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Suncor Energy Inc. , Canada's biggest energy company, posted a $457-million profit in the final quarter of 2009, reversing a big loss in the prior-year period but remaining well below analyst expectations.

The oil and gas producer, refiner and fuel retailer - which merged with former Crown corporation Petro-Canada last August - said it earned 29 cents per share in the last three months of the year.

That compared to a net loss of $215-million, or 24 cents per share, for the fourth quarter of 2008.

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The improvement came on higher crude oil prices in the quarter, Suncor said, which pushed revenue before royalties and excluding revenue from energy trading to $7.5-billion from $3.98-billion.

Last year "was really about creating the new Suncor," chief executive officer Rick George told analysts and reporters on a conference call Tuesday.

"And 2010 will be about realizing the benefits of that."

Disappointing Earnings

UBS Investment Research analyst Andrew Potter called the report a "weak finish to 2009," with Suncor's operating earnings per share at 20 cents, far below the brokerage's forecast of 40 cents per share and the consensus estimate of 42 cents.

"We attribute the variance from our forecast to a combination of factors including higher than forecast cash operating costs, capex (capital spending) and royalties," Potter wrote in a briefing to clients.

He also noted that Suncor is forecasting volumes this year around 644,000 barrels per day before asset sales related to the Petro-Canada takeover, whereas UBS had looked for about 660,000 barrels per day with 60,000 to 80,000 barrels per day worth of production going to asset sales.

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Suncor shares dropped 87 cents or 2.5 per cent to $33.97 in heavy mid day trading on the Toronto Stock Exchange.

Suncor's total upstream production during the fourth quarter of 2009 averaged 638,200 barrels of oil equivalent per day, including additional production of 325,600 barrels per day resulting from the merger.

The company inherited a hodge-podge of assets through the Petro-Canada deal, including refineries, a gas station chain, natural gas holdings, offshore production and overseas operations. Since the merger, Suncor has been paring down parts of its portfolio that don't fit with its core oilsands business.

It's from that "slimmed down base" that Suncor aims to grow its oilsands business by about 10 to 12 per cent per year through to 2020, Mr. George said on the conference call.

Divestment Plans

Suncor is on track to sell up to $2-billion in natural gas assets by the end of this year, and says the sale its offshore Trinidad and Tobago holdings is imminent. There has also been a lot of interest in some of Suncor's smaller North Sea operations.

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Assets in Syria and Libya, on the other hand, are worth keeping for now, said Mr. George. In Syria, natural gas production is slated to start up in the second quarter of this year.

"You can actually do business in Syria. I'm absolutely convinced of that. It's a place that honours their contracts," Mr. George said. "They've been relatively good to work with, and so it's a place I'm not particularly afraid of."

Doing business in Libya has been a headache for some other Canadian energy companies, but Mr. George sees potential in a large oil property Petro-Canada used to own in the North African country.

"We currently have no plans except to move ahead there," he said.

In all, Suncor aims to sell between $2-billion and $4-billion in assets. Those sales are expected to reduce Suncor's workforce by about 1,000 employees.

Shortly after the Petro-Canada deal closed, Suncor cut another 1,000 jobs, mostly at head office where positions between the two companies overlapped.

Last month Suncor sold natural gas operations in Colorado to Houston-based Noble Energy Inc. for $494-million (U.S.).

In late 2009, Suncor sold 98 of its retail gas stations to Husky Energy Inc. Suncor was required to divest some of its downstream assets as one of the Competition Bureau's conditions for allowing the company to merge with Petro-Canada.

In the oilsands, construction is underway on Phase 3 of the Firebag project near Fort McMurray, Alta., and Phase 4 is expected to go ahead next.

But a decision on Fort Hills, a proposed mining operation in which Petro-Canada used to be the lead partner, won't take place until late 2010 at the earliest.

Suncor has a 60 per cent stake in Fort Hills, with Vancouver miner Teck Resources Ltd. and oilsands junior UTS Energy Corp. evenly splitting the remaining stake.

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