Suncor Projects Lower Oil Output in 2016

CALGARY, Alberta—Suncor Energy Inc., Canada's largest oil company, on Tuesday forecast lower production volumes next year even as it plans to boost capital spending on new projects and maintenance at existing operations.

Suncor said production next year will range from 525,000 to 565,000 barrels a day, down from estimated output this year of 550,000 to 595,000 barrels a day. It cited scheduled maintenance at its oil sands plants for the reduction in production volumes.

The first major Canadian oil producer to announce its full 2016 forecast, Suncor's announcement may be a bellwether for industry production amid a prolonged downturn in crude oil prices. Two other large Canadian producers, Cenovus Energy Inc. and Canadian Natural Resources Ltd., have previewed their 2016 budgets and signaled plans to cut spending unless oil prices rebound.

Suncor said it expected to spend up to 7.3 billion Canadian dollars ($5.48 billion) next year, about 55% of which would be earmarked for growth projects. That is the upper end of a budget range that could be as low as C$6.7 billion. But that would be more than the company has budgeted this year in its latest forecast, which estimates spending between C$5.8 billion to C$6.4 billion.

"We're well-positioned to invest in our base business and growth projects, even in a lower-for-longer oil price environment," Suncor Chief Executive Steve Williams said in a statement.

Much of that spending is likely to be directed toward the Calgary-based company's majority stake in the C$15 billion Fort Hills oil sands mine, a giant 180,000-barrel-a-day project that is currently under construction and expected to start up in late 2017.

In September, Suncor increased its interest in Fort Hills to a controlling 50.8% by purchasing an additional 10% stake from Total SA of France. Total retained a 29.2% share of the project and Teck Resources Ltd. owns the remaining 20% stake.

Suncor said its oil sands production is expected to total 400,000-425,000 barrels a day, not including an additional 30,000-35,000 barrels a day from its interest in the Syncrude oil sands consortium. That range is below this year's estimate for daily oil sands output of between 410,000 and 440,000 barrels, not including 32,000-36,000 barrels a day from Syncrude.

As a result of cost-cutting efforts, Suncor said its oil sands cash operating costs would fall to C$27-C$30 a barrel next year, below the C$28-C$31 it projects for this year.

Write to Chester Dawson at [e-mail]

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(END) Dow Jones Newswires

November 17, 2015 19:15 ET (00:15 GMT)

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