Suncor Energy Inc. · TSX:SU
Suncor Energy — Investor Day (May 2021)
71 slides from Suncor Energy's investor day presentation, May 26, 2021
Slide 1: 2021 Investor Day
2021 Investor Day May 26th, 2021
Slide 2: Agenda
Agenda Operational excellence and outlook 1 Outline of key strategic objectives to maximize value-over-volume strategy and associated outlook $2 billion free funds flow1 initiatives deep dive 2 Complete breakdown of nine key initiatives driving rationalization of costs and sustaining capital and imp
Slide 3: Operational excellence & outlook
Operational excellence & outlook 3
Slide 4: Value over volume - upstream production outlook
Value over volume - upstream production outlook1 OPERATIONAL EXCELLENCE & OUTLOOK • Average production 2021 – 2025 of ~800 kbpd • Capital discipline – focus on highly economic debottlenecks vs. mega projects • Targeting to operate Base Plant, Fort Hills and Syncrude at 90% & In Situ assets at >95% u
Slide 5: Value over volume - product outlook
Value over volume - product outlook 1 OPERATIONAL EXCELLENCE & OUTLOOK • Maximize margin capture by increasing SCO production • Improving upgrader reliability increases higher margin SCO volume without growing top-line production SUNCOR ENERGY 1, 2 5
Slide 6: Priority – keep the upgraders full
Priority – keep the upgraders full 1 OPERATIONAL EXCELLENCE & OUTLOOK • Targeting 90% upgrader utilization at Base Plant & Syncrude • Maximizing upgrader throughput critical to maximizing margin capture • Interconnecting pipelines between assets is key for bitumen feedstock supply and upgrader relia
Slide 7: Exploration & production
Exploration & production OPERATIONAL EXCELLENCE & OUTLOOK • High quality basins and geographic diversification • Consistent free funds flow1 (FFF) generation • Investment decisions based on accretive FFF and high returns, rather than replacing reserves / maintaining production SUNCOR ENERGY 1 7
Slide 8: Syncrude – path to performance
Syncrude – path to performance 1 OPERATIONAL EXCELLENCE & OUTLOOK • Consistent improvement in Syncrude reliability with increased Suncor involvement • Suncor operatorship transfer at end of Q3 20212 • Operational and cost performance targets on track for accomplishment by 2023 • Interconnection with
Slide 9: Syncrude – structural cost synergies upon assumption of operatorship
Syncrude – structural cost synergies upon assumption of operatorship1,2 OPERATIONAL EXCELLENCE & OUTLOOK • $300 million (gross) structural savings (in addition to Suncor’s $2 billion incremental free funds flow target) • Fundamental changes to joint venture operating structure eliminates duplicative
Slide 10: Syncrude cash operating cost target
Syncrude cash operating cost target 1,2 OPERATIONAL EXCELLENCE & OUTLOOK • $30/bbl Syncrude cash operating cost target anticipated to be sustainably achieved by the end of 2023 SUNCOR ENERGY 1, 2, 3, 4 10
Slide 11: Midstream & logistics – the integration linchpin
Midstream & logistics – the integration linchpin 1 OPERATIONAL EXCELLENCE & OUTLOOK • Maximizing value capture of every barrel 2 produced (crude & refined products) while managing market risk Captured ~130% of NYH 2-1-1 4 • • ~5% bitumen realization outperformance vs. benchmark 4 1, 2, 3, 4 3 11
Slide 12: Downstream resilience via feedstock advantage
Downstream resilience via feedstock advantage1 OPERATIONAL EXCELLENCE & OUTLOOK • Infrastructure investments enabled all refineries access up to 100% of lower cost inland crude feedstock • Feedstock from equity barrels increased from 30% to 40% since 2011 • Maximize overall Suncor margin with optima
Slide 13: Suncor's Downstream scope & geographic advantage
Suncor's Downstream scope & geographic advantage OPERATIONAL EXCELLENCE & OUTLOOK Suncor’s key structural downstream advantages: Suncor superior market returns • Operating in geographically advantaged markets Geographic advantage • Consistent access to lower cost inland feedstock Advantaged feedstoc
Slide 14: Downstream advantage – industry leading utilization
Downstream advantage – industry leading utilization 1 OPERATIONAL EXCELLENCE & OUTLOOK • 10 years of Suncor utilization outperformance: • 5% > US average • 11% > Canadian average • 2020 Suncor outperformance: • 10% > US average • 12% > Canadian average SUNCOR ENERGY 1 14
