Analysts bullish as Suncor exceeds Q3 expectations, leveraging safety and reliability for growth
Suncor Energy Inc. delivered strong third-quarter results, impressing analysts and investors, as reported by BNN Bloomberg.
Dan Fong, head of research for industrials and energy at Veritas Investment Research, shared his increasingly optimistic outlook for the company in an interview on Monday.
The Calgary-based energy giant earned $2.02bn in its third fiscal quarter, a rise from $1.54bn in the same period last year. Earnings per share increased to $1.59 from $1.19.
Upstream production also saw significant growth, reaching approximately 828,600 barrels of oil equivalent per day, compared to 690,500 barrels per day in the third quarter of 2022.
Fong attributed Suncor’s strong performance to its focus on improving margins and controlling costs through smaller projects.
“We thought they were ahead of schedule on their turnaround, and we thought at that point, the stock was reflecting full and fair value,” Fong said.
Reflecting on the company’s third-quarter earnings, he added, “They blew expectations right out of the water, almost on every single measure they excelled, and we’re becoming increasingly confident that there’s more room to run here.”
Suncor’s emphasis on safety, reliability, and cost management has translated into financial success.
“It’s a lot of little things, so for instance, this is a company that’s really sharpened its focus on the fundamentals, those being safety, reliability and costs,” said Fong.
He emphasised that these priorities contribute to higher asset utilisation, which in turn drives production and revenue growth.
According to Fong, Suncor’s commitment to safety is a key factor in its financial performance.
“Everybody looks at safety as: ‘Oh it’s just a buzzword, and it’s a politically correct thing,’ but there are tangible benefits to safety. It is the number one thing in a lot of these industrial companies,” he said.
Higher safety standards lead to better-maintained assets, improved utilisation, and increased production volumes.
“When you have that steadiness of volume… that translates into positive operating leverage, so you see that time and time again,” Fong noted.
Rather than heavily investing in new wells, Suncor focused on maximising the productivity of its existing assets.
Fong highlighted several low-investment initiatives that improved the company’s production capacity. “Basically, low investment projects that unleash or at least improve the productive capacity of those assets… so they can produce more with the same or less cost,” he explained.
Incremental investments at refineries in Sarnia and Montreal increased production by 3,000 and 12,000 barrels per day, respectively. “These things together, when you add them up, they have a sizeable impact,” said Fong.
Suncor’s third-quarter performance reflects its ongoing efforts to optimise operations and achieve steady growth.
“Fast forward to third quarter earnings, they blew expectations right out of the water, almost on every single measure they excelled,” Fong stated, adding that the results reinforce confidence in the company’s continued upward trajectory.
