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Energy Companies

Suncor Energy Inc. 2020

Net loss of $4.3 billion in 2020 compared to net earnings of $2.9 billion in 2019

Suncor is an integrated energy company headquartered in Calgary, Alberta, Canada. The Company develops one of the world's largest petroleum resource basins – Canada's Athabasca oil sands. The Company also explores for, acquires, develops, produces and markets crude oil in Canada and internationally, transports and refines crude oil, markets petroleum and petrochemical products. Suncor also operates a renewable energy business and conducts energy trading activities such as the marketing and trading of crude oil, natural gas, byproducts, refined products, and power.

The Company operates in four Segments: Oil Sands; Exploration & Production (E&P); Refining & Marketing (R & M) and Corporate, Energy trading and Elimination.

In 2020, the company paid $1.670 billion in dividends to shareholders and, prior to the onset of the COVID-19 pandemic, repurchased $307 million of its own common shares for cancelation. In 2020 the Company reached an agreement to sell its 26.69% working interest in the Golden Eagle Area Development (GEAD) for US$325 million. The effective date of the sale is January 1, 2021. This enables the company to allocate resources to core assets and maximize shareholder returns. The company achieved the second-best year of Single Cell Oil (SCO) production in its history with 466,200 bbls/d.

According to the Annual Financial Report Suncor delivered on annual cost reduction targets, reducing annual operating costs by $1.3 billion (approximately 12%) in 2020, compared to 2019 levels, and reduced annual capital expenditures by $1.9 billion (approximately 33%) in 2020, compared to the original 2020 capital guidance midpoint.

Suncor's net loss in 2020 was $4.319 billion, compared to net earnings of $2.899 billion in 2019 and $3.293 billion in 2018. In 2020, the company recorded after-tax impairment charges of $1.376 billion on its share of the Fort Hills assets, in the Oil Sands segment, and $845 million against its share of the White Rose and Terra Nova assets, in the Exploration and Production (E&P) segment, due to a decline in forecasted crude oil prices as a result of decreased global demand due to the impacts of the COVID-19 pandemic.

Suncor's consolidated operating loss in 2020 was $2.242 billion, compared to operating earnings of $4.358 billion in 2019 and $4.312 billion in 2018. In 2020, crude oil and refined product realizations decreased significantly, with crude oil and crack spread benchmarks declining by more than 30% compared to 2019 due to the impacts of the COVID-19 pandemic and OPEC issues.

Funds from operations for 2020 were $3.876 billion, compared to $10.818 billion in 2019 and $10.172 billion in 2018 and were impacted by the same factors as operating loss described above.

Cash flow provided by operating activities, was $2.675 billion in 2020, compared to $10.421 billion in 2019 and to $10.580 billion in 2018.

Segmentally, the Company had the following financial results:

The Oil Sands segment had an operating loss of $2.278 billion in 2020, compared to operating earnings of $1.622 billion in 2019. The decrease was primarily due to lower realized crude prices, as crude benchmarks decreased by approximately 30% compared to the prior year as a result of the COVID-19 pandemic. Operating earnings were also impacted by lower production volumes.

Oil Sands had a net loss of $3.796 billion in 2020, compared to $427 million in 2019, funds from operations for the Oil Sands segment were $1.986 billion in 2020, compared to $6.061 billion in 2019, and were influenced by the same factors that impacted operating loss.

The E&P segment had operating earnings of $13 million in 2020, compared to $1.141 billion in the prior year, with the decrease due to significantly lower realized crude prices due to the impacts of the COVID-19 pandemic, which resulted in crude oil benchmarks decreasing by more than 30%, and lower sales volumes. Operating earnings in 2019 included insurance proceeds related to the company's assets in Libya.

E&P had a net loss of $832 million in 2020, compared to net earnings of $1.005 billion in 2019 due to a decline in forecasted crude oil prices as a result of decreased global demand due to the COVID-19 pandemic. Funds from operations were $1.054 billion in 2020, compared to $2.143 billion in 2019. The decrease was largely due to the same factors that impacted operating earnings described above.

R&M segment contributed annual operating earnings of $866 million in 2020, compared with $2.912 billion in 2019. The decrease was primarily due to lower refining and marketing margins. Net earnings in 2020 were $866 million, compared to net earnings of $3.000 billion in 2019.

R&M achieved an annual funds from operations of $1.708 billion in 2020, compared to $3.863 billion in 2019, due to the same factors that impacted operating earnings described above.

Corporate and Elimination incurred an operating loss of $936 million in 2020, compared with an operating loss of $1.113 billion in 2019. The decreased operating loss was primarily due to lower share-based compensation expense. Funds used in operations for the Corporate and Eliminations segment were $872 million in 2020, compared to $1.249 billion in 2019, and were influenced by the same factors that impacted operating loss.

As per 31st December 2021 Suncor's net debt was $19.814 billion, compared to $16.010 billion as per 31st December 2019. During 2020, total debt increased by $3.729 billion, primarily due to a net increase in short-term and long-term debt and additional leases entered in 2020.

At the end of the year 2020, the Company's net debt to funds from operations measure was 5.1 times, which is higher than management's maximum target of less than 3.0 times. Suncor will remain disciplined in its capital allocation and plans to pay down between $1.0 billion and $1.5 billion of debt in 2021.