Slide 15: Downstream advantage – industry leading profitability
Downstream advantage – industry leading profitability OPERATIONAL EXCELLENCE & OUTLOOK • Best in class refining EBITDA per barrel from refining, midstream & logistics organization – excluding rack forward (retail & wholesale) • ~2x more profitable in 2020 than closest peer1 SUNCOR ENERGY 1, 2 15
Slide 16: Rack forward advantage – secure consumer channels
Rack forward advantage – secure consumer channels Petro-Canada brand Rack forward OPERATIONAL EXCELLENCE & OUTLOOK #1 fuel brand >1,500 retail sites1 • Secured distribution & sales channels in Canada2 for refinery production • #1 Canadian market share >4.7 million #1 Canadian loyalty members market
Slide 17: Rack forward advantage – significant & stable cash flow contribution
Rack forward advantage – significant & stable cash flow contribution OPERATIONAL EXCELLENCE & OUTLOOK • Significant value contribution from Rack forward business • Adds incremental free funds flow to already strong refining and marketing profitability • ~$4.75/bbl EBITDA includes fuel margin and ass
Slide 18: $2B free funds flow initiatives deep dive
$2B free funds flow initiatives deep dive SUNCOR ENERGY 18
Slide 19: $2B free funds flow growth - $1.60/share by 2025
$2B free funds flow growth - $1.60/share by 2025 1,2 Growing annual free funds flow3 by >$2 billion by 2025 from optimization • ~$1.90 billion FFO3 $2B FREE FUNDS FLOW GROWTH • ~$0.25 billion asset sustainment capital 2018 / 2019 baseline4 • Total OS&G ($B): $10.9 • Asset sustainment & maintenance (
Slide 20: Investing through the cycle yields big returns
Investing through the cycle yields big returns 1 $2B FREE FUNDS FLOW GROWTH • Annual FFF2 by 2025: ~$2.1B • ~$1.5B capital invested pre-2021 (incl. ~$400M capital allocated to PASS2) • ~$2B capital remaining (2021 – 2025) (~2/3 allocated to Cogen3 & Forty Mile Wind4) SUNCOR ENERGY 1, 2, 3, 4, 5 20
Slide 21: $2B free funds flow growth details
$2B free funds flow growth details 1 $2B FREE FUNDS FLOW GROWTH • Annual FFF2 by 2023: ~$1.3B • Annual FFF2 by 2025: ~$2.1B • IRR: ~40%3 • Capital: ~$3.5B (2018-2025), $2.0B remaining SUNCOR ENERGY 1, 2, 3 21
Slide 22: Initiatives towards free funds flow growth
9 initiatives towards free funds flow growth 1,2,3 • $2B FFF growth breakdown • 2021 – ~$450M (~$0.30 / share) $2B FREE FUNDS FLOW GROWTH • 2023 – ~$1.3B (~$0.90 / share) • 2025 – >$2B (~$1.60 / share) 1. Supply, marketing & trading optimization 2. Suncor/Syncrude interconnecting pipelines (ICP) 3.
Slide 23: Supply, marketing & trading optimization
Supply, marketing & trading optimization • ST&O maximizes value of each barrel • Significant physical product footprint Extensive midstream & logistics portfolio $2B FREE FUNDS FLOW GROWTH • • Advanced marketing, trading expertise & capabilities • Real-time molecular ‘digital integration’ 2021 2023
Slide 24: Suncor / Syncrude interconnecting pipelines (ICP)
Suncor / Syncrude interconnecting pipelines (ICP)1 • Required infrastructure to achieve 90% Syncrude utilization2 Minimizing impact of planned & $2B FREE FUNDS FLOW GROWTH • unplanned downtime • Leverage excess processing capacity to maximize value of invested capital • Improve flexibility of interm
Slide 25: Permanent Aquatic Storage Structure (PASS)
Permanent Aquatic Storage Structure (PASS)1 • Shortens reclamation timeline by ~10 years $2B FREE FUNDS FLOW GROWTH PASS does not result • Avoids expensive seasonal earth moving activities in new disturbed areas • 400,000 annual worker hours reduced • 250,000 annual heavy duty equipment kilometers s
Slide 26: Mine optimization – digital mine & AHS
Mine optimization – digital mine & AHS 1 • Connecting each, previously independent operation (mining through processing), creating an optimized, interconnected operation $2B FREE FUNDS FLOW GROWTH • Virtual shovel coach • Provide shovel operators with live metrics to optimize pay loads and reduce lo
Slide 27: Supply chain management
