant oil sands capital investments "in the foreseeable future," according to Steve Williams, the company's chief executive officer, "You'll see us sustainably increasing the dividend as we grow annual sales," he said, referring to Suncor switching focus to paying back investors with a share buyback planned later this year as well as future increases in dividends.
Down south, Daniel Yergin, vice chairman of IHS Markit, told CNBC's Squawk Box, "We're expecting this year to see U.S. production probably increase from beginning to end by more than 500,000 barrels a day."
By comparison, the International Energy Agency in January pegged the growth at a more conservative 320,000 bpd.
Yergin earlier predicted similar gains if West Texas Intermediate stayed between $50 and $55 per barrel, and he augmented his latest forecast by saying of American producers drilling more efficiently, "a dollar invested in 2017 produces about two and a half times as much oil as a dollar invested in 2014, so
As is the case with Suncor, Yergin credited the OPEC cuts and resulting crude price recovery for giving American producers the latitude to increase output; but rather than reiterating the contention that the cartel is acting magnanimously, he said the reason members are sticking to the reduction agreement is because so many of them are oil-dependent and struggling with budget deficits.
However, the increases are presumably bad news to OPEC members such as Qatar and Iran, which this week hinted that it might take more than the six month lifespan of the cutback agreement to bring about a true market rebalance.
