While Suncor Energy hit record production for its first quarter, the real turning point for the company has been its success in driving down operating costs, says an energy analyst.
The Alberta-based energy giant is transforming into one of North America’s lowest cost oil producers, says Randy Ollenberger, managing director, oil & gas equity research at BMO Capital Markets.
“The biggest factor really has been improved reliability of their assets. So getting more volumes through what is essentially a fixed cost business,” says Ollenberger.
Suncor Energy Inc. reported a first-quarter profit of $2.1 billion, a notable increase from the $1.69 billion earned during the same quarter last year.
Ollenberger says while some production outages weighed in on production results, it was still able to post an adjusted profit of $1.42 per share, surpassing the average analyst forecast by approximately 10 cents.
He says Suncor has done a very good job of slashing its breakeven price by US$10 a barrel, now sitting at US$42 WTI. This covers all sustaining capital and dividends.
“That’s among the lowest in North America,” says Ollenberger. They’re really well positioned relative to the rest of the sector, but obviously also relative to any drop in oil prices here.”
He highlights that the company is pushing further, targeting another US$5 reduction in its break even price over the next few years.
“That would put them basically as the lowest within North America in terms of break even price,” says Ollenberger.
“The company has made great strides, and they’re expected to continue to make some solid progress over the next two years.”
Suncor’s stock price fell over six per cent after the earnings report. On Wednesday afternoon, it was $89. The company achieved its strongest overall performance in history in 2025, reporting net earnings of $7.5 billion.
Maintaining $6 billion budget
Suncor plans to maintain a steady annual capital expenditure of $6 billion while boosting production and offsetting its base mine, it detailed during its Investor Day in March.
This strategy enables 100,000 barrels per day of growth while replacing the aging Base Plant, Millennium, and North Steepbank mines, all within the current budget.
“We’re talking about offsetting 200,000 to 300,000 barrels a day production out of the base mine,” he says.
“They believe they can accommodate about 100,000 barrels a day of production growth as well as offset the anticipated decline in their base mine in the 2030,” says Ollenberger.
He says he does not anticipate any increase in capital spending from the company.
Stronger downstream performance
Suncor increased the capacity of its underlying assets by about 10 per cent.
“What we’re seeing is much stronger downstream performance out of the company on a sustained basis,” says Ollenberger.
“They’re on track this year to deliver downstream results probably close to $8 billion that would eclipse the $6 billion in change that we saw in 2022.”
He says he expects product margins to remain strong through the second quarter.
Ongoing geopolitical tensions, specifically the conflict involving Iran, have kept fuel prices high and profit margins elevated.
He says even if the situation stabilizes soon, the company would see lingering impacts that would result in elevated margins right through the balance of the second quarter.
“So a great year for Suncor in the downstream,” says Ollenberger.
