Suncor Energy Inc. · TSX:SU
Suncor Energy — Q4 2018 Earnings Presentation
40 slides from Suncor Energy's earnings presentation, Feb 5, 2019
Slide 1: Suncor Energy Q4 2018 Investor Information
Suncor Energy Q4 2018 Investor Information Published February 5, 2019
Slide 2: Canada's leading integrated energy company
2 Canada’s leading integrated energy company $76B ~940 mbpd ~600 mbpd 31+ years ~460 mbpd ~1750 Enterprise value1 Oil production Heavy upgrading 2P Reserve life Refining nameplate Retail sites4 As at December 31, 2018 nameplate capacity2 nameplate capacity2 index3 capacity2 1, 2, 3, 4 See Slide Note
Slide 3: Suncor – A resilient business focused on shareholder returns
3 Suncor – A resilient business focused on shareholder returns Cash flow growth Cash generation Strong potential FFO1 increase largely independent of market conditions Significant upside FFO1 sensitivity to WTI, based on TTM5 actuals US$64.80 WTI, 0.77 C$/US$, US$18.00 NYH 3-2-1 crack spread ~5% CAG
Slide 4: Multi-year focus on structural free funds flow growth
4 Multi-year focus on structural free funds flow growth1,2 Production growth5 Growth Free funds In situ replication flow growth projects1,5 Opportunistic Production share buybacks Debottlenecks, cost growth reductions & margin Fort Hills, Syncrude improvements and Hebron ~4% anticipated Sustain the
Slide 5: The Suncor business advantage
5 The Suncor business advantage Financial strength Unique business Long life, low decline through market cycles integration and low cost ~800 mbpd 2019 production guidance4 Resilient free funds flow1 ~1000 mbpd of conversion capacity5 ~600 mbpd of heavy upgrading capacity6 ~$93 ~$65 ~36yrs ~$51 Oil
Slide 6: The foundation of our business
6 The foundation of our business Operational excellence Reliability Seeking to significantly improve the reliability of our business Personal and process safety Journey to Zero – goal to eliminate all workplace incidents Cost management Continuous focus on structural cost reduction initiatives Envir
Slide 7: Capital discipline – flexible capital allocation plan
7 Capital discipline – flexible capital allocation plan1 $10/bbl increase in Brent price would generate approximately $2.4 billion of additional FFO2 Capital commitment Discretionary capital Balance Sustained Production sheet price growth to leverage Sustaining Buyback4 outlook* 20203 Dividend4 Grow
Slide 8: Medium-term investment proposition – free funds flow growth
8 Medium-term investment proposition1 – free funds flow2 growth Free funds flow2 improvement potential for years 2020 - 2023 inclusive3 Examples of high return investment opportunities3 Excluding commodity price changes & independent of production growth Suncor – Syncrude pipeline Tailings managemen
Slide 9: Longer term organic growth – Replication
9 Longer term organic growth – Replication1 Targeting less than $50 WTI (USD) cost of capital breakeven1 Planned phases of 40 mbpd next ~10 generation in situ facilities (replication) Phases submitted for regulatory approval 7 2 approved and 5 pending approval 2023/24 Potential first oil from first
Slide 10: Disciplined cost management
10 Disciplined cost management History of structural cost reductions Medium-term cost reduction Consistent reduction in oil sands cash operating costs (C$/bbl) targets4 (C$/bbl) $40 Oil sands1 Oil sands ≤ $20/bbl $37.00 Fort Hills ≤ $20/bbl Reflects a heavy Syncrude ≤ $30/bbl maintenance year Mining
Slide 11: Generating discretionary free funds flow
11 Generating discretionary free funds flow1 FFO2 consistently exceeds sustaining capital, associated capitalized interest and dividends (C$ billions) $12 $10 $10.2 $8 $9.1 $6 $6.8 $6.0 $2.3 $4 $2.1 $1.6 $1.9 $2 $3.9 $2.7 $3.0 $2.3 $0 2015 2016 2017 2018 2019E WTI US$3 $48.75 $43.35 $50.95 $64.80 $5
Slide 12: Returning value to shareholders
12 Returning value to shareholders 17 consecutive years of dividend increases1 & opportunistic share buybacks with increased share repurchase program2 17% $0.42 ~$5 billion $2 billion New share Q1 2019 dividend Q1 2019 dividend NCIB programs executed3 (May 2017- Feb 2019) repurchase program increase
Slide 13: Strong balance sheet
13 Strong balance sheet Net debt to FFO1 1.5x Net debt to FFO1 Target < 3x Has remained within target range throughout all price cycles 28% Total debt to capitalization 97.95 Target 20-30% 94.20 93.00 WTI ($US/bbl) $5.8B Liquidity Cash & cash equivalents ($2.2B) plus available credit facilities ($3.
