EXPROPRIATE BIG OIL
Canadian oil producer Suncor sees dividend doubling as sustainable

Petrochemical storage tanks are seen at the Suncor Energy chemical plant near Edmonton

By Rod Nickel

WINNIPEG, Manitoba (Reuters) -Suncor Energy Inc's strategy of returning cash to shareholders and repaying debt with its soaring profits is sustainable even if surging crude prices pull back, the company's chief executive said on Thursday.

The stock of Canada’s second-biggest oil producer climbed as much as 10% after it said late on Wednesday that it would double its dividend, reversing a cut made last year when lockdowns due to the COVID-19 pandemic hammered fuel demand.

Suncor also said it would buy back more shares than it previously planned and repay debt faster, just a year and a half after the pandemic's spread reduced travel and generated losses for oil producers. The company reported a net profit of C$877 million ($710.58 million)for the third quarter after losing money a year earlier.

Suncor's strategy is sustainable even if West Texas Intermediate oil prices fall to $55 per barrel, from the current price around $82, CEO Mark Little said on a quarterly call with analysts.

"The business is looking really strong," Little said. "And when you look at consumer demand, although it's off a bit, you're seeing (refineries) recover and providing significant and stable cash flows."

Other Canadian oil companies will likely follow Suncor and return more cash to investors, TD Energy analyst Menno Hulshof said in a note.

But while higher oil prices have swelled profits, soaring natural gas prices have raised Suncor's costs. Like other oil sands producers, Suncor uses steam from burning natural gas to extract oil, and the gas price spike has raised production costs, the company said.

Suncor shares have risen 45% this year, but have lagged the TSX energy index, which has gained 73%, as the company wrestled with operational problems at its Fort Hills mine. The mine now looks to fully ramp up production by year-end.

Suncor returns dividend to 2019 levels, hikes buyback plan

Michelle Zadikian, BNN Bloomberg

Suncor Energy Inc. is sharing the wealth with its shareholders as it benefits from surging oil prices and progress on its plan to increase its annual free funds flow.

The oil producer announced Wednesday that its board of directors has approved a quarterly dividend hike of 100 per cent to $0.42 per common share, from $0.21 per share – marking a return to 2019 levels.

Suncor is also increasing its share buyback plan by an additional two per cent to roughly seven per cent of its float, or 107 million shares.

“Operational initiatives and higher commodity prices than expected have accelerated the achievement of two key objectives, namely increasing return of capital to shareholders and reducing net debt,” the company wrote in an after-hours press release.

Oil prices have rallied in recent months as rising demand has outstripped supply.

Suncor said as of Sept. 30, it had paid down $3.1 billion in debt so far this year, which will continue to be a focus for the company.

In a separate release late Wednesday, Suncor said it swung to an operating profit of $1.04 billion in the third quarter, compared to an operating loss of $338 million a year earlier. Meanwhile, its quarterly funds from operations more than doubled to $2.64 billion, from $1.17 billion in the prior year.