Suncor Energy Inc. · TSX:SU
Suncor Energy — Q4 2017 Earnings Presentation
40 slides from Suncor Energy's earnings presentation, Feb 21, 2018
Slide 1: Suncor Energy Investor Information
Fort Hills first PFT oil Suncor Energy Investor Information Published February 21, 2018
Slide 2: Canada's leading integrated energy company
2 Canada’s leading integrated energy company $89B Enterprise value December 31, 2017 1 35+ years 2P Reserve life index as at Dec. 31, 2016 2 685mboepd 100% Oil production 462mbpd Refining capacity FY 2017 3 >531mbpd Product sales FY 2017 ~1750 Retail sites In North America Oda 1, 2, 3 See Slide Note
Slide 3: The Suncor advantage
3 The Suncor advantage Financial flexibility Long life & low decline Strong balance sheet Cost and carbon competitive Financial — 1.4x A low ~40yrs $34.50 Oil Sands 2P 2017 sustaining capex Net debt to FFO1 Baa1 Reserve Life Index2 + cash cost / bbl3 50+ years of operations E&P 16 years of dividend
Slide 4: Near-term investment proposition – growing shareholder returns
4 Near-term investment proposition – growing shareholder returns Growth Cash generation Strong production1 increase from projects in flight Significant upside FFO3 sensitivity to WTI, based on TTM4 actuals mbpd US$50.95 WTI, 0.77 C$/US$, US$17.70 NYH 3-2-1 crack spread 900 (C$ billion) $14 800 9% $1
Slide 5: Medium-term investment proposition – free funds flow growth
5 Medium-term investment proposition – free funds flow growth1 Growth Margin improvements Opex & Sustaining capital Firebag Coke fired boiler E&P AHS2 deployment Steam generation & Value developments replacement Basemine implementation water handling Lower cost, high efficiency & asset extensions Hi
Slide 6: The foundation of our strategy
6 The foundation of our strategy Operational excellence Optimizing the base business Suncor and Syncrude upgrader reliabilities Multi year journey to reach >90% reliability • Safety as a core value Baseplant Syncrude 91% 91% 90% • Industry leading reliability 88% 82% 83% • Disciplined cost managemen
Slide 7: Disciplined cost management
7 Disciplined cost management Total OS&G ~5% below 2014 levels while production increased ~30% Consistent reductions in unit operating costs C$/bbl 40% Oil Sands1 E&P2 685 mbpd $37.05 30% $37.00 R&M3 $33.80 20% Production $27.85 $26.50 10% $23.80 535 mbpd 0% $9.75B $9.92 $8.59 $10.03 $9.67 $8.32 $7.
Slide 8: Generating discretionary free funds flow
8 Generating discretionary free funds flow1 FFO2 consistently exceeds sustaining capital, associated capitalized interest and dividends (C$ billions) $10 $9.1 Expected Impacts to 2018 FFO $8 Fort Hills & Hebron ramp-up • Full opex costs • Partial production $6.8 $6 $6.0 Heavy maintenance year • U1 m
Slide 9: Capital discipline – near-term flexible capital allocation plan
9 Capital discipline – near-term flexible capital allocation plan1 Production Growth Balance sheet Capital 1 growth Dividend3 Buybacks3 post 2019 leverage metrics to 20202 Defer $40 WTI $4.0B debottlenecking and Upper range None USD pre-engineering on replication Invest in Grow with $50-$55 9% value
Slide 10: Returning cash to shareholders
10 Returning cash to shareholders 16 consecutive years of dividend increases 1 & opportunistic share buybacks with planned NCIB renewal2 5% Dividend + buyback yield3 84% 5-year TSR4 $1.4B Share repurchases in 2017 As of December 31, 2017 Including reinvested dividends Completed 70% NCIB2 2012-2017 1
Slide 11: Strong balance sheet
11 Strong balance sheet Conservative debt targets Debt metrics - as at December 31, 2017 <3x Net debt to FFO1 1.4x Net debt to FFO1 20-30% Total debt to capitalization 26% Total debt to capitalization Investment grade credit rating $7.2B Liquidity A— DBRS Rating Limited (A Low) Stable Cash & cash eq
Slide 12: Returns & balance sheet superior to oil sands peers
12 Returns & balance sheet superior to oil sands peers Only oil sands company delivering on both shareholder returns and balance sheet commitments Grow the dividend with sustainable funds Maintain a strong balance sheet as a flow increases and execute opportunistic strategic asset share repurchases
Slide 13: Performance in line with supermajors
13 Performance in line with supermajors Suncor delivers strong production growth while offering shareholder returns and balance sheet strength in line with the supermajors Production growth Shareholder returns Strong balance sheet Supermajors’ growth limited by their scale Grow the dividend with sus
