Suncor Declares Poor Economics for Building Voyageur Upgrader

The president and chief executive of Suncor Energy Inc. made an announcement on Wednesday, declaring that the gusher of light oil flowing from tight formations in North America will be further eroded by the economic argument for building the Voyageur upgrader.

However, regardless of haven taken $1.5-billion writedown on the project which resulted in net fourth-quarter loss for the company, Steve Williams declared that a final decision regarding the delayed multibillion-dollar project, which is shared with French giant Total S.A., will not be announcement until the end of March. Williams mentioned that “If you go out in the five-year-and-beyond time frame, clearly … we have a mix challenge on the continent,” he said on a conference call. “We have too much light, effectively, sweet crude, which is what upgraded synthetic crude, effectively, is, and if anything we have too little heavy crude. That’s quite a change. … Our view is that will cause on a squeeze on upgrading margins.” A decrement was recorded in share prices of Suncor Energy Inc. as it declined for more than $2, or six per cent, in Toronto to $32.36 after the company publicized its operating earnings of $1 billion, along with a net loss of $562 million in the last three months of 2012 due to the after-tax impairment charge on the partly built Voyageur upgrader.

An analyst, Andrew Potter, states that “we continue to believe that, once the project is officially deferred, it will free up immense capital slated to be returned to shareholders (via share buybacks and dividend increases).” He added that “SU’s carrying value remaining for the assets is currently about $345 million.”

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