Supply chain management1 • Procure ~$10B services & materials annually (operating costs & capital) • Estimated ~2% savings in total services and materials $2B FREE FUNDS FLOW GROWTH • For consumable materials, reduced supplier list from ~1,000 in 2019 • <100 in 2022 • Strategic partnership with Micr
Slide 28: Business process transformation
Business process transformation1 $2B FREE FUNDS FLOW GROWTH • Moving from ~30% • ~90% process standardization • 10 – 15% reduced workforce as automated systems eliminate manual processes • Fundamental enabler for numerous other initiatives and their associated benefits FFF2,3 2021 2023 2025 Value dr
Slide 29: Exceed $1B target by 2023
Exceed $1B target by 2023 1 $2B FREE FUNDS FLOW GROWTH SUNCOR ENERGY 1, 2, 3 29
Slide 30: Coke boiler replacement (Cogen)
Coke boiler replacement (Cogen) 1 • Significantly lower sustaining capital and carbon $2B FREE FUNDS FLOW GROWTH compliance costs versus existing coke fired boiler reaching end of useful life • Commissioning late 2024 • Sells 800MW low carbon power to Alberta grid • Emissions reduction of ~5MT per y
Slide 31: Forty Mile Wind
Forty Mile Wind1 • Located in Southern Alberta $2B FREE FUNDS FLOW GROWTH • Commissioning Q4 2022 • 200MW installed capacity; ~40% capacity factor • $300M capital; ~$50M annual FFF2,3 • ~45% FFF from power sales • ~55% FFF from carbon offsets • IRR: ~15%4 FFF2,3 2021 2023 2025 Value driver2,3 Opex S
Slide 32: Asset debottlenecks
Asset debottlenecks1 Firebag debottleneck • 6% nameplate capacity increase by expanding emulsion $2B FREE FUNDS FLOW GROWTH handling & steam generation (2020) Edmonton Refinery debottleneck • 3% nameplate capacity increase (2020) Burrard Terminal • Increased export capacity off west coast Canada (20
Slide 33: Digital technology adoption
Digital technology adoption 1 • Over 30 initiatives underway driving ~$400M of FFF2 $2B FREE FUNDS FLOW GROWTH • Digitally optimized assets example • Empower Suncor field workers with tablet digital toolkit with access to all technical data • Improve personal & process safety, increase reliability,
Slide 34: $2.15B free funds flow on track by 2025
$2.15B free funds flow on track by 2025 1,2 $2B FREE FUNDS FLOW GROWTH SUNCOR ENERGY 1, 2, 3 34
Slide 35: >$2 billion free funds flow improvement
>$2 billion free funds flow improvement 1,2 • $2 billion initiatives drive reduced cost structure, achieving long term cash cost targets while mitigating carbon costs $2B FREE FUNDS FLOW GROWTH • Margin enhancements further integrate assets via debottlenecks, marketing expertise & power revenues • C
Slide 36: Sustainability leadership
Sustainability leadership SUNCOR ENERGY 36
Slide 37: A multi-decade history of sustainability leadership
A multi-decade history of sustainability leadership Our leadership is reflected in our environmental and social legacy, strategic investments and diverse partnerships, all underscored by leading governance practices. CARBON STRATEGIC OBJECTIVES SUNCOR ENERGY 1, 2 37
Slide 38: Our carbon objectives
Our carbon objectives 1,2 Be a net zero company by 2050 Increase our interim goal – reduce carbon emissions across our value chain by 10 Mt per year CARBON STRATEGIC OBJECTIVES Reduce emissions from within our operations (net zero on scope 1) by 2030 Reduce emissions from the imported energy Reduce
Slide 39: Carbon reduction pathways to 2030
Carbon reduction pathways to 2030 1,2 up to ~20%* CARBON STRATEGIC OBJECTIVES up to ~20%* Our 2030 carbon intensity goal up to ~40%* is being converted to absolute up to ~50%* reductions and we are making up to ~60%* it more ambitious We have a portfolio of carbon reduction opportunities to meet our
Slide 40: Sources of emissions and base business reductions
Sources of emissions and base business reductions 1,2 Just five processes account for CARBON STRATEGIC OBJECTIVES ~98% of our operated emissions We understand the sources of our emissions and almost 100% can be managed with technologies that are well understood We continue to pursue economic pathway
Slide 41: Energy expansion
Energy expansion SUNCOR ENERGY 41
Slide 42: The energy expansion
The energy expansion1 Expanding along the existing integrated energy value chain Lowering costs, increasing revenue, and improving the carbon intensity of Suncor operations and consumer products ENERGY EXPANSION SUNCOR ENERGY 1 42 *See slide 65 for additional details