Slide 14: Regional synergies for existing assets
14 Regional synergies for existing assets 100% WI Fort Joint ownership Hills Regional synergy opportunities1 P Upgrader feedstock optionality Syncrude Turnaround planning optimization Joslyn C Unplanned outage impact mitigations Firebag In Situ Process and technology sharing MacKay River Syncrude In
Slide 15: Oil sands bitumen production
15 Resilient to Western Canadian L/H1 differential $1.00/bbl widening of WTI-WCS differential expected to result in ~$25 million decrease in FFO2 in 2018 Royalty paid on bitumen Revenue made on the value of Suncor’s Minimizing exposure to production integration and optionality wide differential mark
Slide 16: In situ – cost reduction history and enhanced future designs
16 In situ – cost reduction history and enhanced future designs Structural cost savings Next generation well pad design $/bbl SOR Simplified sustaining well pad design currently being deployed $26 4 New in situ well pad compared to previous Suncor designs: 9100 $13 2 230 3 0.7 625 25 $0 0 2012 2013
Slide 17: Replication – longer term organic growth
17 Replication1 – longer term organic growth Targeting $50 WTI (USD) breakeven cost of capital1 Planned phases of 40 mbpd next ~10 generation in situ facilities (replication) Phases in regulatory process 7 2 approved, 1 submitted and an additional 4 to be submitted in 2018 2023 Potential first oil f
Slide 18: Syncrude – increasing ownership of an improving asset
18 Syncrude – increasing ownership of an improving asset 36.74% COS WI transaction Effective March 21, 2016 58.74% Suncor WI As at January 1, 2018 5% Murphy WI transaction Effective April 1, 2016 ~$53 k/bpd Capital intensity 5% Mocal WI transaction1 Effective January 1, 2018 Capital intensity of acq
Slide 19: Syncrude – realized and near-term synergies
19 Syncrude – realized and near-term synergies Response and recovery following the Syncrude incident in March 2017 Suncor collaborated with Syncrude by: • trucking untreated product from Syncrude to baseplant, avoiding complete shutdown of the cokers • supplying key parts and materials from Suncor i
Slide 20: Fort Hills – transitioned to continuous operation
20 Fort Hills – transitioned to continuous operation January 2018 2018 guidance First PFT1 oil Metric Q1 Q2 Q3 Q4 6,000 bbl/d Production (mbpd) 20-40 30-50 60-70 80-90 FH bitumen2 processed at baseplant in Q4 2017 Opex7 $70-80 $40-50 $30-40 $20-30 (/bbl) 53.06% Suncor working interest Operations 103
Slide 21: Fort Hills – designed for safe, reliable, low-cost ramp-up
21 Fort Hills – designed for safe, reliable, low-cost ramp-up and operations Based on regional benchmarking, Suncor has invested significant capital to meet or exceed ramp-up and performance targets Investments included in pre-sanction design with associated capex1 6-months pre-stripping (~$120M) Ra
Slide 22: Fort Hills – staged approach to secondary extraction ramp-up
22 Fort Hills – safe, staged approach to secondary extraction ramp-up Secondary extraction – process by which water and fine solids are removed from bitumen froth using hydrocarbon-based gravity separation Secondary extraction is mechanically complete 65% of secondary extraction is fully commissione
Slide 23: Autonomous Haul Trucks – operationalizing technology
23 Autonomous Haul Trucks – operationalizing technology Four year evaluation followed by six year phased implementation starting in 2018 Truck evaluation 1 year (2014) 6 truck commercial evaluation – optimizing mine operations & processes 3 years (2015-2017) Commercial ramp-up 6 years (2018+) ~10% p
Slide 24: ESG leadership
24 ESG leadership Environment Resilience through strategy GHG reduction Meaningful disclosure Stress test carbon strategy against three Regulatory submission to replace coke-fired boilers with Issued first sustainability report in 1995 – energy futures scenarios two cogeneration units more than two
Slide 25: Appendix
Appendix SuNCoR)
Slide 26: 2018 Capital and production guidance
26 2018 Capital and production guidance1 2018 Capital2 Growth capital3 Production4 $ millions percent boepd Upstream 3,650 – 4,050 30% 425,000 – 455,000 Oil Sands operations Downstream 800 – 850 0% 50,000 – 60,000 Fort Hills Corporate 50 – 100 0% 150,000 – 165,000 Syncrude 105,000 – 115,000 E&P 415,
