Suncor to take $80 million hit after Nova Scotia project found non-commercial

Suncor Energy Inc. (TSX:SU)(NYSE:SU), one of Canada’s largest oil companies, will write off its share of the cost the first exploration well in its Nova Scotia joint venture exploration project with Shell Canada, as it proved to be non-commercial.

The Calgary-based company said the related charge of about $80 million (Cdn$105 million) will be taken in the current quarter.

The Shelburne Basin project, located about 250 kilometres offshore, south of Halifax, is a joint venture between Shell Canada Ltd, ConocoPhillips Canada East Coast Partnership and Suncor.

Operator Shell owns 50%, ConocoPhillips 30% and Suncor 20% of the project.

Shell began drilling the first well in October, with the goal of determining the potential presence of hydrocarbons in the area.

The discouraging results from the first exploration well is yet another blow to Suncor, recently hit by wildfires that halted its oil sands operations in Alberta.

In general, it has been a painful year for oil companies, as crude prices have struggle around $40 ore less a barrel due to a surplus in global markets.

Earlier this month the International Energy Agency said it expected the glut to last for longer than previously thought, persisting into late 2017 as demand growth slumps and supply proves resilient.

Russian President Vladimir Putin on Wednesday ordered the start of production at a new oilfield that would add about 12,000 barrels per day in output, after daily oil production reportedly hit record highs of 11.75 million barrels.

And OPEC’s top exporters such as Saudi Arabia, Iran, Iraq, Nigeria and Libya have also hiked, or been trying to increase output in recent months.

Oil producers are set to meet next week to discuss a possible output freeze.