Image source: Suncor Energy.
Despite operating in the midst of one of the worst oil market downturns in decades, Canadian oil giant Suncor Energy is thriving. That was evidenced by the company's strong third-quarter report, as well as comments made by CEO Steve Williams on its third-quarter conference call. Here are five things he wanted investors to know about the company's recent success.
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1. Rock-solid operating results
There were three achievements that really contributed to Suncor's strong quarter:
- It reached 90% throughput at its upgraders.
- Its costs fell to the lowest level in years.
- It delivered record low-cost in-situ production.
It was the combination of these factors that really drove strong cash flow for the company during the quarter.
2. The company has hit all of its goalsNot only did Suncor Energy have several noteworthy achievements during the quarter, but it has already hit all of its goals for 2015.
What's most impressive is that not only did the company meet its goals for 2015, but it has already achieved its 2017 goal of 90% throughput, showing just how far the company has come in a short amount of time.
3. Suncor's refineries really benefit from weak oil pricesOne of the things that sets Suncor apart from a lot of other energy companies is its vertical integration whereby it owns refining assets. This integration really paid off last quarter.
Suncor's refineries benefited from weak crude prices and delivered robust cash flow. In fact, CFO Alister Cowen pointed out on the call that its refining and marketing segment accounted for 42% of its cash flow last quarter, which is up from 22% in the year-ago period.
Source: Suncor Energy
3. Capital discipline is paying offWeak oil prices makes it imperative for oil producers to watch every penny they spend. That has been a real strength of Suncor.
While most of its peers are just struggling to break even, Suncor Energy is actually generating free cash flow. That accomplishment can be attributed to the company's focus on its costs, and especially its disciplined approach to cap ex spending.
5. Taking advantage of the downturn Suncor Energy has been aggressive in 2015 to take advantage of unique opportunities to increase its ownership in key oil sands assets. One opportunity it recently closed was a deal to buy another 10% stake in its Fort Hills oil sands development from French oil giant Total.
In seizing this opportunity, Suncor is accomplishing two major goals. First, it now has majority control of the project, meaning it will set the tone for development and operations. Second, it is acquiring this additional stake at a significant discount to the project's replacement cost, which will improve overall returns.
Investor takeawaySuncor Energy has really been impressive this year with it being one of the few oil companies generating free cash flow. There are two things that have enabled it to accomplish that rare achievement: Financial discipline and vertical integration. Furthermore, because it is so strong financially, the company has been able to take advantage of an opportunity that arose during the downturn to increase its stake in a key project at a significantly discounted price. Clearly, Suncor Energy is thriving at a time when most energy companies are just focused on surviving.
The article 5 Things Suncor Energy Inc's CEO Wants You to Know originally appeared on Fool.com.
Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Total (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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