Slide 14: Generating industry-leading FFO per barrel and shareholder returns
14 Generating industry-leading FFO1 per barrel and shareholder returns Delivering leading FFO1 per barrel2 and shareholder returns despite Canadian oil differential headwinds, demonstrating the value of our integrated business model and global competitiveness Quality cash flow Shareholder returns Re
Slide 15: Return on capital employed past the inflection point
15 Return on capital employed1 past the inflection point Suncor's spending on major capital projects Fort Hills and Hebron completed The 50 year long life, low decline production profile of Fort Hills has begun Focusing on near-term low capital intensity and high value added projects2 Debottleneck e
Slide 16: Minimizing impacts of oil differential volatility
16 Minimizing impacts of oil differential volatility Reliable cash flow from the value of Suncor’s unique integrated model NOT Exposed 100 % E&P production attracting Brent based pricing All offshore production with access to tidewater Heavy upgrading capacity1 ~600 mbpd Conversion of bitumen to a s
Slide 17: IMO 2020 – Positive FFO impact expected for Suncor
17 IMO1 2020 – Positive FFO2 impact expected for Suncor Expect IMO1 regulatory change will enhance demand for middle distillates used in new marine fuel Projected impacts Suncor advantages Decreasing global demand for bunker fuel3 Minimal exposure to bunker fuel Sales from Suncor refineries (~1%) Wi
Slide 18: Regional synergies for existing assets
18 Regional synergies for existing assets Regional synergy opportunities1 Upgrader feedstock optionality from multiple oil sands assets Crude feedstock optionality for Edmonton refinery Unplanned outage impact mitigations Turnaround planning optimization Process and technology sharing Sparing, wareh
Slide 19: Market access for Suncor's oil sands production
19 Market access for Suncor’s oil sands production Suncor has made strategic investments in refineries and current/proposed logistics infrastructure to mitigate Alberta egress limitations and market disconnects Fort McMurray ~750 Alberta egress bottleneck does not impact the ability to move Suncor b
Slide 20: Fort Hills – Delivering on commitments
20 Fort Hills – Delivering on commitments Exceeded ramp-up expectations Leading edge technology Production Guidance vs. Actual OPEX Guidance1 vs. Actual Autonomous Haul Systems ready (mbpd) ($/bbl) Trucks and operations are ready for conversion 100 90 80 75 Secondary extraction – Paraffinic Froth Tr
Slide 21: Syncrude – Following Suncor's proven reliability journey
21 Syncrude – Following Suncor’s proven reliability journey Suncor’s base plant upgrader reliability 91% 91% Multi-year journey to reach >90% reliability 90%1 Reliability step-change after 4 years 83% Not a gradual profile 81% interconnect pipeline 80% Firebag to basemine 79% fully operational Sunco
Slide 22: ESG leadership
22 ESG leadership Environment Regulatory & policy leadership GHG & water performance Technology & innovation Operate under one of the most stringent, >60% reduction in Oil Sands Base GHG emissions $400M in technology investments in 20184 transparent and compliance-focused regulatory intensity since
Slide 23: Suncor's tailings reclamation – PASS
23 Suncor’s tailings reclamation – PASS PASS technology aims to rapidly dewater and treat tailings to accelerate reclamation and lower our environmental footprint at a lower cost Advancing execution, with regulatory approval received October 2017 Suncor pioneered TRO in 2010 (Tailings Reduction Oper
Slide 24: Appendix
24 Appendix SUNCoR)
Slide 25: 2019 Capital and production guidance
25 2019 Capital and production guidance1 2019 Capital2 Economic Investment3 Production4 $ millions percent boepd Oil Sands 3,050 – 3,400 17% 410,000 – 440,000 Oil Sands operations E&P 1,000 – 1,200 97% 85,000 – 95,000 Fort Hills Downstream 700 – 775 23% 160,000 – 180,000 Syncrude Corporate 150 – 225
Slide 26: High quality mining, in situ and upgrading portfolio
26 High quality mining, in situ and upgrading portfolio1 Base Plant Syncrude 350,000 bpd capacity Syncrude operated Suncor working interest 100% 205,600 bpd coking capacity (SU WI) 1,488 mmbbls 2P reserves1 Suncor working interest 58.74% 1,370 mmbbls 2P reserves (SU WI) 1,2 Firebag Fort Hills 203,00
