Suncor Energy Inc. · TSX:SU
Suncor Energy — Q4 2016 Earnings Presentation
40 slides from Suncor Energy's earnings presentation, Feb 8, 2017
Slide 1: Investor Information
Cover Photograph – Fort Hills secondary extraction construction as at October 31, 2016 Investor Information Published February 8, 2017
Slide 2: Suncor investment thesis
2 Suncor investment thesis Growth from inflight projects Cash generation upside sensitivity Production1 increase Benchmarked off 2016 $5988M Funds from Operations (FFO3) and US$43.75 (mbpd) realized Brent pricing, 0.75 C$/US$, US$14.05 NYH crack spread (C$ billion) FFO sensitivity to Brent pricing 8
Slide 3: Suncor value proposition
3 Suncor value proposition Operational excellence Optimizing the base business • safety as a core value • industry leading reliability • disciplined cost management • leader in sustainability Capital discipline Rigorous capital allocation process • vast portfolio of high quality organic growth oppor
Slide 4: Strong production growth through the end of the decade
4 Strong production growth through the end of the decade Suncor’s production growth forecast1 (mbpd) 2016-2019 planned CAGR2 ~10% per share Hebron 800 E&P 700 600 Syncrude 500 Fort Hills forest fire impact 400 Base Oil Sands 300 Firebag MacKay Alberta 200 Base Mine 100 Major Oil Sands U2 FB U1 Turna
Slide 5: Significant and sustainable cost reductions
5 Significant and sustainable cost reductions Operating, selling and general expenses Oil Sands operations cash operating costs1 C$ billions C$/bbl $~1.40 $10.00 $39.05 $37.05 $37.00 COS & Murphy $9.50 $33.80 additions $~0.85 $9.15 $27.85 $26.50 $8.60 $~1.00 $23.75 Q1,Q3 & Q4 Average2 2014 2015 2015
Slide 6: Generating discretionary free cash flow
6 Generating discretionary free cash flow1 Funds from operations2 consistently exceeds sustaining capital, associated capitalized interest and dividends (C$ billions) $10 $9.4 $9.1 $8 $6.8 $6 $6.0 $1.1 $4 $1.5 $1.6 $1.9 $2 $3.8 $3.1 $2.7 $2.3 $5.2 $0 2013 2014 2015 2016 2017 E WTI US$4 $97.95 $93.00
Slide 7: Capital Discipline
7 Capital Discipline “Let me be clear - for us, having cash available to invest doesn't mean we're going to run out and spend it. We remain steadfast in our commitment to exercise discipline in allocating that capital.” Steve Williams, President and CEO, Barclays Conference 9/7/2016 Capital Allocati
Slide 8: Returning cash to shareholders
8 Returning cash to shareholders A leader in dividend growth1 Growing dividends throughout the crude price cycle Five year dividend growth relative to global peers (Q4 2011 – Q4 2016) % dividend growth, 2010 baseline 200% 200% $94.90 $97.95 $94.20 100% Suncor $79.50 $93.00 100% $48.75 0% $43.35 0% -
Slide 9: Strong balance sheet coming out of the downcycle
9 Strong balance sheet coming out of the downcycle Conservative debt targets Debt metrics as at December 31, 2016 <3x net debt to FFO1 2.4x net debt to FFO1 20-30% total debt to capitalization 2 28% total debt to capitalization2 Alow — investment grade credit rating liquidity Baa1 DBRS Rating Limite
Slide 10: Suncor's acquisitions of additional Syncrude Working Interest
10 Suncor’s acquisitions of additional Syncrude Working Interest (WI) Transaction history Near term benefits COS transaction closed Expected annual synergy2 savings 3/21/16 36.74% working interest ~$25M at time of acquisition 6/23/16 Murphy transaction closed Actual annual synergy2 savings 5% workin
Slide 11: Syncrude's journey to reliable low cost operations
11 Syncrude’s journey to reliable low cost operations 2015 Identification of production constraints and reliability risks 2016 Disciplined execution of the reliability improvement plan Q1 2016 Suncor COS transaction closed Q2 2016 Suncor Murphy transaction closed Q3 2016 Successful asset start-up an
Slide 12: Advancing the Syncrude partnership
12 Advancing the Syncrude partnership Owners have aligned on framework to drive and sustain world class performance Ownership • Then: seven owners, with 37% WI held by experienced oil sands miners • Now: five owners, with 79% WI held by experienced oil sands miners Governance Governance • Syncrude g
Slide 13: The Suncor view on Syncrude: significant opportunities ahead
