Flint could lose up to $150M in sales from Suncor delay

Flint Energy Services Ltd. will lose as much as $150 million in revenue from the decision by Suncor Energy Inc. to slash its spending in 2009, the oil services company said Thursday.

Three month stock chart for Flint Energy Services Ltd.

Calgary-based Flint, which provides construction and maintenance services to oil companies in Canada, said the company's infrastructure division will realize between $100 million and $150 million less in revenue for the current year.

Earlier in January, Suncor, which has large oilsands projects in Fort McMurray, Alta., announced it was chopping its capital spending budget for 2009 by 50 per cent to $3 billion.

Flint has a contract to help construct Suncor's steam-injection facility, known as Firebag 3, at Fort McMurray, a project that is already about 50 per cent completed.

"This is disappointing news for Flint and our people who have been involved with the project. However, we recognize and respect the reasoning behind this decision," said Bill Lingard, Flint's president and chief executive officer.

Slumping global oil prices have reduced the economic viability of high-cost sources of crude, such as in Alberta's oilsands region. As a result, many producers have cut back what they had expected to spend on project expansion in Western Canada.

Lockerbie & Hole also takes hit

Lockerbie & Hole Inc., an Edmonton-based oil construction company, also said it would suffer as a result of Suncor's cutback.

Lockerbie had anticipated $35 million in revenue in 2010 from working on Suncor's Firebag co-generation plant. Now, the earnings will be delayed "until a later date," the company said in a news release earlier in the week.

For its part, Flint had anticipated revenue of approximately $2 billion in 2008 and had already posted sales of $1.6 billion for the first nine months of the year. That figure was $284 million higher than the revenue results for the same nine-month period one year earlier.

Besides the reduction in 2009 revenue, Flint also noted that Suncor's delay would slow down how the services company uses up its backlog of projects on the books by $800 million in 2008.

Similar to transportation equipment companies, Flint books future orders as a way of guaranteeing continuing work.

In January, Flint signed a deal with CSS Thermal Oilsands worth $16 million annually. Back in November, the company announced a contract with the Canadian subsidiary of Norway's StatoilHydro for about $50 million.

In mid-morning trading, Flint shares were down approximately 1.5 per cent to $5.80. The company shares were worth more than $25 in July, the same time that global oil prices were peaking at $147 US a barrel.

Now crude prices are languishing in the $40 to $45 range and Flint's stock has tumbled as well.