Slide 27: Typical attributes of North American oil plays
27 Typical attributes1 of North American oil plays Initial Decline Sustaining Operating Reservoir Recovery Illustrative annual funds flow profiles2 capital rate costs cost risk factor Mining High Very low Very low Medium Very low Very high In situ Medium Low Low Low Low High Offshore High High Mediu
Slide 28: High quality mining, in situ and upgrading portfolio
28 High quality mining, in situ and upgrading portfolio1 Base Plant Syncrude 350,000 bpd capacity Syncrude operated Suncor working interest 100% 188,000 bpd coking capacity (SU WI) 1,619 mmbbls 2P reserves Suncor working interest 58.74% 1,438 mmbbls 2P reserves (SU WI)2 Firebag Fort Hills 203,000 bp
Slide 29: Market access for Oil Sands production
29 Market access for Oil Sands production Suncor currently has approximately 750 mbpd of near-term market access1 Proposed projects would provide Suncor with expanded pipeline connectivity to markets Pipeline Current and forecasted gross pipeline capacity2 Feeder lines TMPL Fort McMurray 300 mbpd ca
Slide 30: Canada's largest Refining & Marketing business
30 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 31: Refining & Marketing – the value of integration
31 Refining & Marketing – the value of integration R&M annual net earnings1 Suncor peers1 Refinery utilization vs. US average Suncor US$/bbl of capacity High Percent of refining capacity Average US Average2 $15 Low 100% $10 90% $5 $0 80% 2012 2013 2014 2015 2016 Q3 YTD 2017 2012 2013 2014 2015 2016
Slide 32: Offshore with >410 million barrels of 2P reserves
32 1 Offshore with >410 million barrels of 2P reserves Terra Nova Hibernia Suncor Energy operated ExxonMobil operated Suncor working interest 37.675% Suncor working interest 20.0%2 43 mmboe 2P reserves (SU WI) 88 mmboe 2P reserves (SU WI) White Rose Buzzard Husky Energy operated Nexen Petroleum UK o
Slide 33: E&P – High value projects & upside potential
33 E&P – High value projects & upside potential $1.7B of FFO1, $645M of capex and $746M of operating earnings1 in 2017 High return investment opportunities Maximizing value of existing assets 50% Within discovered resources Average project IRR >30%2 Planned first oil before 2025 Range of capital inv
Slide 34: Track record of counter-cyclical acquisitions and divestments
34 Track record of counter-cyclical acquisitions ( ) and divestments ( ) $100 WTI US$/bbl Total E&P Canada 1 10% Fort Hills WI $80 $ Non-core UK offshore Canadian Oil Sands 2 37% Syncrude WI $60 Petro-Canada 6 1 5 2 4 Rosebank 3 3 $40 30% WI $20 Murphy Oil 4 5% Syncrude WI $40 NYH 3-2-1 US$/bbl Pion
Slide 35: Notes
35 Notes SuNCoR)
Slide 36: Advisories
36 Advisories Forward-Looking Statements – This presentation contains applicable political and economic conditions; risks associated with Funds from operations is defined in the Quarterly Report, and for 2017 certain “forward-looking statements” within the meaning of the existing and potential futur
Slide 37: Slide Notes
37 Slide Notes Slide 2------------------------------------------------------------- and 2016 full year liquids production and planned volumes for 2020. environment, which are subject to change. Actual results may differ (1) Market capitalization + debt - cash and cash equivalents. Includes the acqui
Slide 38: Slide Notes (continued)
38 Slide Notes (continued) Slide 8 (continued)----------------------------------------------------- the twelve months ended December 31, 2015 ($0.03/share by dividing in situ sustaining capital by in situ bitumen production, all as (5) Represents anticipated sustaining capital expenditures (inclusiv
Slide 39: Slide Notes (continued)
39 Slide Notes (continued) Slide 20 (continued)--------------------------------------------- economics (development capital, operating and sustaining costs) accounting, while Suncor reports on a first in first out (FIFO) basis (7) Refers to Fort Hills cash operating costs per barrel, which is using
Slide 40: Investor Relations contacts
Investor Relations contacts Steve Douglas David Burdziuk Valerie Roberts Ever Motis Vice President IR Director IR Senior Analyst IR Associate IR [email protected] [email protected] [email protected] [email protected] Visit us at the Investor Centre on suncor.com 1-800-558-9071 [email protected]