What Does Suncor's (SU) 2019 Capital Expenditure Plan Reveal?
Zacks Investment Research | Dec 16, 2018 09:29PM ET
Suncor Energy Inc. (NYSE:SU) recently announced its corporate guidance and estimated capital budget in the range of C$4,900-C$5,600 million for 2019, higher than C$4,500-C$5,000 million guided for 2018. The integrated energy player used C$4,131 million for capital and exploration in the first nine months of 2018. Notably, 63% of the company’s total capital budget for 2019 will be directed toward planned sustaining and maintenance activities, while the rest can be invested in value creating projects with low capital intensity.
Suncor‘s capital expenditure program incorporates its initiatives to expand the infrastructure of midstream logistics, improve margins and reduce cost over the 2020-2023 time period. These are expected to positively impact the company’s operations, enabling it to increase dividends, buy back shares and further strengthen its balance sheet, which currently has a debt-to-capitalization of 22.6%.
Analyzing Suncor's 2019 Capital Budget:
Upstream
Suncor intends to allot C$3,050-C$3,400 million for upstream oil sands expenditures, and C$1,000-C$1,200 million for upstream exploration and production. This leads to a total upstream capital budget of C$4,050-C$4,600 million compared with 2018 guided range of C$3,650-C$4,050 million. The company spent C$3,544 million in the first nine months of 2018.
Production: Production from total upstream operations for full-year 2019 is estimated at 780,000-820,000 barrels of oil equivalent per day (Boe/d), reflecting a 10% rise from the 2018 level. Output from oil sands operations is expected in the range of 410,000-440,000 barrels per day (BPD). Suncor’s production from its Fort Hills stake is expected in the range of 85,000-95,000 BPD, while the same from Syncrude is estimated at 160,000-180,000 BPD. Moreover, exploration and production for full-year 2019 is expected within 105,000-115,000 Boe/d.
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