In response to lower crude prices, Suncor Energy Inc. is cutting $1 billion from its 2015 capital spending program and reducing operating expenses by $600 million-$800 million, to be phased in over two years, offsetting inflation and growth.
It is also reducing its total workforce by approximately 1,000 people, primarily through its contract workforce, but also via employee positions.
There will also be an overall hiring freeze for roles that are not critical to operations and safety, it said.
Last November, the company announced capital spending plans of between $7.2 billion and $7.8 billion for 2015. It now plans capital expenditures of between $6.2 billion and $6.8 billion.
“Our integrated model and strong balance sheet have positioned us well for the price downturn,” said Steve Williams, president and chief executive officer, in a press release. “Cost management has been an ongoing focus, with successful efforts to reduce both capital and operating costs well underway before the decline in oil prices.
“However, in today’s low-crude-price environment, it’s essential we accelerate this work,” said Williams. “Today’s spending reductions are consistent with our commitment to spend within our means and maintain a strong balance sheet. We will monitor the pricing environment and take further action as required.”
Initiatives to achieve the cost-reduction targets include deferral of some capital projects that have not yet been sanctioned, such as MacKay River 2 and the White Rose Extension, as well as reductions to discretionary spending.
Production expectations of between 540,000 barrels of oil equivalent (boe) per day and 585,000 boe per day for 2015 have not changed and budgets affecting the company’s safety, reliability and environmental performance have been specifically excluded from the cost reduction program, said the press release.
Major projects in construction such as Fort Hills and Hebron will move forward as planned and take full advantage of the current economic environment, it said. “These are long-term growth projects that are expected to provide strong returns when they come online in late 2017.”
Suncor has issued an update to its 2015 guidance to reflect lower pricing and related assumptions.
The updated total for oilsands capital expenditures in 2015 is now forecast to be between $3.85 billion and $4.25 billion, instead of $4.3 billion to $4.75 billion announced in November.
Exploration and production expenditures are now expected to range between $1.45 billion and $1.55 billion in 2015, down from the previously announced $1.75 billion to $1.85 billion, while capital expenditures in refining and marketing are now slated to be $750 million to $800 million, down from between $975 million and $1 billion. Corporate spending is now forecast at $150 million to $200 million.
Oilsands cash operating costs this year are expected to be $30 to $33 per bbl.
Market assumptions are for a Brent oil price of US$65 per bbl, WTI at Cushing of US$59 per bbl and for Western Canadian Select at Hardisty of US$42 per bbl.
The natural gas spot AECO price is forecast at C$3 per gigajoule. The Canada/U.S. exchange rate is forecast as 85 cents.