Slide 27: Typical attributes of North American oil plays
27 Typical attributes1 of North American oil plays Suncor’s business is focused on a long life, low decline reserves base Initial Decline Sustaining Operating Reservoir Recovery Illustrative annual FFO2 profiles3 capital rate costs cost risk factor Mining 50 Years High Very low Very low Medium Very
Slide 28: Canada's largest Refining & Marketing business
28 Canada’s largest Refining & Marketing business Edmonton refinery Sarnia refinery 142,000 bpd capacity 85,000 bpd capacity 100% oil sands feedstock1 ~75% oil sands feedstock1 Commerce City refinery Montreal refinery 98,000 bpd capacity 137,000 bpd capacity ~20% oil sands feedstock1 ~30% oil sands
Slide 29: Refining & Marketing – the value of integration
29 Refining & Marketing – the value of integration R&M Funds from operations1 WTI – WCS ($US/bbl) Refinery utilization vs. US average Suncor Capturing the value of widening differentials FFO ($CAD billions) Percent of refining capacity US Average2 5 25.50 26.30 3 0 100% 21.05 19.40 2 0 4 13.50 13.85
Slide 30: Offshore with >415 million barrels of 2P reserves
30 Offshore with >415 million barrels of 2P reserves1 Terra Nova Hibernia Suncor Energy operated ExxonMobil operated Suncor working interest 37.675% Suncor working interest 20%2 41 mmboe 2P reserves1 (Suncor WI) 73 mmboe 2P reserves1 (Suncor WI) White Rose Buzzard Husky Energy operated CNOOC Petrole
Slide 31: E&P – Investing in high value, low risk projects
31 E&P – Investing in high value, low risk projects Recent performance Sanctioned projects1 mboe/d Oda (Norway) 120 • 30% working interest 100 Hebron • 11 mbbls/d anticipated net peak production 80 White Rose • First oil expected Q2 2019 60 Hibernia Terra Nova 40 Golden Eagle Fenja (Norway) 20 Buzza
Slide 32: Track record of counter-cyclical acquisitions and divestments
32 Track record of counter-cyclical acquisitions and divestments Non-core UK offshore 10% Fort Hills WI $100 WTI US$/bbl 1 Total E&P Canada $80 $ 37% Syncrude WI 2 Canadian Oil Sands $60 7 Petro -Canada 6 1 5 2 3 4 Rosebank $40 3 30% WI $20 5% Syncrude WI 4 Murphy Oil $40 NYH 3-2-1 US$/bbl Pioneer r
Slide 33: Notes
33 Notes SUNCoR)
Slide 34: Notes
34 Notes SUNCoR)
Slide 35: Advisories
35 Advisories Forward-Looking Statements – This presentation contains certain debt and equity capital; the timing and the costs of well and pipeline comparable to similar measures presented by other companies. “forward-looking statements” within the meaning of the United States construction; Suncor’
Slide 36: Slide Notes
36 Slide Notes Slide 2------------------------------------------------------------- under the normal course issuer bid (NCIB). 2018 buyback per activities excluding changes in non-cash working capital. (1) Market capitalization + debt - cash and cash equivalents. share reflects $3.1 billion of actua
Slide 37: Slide Notes (continued)
37 Slide Notes (continued) Slide 6--------------------------------------------------------------- expectations including completion of incremental pipeline capacity (5) Illustrative FFO is not intended to be a forecast of Suncor’s FFO. (1) Expected opex savings are upon full implementation and are o
Slide 38: Slide Notes (continued)
38 Slide Notes (continued) Slide 12 continued----------------------------------------------- measure and is calculated as earnings before interest and income Looking Statements in the Advisories. (5) Based on the weighted average number of shares outstanding in taxes divided by the average of total
Slide 39: Slide Notes (continued)
39 Slide Notes (continued) Slide 22 continued----------------------------------------------- Slide 26----------------------------------------------------------- inventory accounting, while Suncor reports on a first in, first out (5) PFT refers to paraffinic froth treatment, AHS refers to (1) Reserve
Slide 40: Investor Relations contacts
Investor Relations contacts Trevor Bell David Burdziuk Valerie Roberts Kinga Uto Ben Harris Vice President IR Director IR Senior Analyst IR Senior ESG Analyst IR Analyst IR tgbell@suncor.com dburdziuk@suncor.com vroberts@suncor.com kuto@suncor.com bpharris@suncor.com Visit us at the Investor Centre