M&A

13 November, 2009

UPDATE 3-Suncor to spend C$5.5 bln, boost oil sands output

UTS shares fell as much as 13 percent on the Toronto Stock Exchange before recovering somewhat. The stock was down 8 Canadian cents, or 3.7 percent, at C$2.09 by late Friday morning.

"The market has largely digested the lack of clarity on Fort Hills," said Chris Feltin, an analyst at Macquarie Securities Canada. "Maybe there's a little disappointment; there wasn't a firm timeline set out one way or another."

Of its C$5.5 billion budget, Suncor will use C$1.5 billion for growth projects at its oil sands operations and elsewhere, targeting output of 350,000 bpd by the end of 2010. About C$4 billion is earmarked for sustaining existing operations.

"With these spending levels, we believe Suncor will likely generate C$2 billion to C$3 billion per year of free cash flow," UBS analyst Andrew Potter said in a note to clients.

Included in the plans for next year is cash to to complete a naphtha unit at its oil sands operations and expand the St. Clair ethanol plant in southern Ontario.

Suncor said its ongoing spending plans take into account the expected savings from its acquisition of Petro-Canada.

The company forecasts about C$400 million in annual savings from workforce reductions, product marketing and supply chain optimization.

Suncor shares rose 46 Canadian cents to C$36.90 by midmorning on Friday on the Toronto Stock Exchange.

($1=$1.05 Canadian) (Additional reporting by Euan Rocha in Toronto and Ajay Kamalakaran in Bangalore; editing by Rob Wilson)

Source: http://www.reuters.com