Suncor Gives Update On Syncrude, Extends Maintenance Period

Upstream oil giant Suncor Energy Inc. (NYSE:SU) recently provided an update on the Syncrude oil sands project. Synthetic crude oil shipments from the Mildred Lake are down as the facility has extended its maintenance timing pushing full ramp-up to mid-July.

Following an explosion and fire at Syncrude on Mar 14, caused by a split in the six-inch carbon steel line on a naphtha hydrotreater recycle circuit, the facility was shut down for maintenance work. Later, Suncor reassured investors saying that there will be no changes in the target set for 2017.

Per Suncor, the repairs are advancing as planned and maintenance work scheduled for the fall has been added to it. This has reduced shipments to approximately 130,000 barrels per day (“BPD”). Although the company expects volumes to incline toward its full potential of 350,000 BPD as maintenance work nears completion in July, investors should remember that the Syncrude project accounts for more than 15% of Suncor's total output.

We would also like to remind investors that Suncor's 2017 production plan incorporated the autumn maintenance plan and hence there will be no change in the production guidance. However, the operational challenges and unplanned outages at Syncrude may affect its cash flows. After all, oil sands segment accounted for 32% of the company's 2016 revenues.

Syncrude's product faces high demand from customers including some producers who blend this synthetic oil with bitumen to make it transportable. The decline in production at Syncrude helped in tightening the price of synthetic crude.

Suncor is the majority owner of Syncrude project with 53.74% interest. The other stakeholders in Syncrude are Imperial Oil Limited (TO:IMO) , Nexen Oil Sands Partnership, Sinopec (NYSE:SNP) and Mocal Energy Limited with 25%, 7.23%, 9.03% and 5% share, respectively.

About The Company

Suncor is a world leader in mining and extracting crude oil from the vast oil-sands deposits of northern Alberta. The company also explores for, develops and markets natural gas. Moreover, it operates a refining and marketing business in Ontario and is actively involved in the development of renewable energy sources. The company is headquartered in Calgary, Canada.

Price Performance

In the last six months, Suncor’s shares have outperformed the Oil and Gas – Canadian – Integrated industry. During this period, the company’s shares fell 9.3%, while the industry witnessed a decrease of 10%.

Zacks Rank and Stock to Consider

Suncor presently has a Zacks Rank #3 (Hold). A better-ranked stock in the oil and energy sector is Delek US Holdings, Inc. (NYSE:DK) . It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Delek US Holdings’ sales for 2017 are expected to increase 71.35% year over year. The company delivered a four-quarter average positive earnings surprise of 60.68%.

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