Slide 43: Energy expansion expenditure outlook
Energy expansion expenditure outlook 1,2 • Energy expansion focus: • Lower cost structure • Reduce carbon emissions • Synergistic with base business & integrated energy value chain ENERGY EXPANSION • Energy expansion investments require • Mid-teens rates of return • Technological maturity • Economic
Slide 44: Low carbon power
Low carbon power1,2 • Power generation adds value by: ENERGY EXPANSION • Integrating power generation with steam requirements for base business • Increase power revenue from sales to grid • Generate carbon credits to offset against base business costs • Currently 5th largest power producer in Albert
Slide 45: Canadian renewable liquid fuels – a growing market
Canadian renewable liquid fuels – a growing market1 • Canadian Clean Fuels Standard (CFS) will increase renewable liquid fuels demand (>2x growth by 2030) ENERGY EXPANSION • Canadian market capacity currently does not meet existing regulatory requirements with domestically produced fuels • CFS is ex
Slide 46: Controlling costs, reducing carbon & increasing margins
Controlling costs, reducing carbon & increasing margins 1,2 Controlling regulatory compliance cost: Producing renewable fuels controls costs, retains margin and returns vs. purchasing increasingly large volumes of 3rd party fuels to meet compliance upon CFS rollout Reducing carbon: ENERGY EXPANSION
Slide 47: Hydrogen
Hydrogen 1,2 • Suncor produces ~15% of Canada's supply and accounts for ~20% of Canada's demand for upgrading and refining processes ENERGY EXPANSION • Hydrogen accounts for ~15% of operated carbon emissions • CCUS can capture CO2 emissions from current grey hydrogen process, reducing carbon complia
Slide 48: Financial outlook & shareholder returns
Financial outlook & shareholder returns SUNCOR ENERGY 48
Slide 49: OS&G improvements – lowering absolute costs
OS&G improvements – lowering absolute costs 1 FINANCIAL OUTLOOK • Defined path to lowering absolute OS&G to ~$9.5 billion by 2025 • ~$1.7B (~15%) reduction from 2019, while modestly increasing production SUNCOR ENERGY 1, 2 49
Slide 50: Cash operating costs per barrel – targets realized
Cash operating costs per barrel – targets realized 1,2 FINANCIAL OUTLOOK • Realization of cash operating costs per barrel targets: • Syncrude by end of 2023 • Fort Hills by 2024 • Oil Sands Operations by 2025 SUNCOR ENERGY 1, 2 50
Slide 51: Asset sustainment and maintenance capital reductions
Asset sustainment and maintenance capital reductions1 New technologies and Cogen2 enhance FINANCIAL OUTLOOK • resilience and lower required capital • Sustain higher production of 800kbpd vs. 2018/19 production of 750kbpd average • Expected spend 2022-2025 of ~$3 billion SUNCOR ENERGY 1, 2 51
Slide 52: Sustainable dividend increases by lowering operating breakeven
Sustainable dividend increases by lowering operating breakeven1,2,3 • Note – all dividends and buybacks are subject to board approval • Rationalization of costs & capital results in continued lowering of breakeven FINANCIAL OUTLOOK • Operating Breakeven = operating costs + asset sustainment & mainte
Slide 53: ~25% CAGR dividend increase at $US35 WTI breakeven
~25% CAGR dividend increase at $US35 WTI breakeven 1,2,3 Lowered operating breakeven via reduced costs and capital and margin growth leads to dividend growth FINANCIAL OUTLOOK Dividend increases tested at Corporate breakeven of $US35 WTI Post dividend increases leaves room for: • Debt reduction • Ec
Slide 54: Balance sheet & debt reduction targets
Balance sheet & debt reduction targets 1,2 • Fortification of balance sheet to weather future commodity cycles Renewed leverage targets FINANCIAL OUTLOOK • include capital leases: • Net-debt-to-FFO3: <2.0X by 2025 & <1.5X by 2030 (at US$55/bbl WTI) • Absolute net debt target ranges: $12 – 15 billion
Slide 55: Share buyback scenario
Share buyback scenario 1,2 FINANCIAL OUTLOOK • Disciplined share buybacks • Combined with current dividend, ~40% of FFO3 allocated to shareholder cash returns (at US$55/bbl WTI) SUNCOR ENERGY 1, 2, 3, 4 55
Slide 56: Economic capital spending priorities
