Suncor cuts spending by $400 million

The Suncor Refinery in Edmonton is seen on April 29, 2014.

CALGARY -- Suncor Energy is trimming its spending plans for this year by a further $400 million, while at the same time boosting its production targets and dividend.

The moves come as U.S. benchmark crude prices continue to languish below US$50 a barrel, dashing hopes in the oilpatch of a quick recovery. A year ago, crude was worth more than twice as much.

The Calgary-based oilsands giant (TSX:SU) said late Wednesday its capital spending this year will be between $5.8 billion and $6.4 billion, as it re-evaluates "non-essential" projects as part of overall cost-cutting initiatives.

It's the second time in 2015 that Suncor has slashed its budget. In January it announced it would reduce its budget by $1 billion to between $6.2 billion and $6.8 billion.

As of April, 1,200 jobs have been cut at Suncor.

Meanwhile, Suncor hiked its production outlook by 10,000 barrels a day to a range of between 550,000 barrels and 595,000 barrels a day.

CEO Steve Williams said Suncor's cash flow is strong enough to fund its capital requirements, while boosting its dividend by a penny to 29 cents a share and renewing is share buyback program.

Cash flow from operations was more than $2.1 billion during the quarter, down from $2.4 billion in the prior-year quarter.

Net earnings during the second quarter were $729 million, compared to $211 million a year earlier, when Suncor booked impairment charges.

Operating earnings, which strip out the effects of unusual items, were $906 million for the quarter, versus $1.14 billion during the same 2014 period.

The operating earnings amounted to 63 cents per share, compared to 77 cents.

Suncor also noted cost reductions in the oilsands. Cash operating costs decreased during the second quarter to $28 a barrel from $34.10 a year earlier.

It said its $13.5-billion Fort Hills oilsands project remains on track to start producing oil in late 2017.