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.
($1 = 1.2342 Canadian dollars)
(Reporting by Rod Nickel in Winnipeg; editing by Barbara Lewis and Marguerita Choy)