Economic capital spending priorities1 • Significant capital spend reduction from FINANCIAL OUTLOOK production growth phase (2016 – 2019) to optimization phase (2021 – 2025) • No longer investing in mega projects to grow production • Invest in the business to grow cash flow SUNCOR ENERGY 1, 2 56
Slide 57: Disciplined capital spending
Disciplined capital spending1 Total capital spend ceiling of $5 billion (2022-25) FINANCIAL OUTLOOK • ~10% reduction in asset sustainment and maintenance capital vs. 2018/19 average • ~35% reduction in economic capital vs. 2016-19 average • ~10% of total capital spend allocated to energy expansion S
Slide 58: Capital allocation in $US55 WTI scenario
Capital allocation in $US55 WTI scenario 1,2 • 5 year plan shows FFO3 growth & resilience1,2 FINANCIAL OUTLOOK • ~25% dividend CAGR at $US35 WTI Corporate breakeven4 • Targeted debt reduction • Disciplined buybacks and capital ($5 billion ceiling) SUNCOR ENERGY 1, 2, 3, 4, 5 58
Slide 59: Financial & capital allocation priorities
Financial & capital allocation priorities1,2 $2 billion free funds flow3 initiatives lower the cost structure & increases margins ~25% dividend CAGR (2021-25) in-line with $2 billion realizations FINANCIAL OUTLOOK Fortification of the balance sheet Excess free funds flow to share buy backs Capital d
Slide 60: Growth & resilience through the cycle
Growth & resilience through the cycle 1 FINANCIAL OUTLOOK SUNCOR ENERGY 1, 2, 3, 4, 5 60
Slide 61: Cumulative FFO allocation - US$55/bbl WTI scenario
Cumulative 5 year FFO allocation - US$55/bbl WTI scenario1,2,3,4 Cumulative FINANCIAL OUTLOOK shareholder returns 2021-2025 ~$21/share SUNCOR ENERGY 1, 2, 3, 4, 5 61
Slide 62: Appendix
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Slide 63: 2021 investor day price deck and sensitivities
2021 investor day price deck and sensitivities 1 Pricing Assumptions 2018/19 average 2021 2022-2025 Exchange rate US$/CDN$ 0.76 0.80 0.76 Brent USD/bbl 67.68 65.00 60.00 WTI USD/bbl 60.93 60.00 55.00 WCS diff USD/bbl (19.55) (12.50) (15.00) APPENDIX SYN diff USD/bbl (3.38) (2.00) (3.00) NYH 2:1:1 US
Slide 64: $2 billion free funds flow rollout
$2 billion free funds flow rollout 1,2 3 APPENDIX SUNCOR ENERGY 1, 2, 3 64
Slide 65: Renewable liquid fuels
Renewable liquid fuels APPENDIX SUNCOR ENERGY 65
Slide 66: Advisories
Advisories Forward-Looking Statements – This presentation contains certain “forward-looking extent anticipated; dividends declared and share repurchases; the sufficiency of herein do not have any standardized meaning and therefore are unlikely to be statements” within the meaning of the United State
Slide 67: Slide notes
Slide notes Slide 2------------------------------------------------------------- (2) In the first quarter of 2021, the Syncrude joint venture owners finalized the agreement for Suncor expenses that were capitalized (under IFRS) were reallocated as an expense for comparability with (1) Free funds flo
Slide 68: Slide notes
Slide notes Slide 22------------------------------------------------------------- See Non-GAAP Measures in the Advisories. subject to change as well as possible future opportunities which may be subject to Board of (1) Based on company’s current business plans and the current business environment, w
Slide 69: Slide notes
Slide notes Slide 34------------------------------------------------------------- expected benefits. See Forward-Looking Statements and Impact of the COVID-19 Pandemic in Directors’, counterparty and regulatory approval. Actual results may differ materially. There can (1) Based on company’s current
Slide 70: Slide notes
Slide notes Slide 55------------------------------------------------------------- Directors’, counterparty and regulatory approval. Actual results may differ materially. There can excluding changes in non-cash working capital. (1) Based on company’s current business plans and the current business en
Slide 71: Investor Relations contacts
Investor Relations contacts Trevor Kate Muhammad Kinga Stacey Bell Charlton Usman Uto Hunter Vice President IR Director IR Senior Analyst IR Senior ESG Analyst IR Coordinator IR tgbell@suncor.com kcharlton@suncor.com muusman@suncor.com kuto@suncor.com sthunter@suncor.com APPENDIX Visit us at the Inv