Suncor Energy Inc. · TSX:SU
Suncor Energy — Q1 2019 Earnings Presentation
40 slides from Suncor Energy's earnings presentation, May 1, 2019
Slide 1: Investor Information Q1 2019
INVESTOR INFORMATION Q1 2019 Published May 1, 2019
Slide 2: Canada's leading integrated energy company
2 Canada’s leading integrated energy company $85B ~940 mbpd ~600 mbpd 28+ years ~460 mbpd ~1750 Enterprise value1 Oil production Heavy upgrading 2P Reserve life Refining nameplate Retail sites4 As at March 31, 2019 nameplate capacity2 nameplate capacity2 index3 capacity2 1, 2, 3, 4 See Slide Notes a
Slide 3: 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$62.80 WTI, 0.76 C$/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 Long life, low decline Unique business Financial strength and low cost integration through market cycles ~800 mbpd 2019 production guidance midpoint5 ~1000 mbpd of conversion capacity6 Resilient free funds flow8 ~31yrs ~600 mbpd of heavy upgrading capacity7 ~$93 ~$65
Slide 6: The foundation of our business
6 The foundation of our business Operational excellence Reliability Continuously 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 Environmental exc
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 anticipated high return investment opportunities3 Excluding commodity price changes & largely independent of production growth Suncor – Syncrude pipelin
Slide 9: Longer term organic growth – Replication
9 Longer term organic growth – Replication1 Targeting less than $50 WTI (USD) cost of capital breakeven1 Planned phases of 40 mbpd next ~10 generation in situ facilities (replication) Phases submitted for regulatory approval 7 2 approved and 5 pending approval 2023/24 Potential first oil from first
Slide 10: Disciplined cost management
10 Disciplined cost management History of structural cost reductions Medium-term cash operating Consistent reduction in Oil Sands operations cash operating costs (C$/bbl) (Fort Hills and Syncrude cash operating costs are not included) cost targets4 (C$/bbl) $40 Oil Sands1 Oil Sands ≤ $20/bbl $37.00
Slide 11: Generating discretionary free funds flow
11 Generating discretionary free funds flow1 FFO2 consistently exceeds sustaining capital, associated capitalized interest and dividends (C$ 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 ~$514 million $2 billion Share repurchases Share repurchase Q1 2019 dividend Q1 2019 dividend per NCIB programs executed3 compl
Slide 13: Strong balance sheet
13 Strong balance sheet 1.6x Net debt to FFO1 Net debt to FFO1 1.5x under the previous leasing standard2 Has remained within target range throughout all price cycles Target < 3x 30% Total debt to capitalization 97.95 28% under the previous leasing standard2 94.20 93.00 Target 20-35% WTI $5.3B Liquid
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
Slide 16: The value of Suncor's integrated business
16 The value of Suncor’s integrated business Benefiting from our crude and product strategy through all market cycles Exposure to high value product pricing provides significant cash flow upside potential BRENT E&P production attracts Brent based pricing PRICING ~110 mbpd Offshore production with ac
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 synergy opportunities for existing assets
18 Regional synergy opportunities1 for existing assets Crude logistics Upgrader feedstock optionality from multiple oil sands assets Crude feedstock optionality for Edmonton refinery Supply chain Sparing, warehousing and supply chain management Consolidation of regional contracts (lodging, busing, f
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 – Leading deployment of mining technologies
20 Fort Hills – Leading deployment of mining technologies Higher quality, fungible product Enhanced reliability & efficiency Secondary extraction – Paraffinic Froth Treatment Autonomous Haul Systems Bitumen froth mixed with solvents to remove water and minerals Heavy haulers are AHS ready, full depl
Slide 21: Syncrude – Following Suncor's proven reliability journey
21 Syncrude – Following Suncor’s proven reliability journey Suncor 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 Suncor
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 $635M 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 In Situ Mining Firebag Base Plant 203,000 bpd capacity 350,000 bpd capacity Suncor working interest 100% Suncor working interest 100% 2,553 mmbbls 2P reserves1 1,418 mmbbls 2P reserves1 MacKay River Syncrude 38,000 bpd capacity Syncrude operat
Slide 27: Focused on long life, low decline reserves base
27 Focused on long life, low decline reserves base Typical attributes1 of North American oil plays Initial Decline Sustaining Operating Reservoir Recovery Illustrative annual FFO2 profiles3 capital rate costs cost risk factor Mining High Very low Low Medium Very low Very high ~85% of Suncor’s 2019 g
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 – Demonstrating cash flow resilience
29 Refining & Marketing – Demonstrating cash flow resilience 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 26.30 Full turnaround 5 25.50 30 100% at t
Slide 30: Offshore with >390 million barrels of 2P reserves
30 Offshore with >390 million barrels of 2P reserves1 East Coast Canada North Sea Hibernia ExxonMobil operated Buzzard Suncor working interest 20% CNOOC Petroleum Europe Limited operated 63 mmboe 2P reserves1 (Suncor WI) Suncor working interest 29.89% 57 mmboe 2P reserves1 (Suncor WI) Hebron ExxonMo
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 Fenja (Norway) 120 • 17.5% working interest • 6 mbbls/d anticipated net peak production 100 Hebron • First oil expected 2021 80 White Rose 60 Hibernia Terra Nova 40 Buzzard Phase 2 (UK) Golden Eagle 20
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 $ 2 37% Syncrude WI Canadian Oil Sands $60 7 Petro -Canada 6 1 5 2 3 4 3 Rosebank $40 30% WI $20 4 5% Syncrude WI 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 in costs; the ability to access external sources of debt and equity capital employed (ROCE) and last in, first out (LIFO) – are not “forward-looking statements” within the meaning of the United States capital; the timing a
Slide 36: Slide Notes
36 Slide Notes Slide 2------------------------------------------------------------- All dividends are at the discretion of Suncor’s Board of Directors. Slide 5--------------------------------------------------------------- (1) Market capitalization + debt - cash and cash equivalents. See Forward-Loo
Slide 37: Slide Notes (continued)
37 Slide Notes (continued) Slide 6--------------------------------------------------------------- Slide 9------------------------------------------------------------- respective year. The WTI pricing for 2019 is based on Corporate (1) Expected opex savings are upon full implementation and are (1) Ba
Slide 38: Slide Notes (continued)
38 Slide Notes (continued) Slide 12 continued----------------------------------------------- (5) Buyback yield is calculated as annual NCIB spend per share Slide 19------------------------------------------------------------ (5) Based on the weighted average number of shares outstanding in divided b
Slide 39: Slide Notes (continued)
39 Slide Notes (continued) Slide 22 continued----------------------------------------------- Slide 26----------------------------------------------------------- Slide 30----------------------------------------------------------- (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