By Chester Dawson
A senior Suncor Energy Inc. executive said Wednesday the company
won't delay its biggest long-term growth projects because it
expects crude oil prices to double from current levels within the
next three to four years.
"In the longer term, oil is going to go back to $90-$100,"
Alister Cowan, the oil sands producer's chief financial officer,
told investors attending a Canadian Imperial Bank of Commerce
conference in Whistler, British Columbia, saying that prices would
rebound to that level "probably in three years or four years'
time."
That bullish outlook echoes recent comments by CEO Steve
Williams, who has said he also expects oil prices to climb back to
the lofty levels of last summer.
U.S. oil for March delivery traded on the New York Mercantile
Exchange settled Wednesday at $47.78 a barrel. Oil prices have
tumbled more than 55% since June, with the steepest decline
following the Organization of the Petroleum Exporting Countries'
rejection of calls to trim output at a meeting on Nov. 27.
"Our long-term expectation is for an average oil price in the
$90 to $100 range," Mr. Williams told The Wall Street Journal after
the OPEC meeting.
Since then, Canada's largest oil company by production volume
has joined many other North American energy producers in slashing
its budget and payroll to cope with the rapid crude price decline.
Last week, Suncor said it would shave 1 billion Canadian dollars
($810 million) from its budget and lay off 1,000 contract
workers.
But the Calgary-based company pledged to move ahead with its
largest growth projects--the Fort Hills oil sands mine in northern
Alberta and the Hebron oil field off the coast of Newfoundland--and
said production would rise to as much as 585,000 barrels of oil
equivalent per day this year, up from 525,000 to 570,000 barrels of
equivalent a day in 2014.
Mr. Cowan told investors Suncor has enough cash on its balance
sheet to fund its stakes in both Fort Hills and Hebron through
their planned startups in 2017. "We have the strength to complete
our growth projects, so yes we will be growing as a business even
in this time of volatile commodity prices," he said.
If prices do remain closer to $45 per barrel for the next two to
three years, Mr. Cowan said Suncor would consider slowing
investment in its large-scale projects, but not canceling them
altogether. "You don't want to cancel or delay big projects in the
middle," Mr. Cowan said. "We've been there before at Suncor. We
know what it costs us--it's multi hundreds of millions of dollars.
We're not going to go there again," he said.
Speaking at the same conference, the financial chief of oil
sands rival Canadian Natural Resources Ltd. said he didn't expect
oil prices to recover beyond $65 per barrel for the foreseeable
future. "Are we going back to $100 oil? Not currently (in) our
view. Are we going back to $60-$65 oil? That has some potential,"
said CNRL Chief Financial Officer Corey Bieber.
Both Mr. Cowan of Suncor and Mr. Bieber of CNRL said their
companies would consider acquiring weaker oil and gas producers if
an opportunity arose.
Suncor has a 40.8% stake in the C$13.5 billion Fort Hills oil
sands surface mine, along with partners Total SA, which owns 39.2%,
and Canadian diversified miner Teck Resources Ltd., with a 20%
share. The company also owns 22.7% of the Hebron project off the
coast of Newfoundland, along with 36% share owner Exxon Mobil
Corp., 26.7% stakeholder Chevron Corp. and two other minority
partners.
Write to Chester Dawson at chester.dawson@wsj.com
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