13 The Suncor view on Syncrude: significant opportunities ahead >90% <30 $/bbl 2020 Asset Reliability Cash Cost Target Year Objective Opportunities Estimated benefit1 • Operations forums created to share best practices, Performance incident learnings, benchmarking and stewardship $1.0-1.5B NPV impro
Slide 14: Fort Hills progress as at December 31, 2016
14 Fort Hills progress as at December 31, 2016 • Fabrication complete • All major plant equipment and materials at site >76% Construction complete • All major vessels and process modules installed • Mining shovels, trucks and equipment arriving on site • Overburden removal and mine preparation on sc
Slide 15: Fort Hills - Sanction overview and current status
15 Fort Hills - Sanction overview and current status Quality - Designed to maximize capacity while optimizing reliability • Leverages the best process and technology designs of developed and operating oil sands projects Cost - Building during a time of reduced activity in the region • Modular design
Slide 16: Fort Hills capital cost and schedule
16 Fort Hills capital cost and schedule Five of six project scope areas tracking on budget and schedule Project capital increase is primarily related to secondary extraction • Post-sanction PFT technology design development with emphasis on asset reliability and process safety • Productivity challen
Slide 17: Fort Hills additional opportunities under consideration
17 Fort Hills additional opportunities under consideration Early commissioning of primary extraction assets • Initial production of froth as early as Q3 2017, trucked to Suncor’s base mine for processing to bitumen with potential for future operations Production and capacity • Accelerated ramp-up •
Slide 18: Fort Hills - Designed for safe, reliable, low-cost operations
18 Fort Hills - Designed for safe, reliable, low-cost operations Based on regional benchmarking, Suncor has invested significant capital to meet or exceed performance targets Investments included in pre-sanction 6-months pre-stripping (~$120M) design with associated capex1 Ramp-up acceleration Post-
Slide 19: Fort Hills go forward expectations
19 Fort Hills go forward expectations – Q1 2017 through first oil Project execution focus • Complete utilities and secondary extraction (PFT) areas • Focus on construction productivity • Take advantage of attractive labour market • Highest quality construction, start-up and operations workforce Time
Slide 20: Environmental leadership
20 Environmental leadership ~55% Reduction in oil sands GHG intensity1 since 1990 Further total GHG emissions intensity reduction 30% target2 by 2030 Investing in and developing integrated renewable energy • Wind Developed 8 projects (395 MW), 2 proposed projects (280 MW) • Solar 3 proposed solar pr
Slide 21: Appendix
21 Appendix FC CCCs‘ (a .Hs_"|"":SC—C™EZ—=2 SuNcor )
Slide 22: Canada's leading integrated energy company
22 Canada’s leading integrated energy company $88B enterprise value1 December 31, 2016 35+ years 2P reserve life index as at Dec 31, 2015 2 623 mboepd 99% oil production 462 mbpd refining capacity Average 2016 inclusive of forest fire impact 1, 2 See Slide Notes and Advisories.
Slide 23: 2017 Capital and production guidance
23 2017 Capital and production guidance1 2017 Capital2 Growth capital3 Production4 $ millions Percent boepd Upstream5 4,135 – 4,475 50% 420,000 – 450,000 Oil Sands Operations Downstream 625 – 675 0% 150,000 – 165,000 Syncrude Corporate 40 – 50 0% 95,000 – 105,000 E&P 425,000 – 445,000 Refinery Throu
Slide 24: Current & Proposed Pipeline Projects: Summary
24 Current & Proposed Pipeline Projects: Summary Market access for Oil Sands production Suncor currently has approximately 750 mbpd of near-term market access1 Proposed projects could provide Suncor with new or expanded pipeline connectivity to markets Pipeline Current and forecasted gross pipeline
Slide 25: Refining & Marketing – the value of integration
25 Refining & Marketing – the value of integration R&M net earnings1 Suncor Peers1 Refinery utilization vs. US average Suncor US$/bbl of capacity High Percent of refining capacity US Average3 Average 100% Low 15 10 90% 5 0 80% 2012 2013 2014 2015 TTM2 2012 2013 2014 2015 2016 Price realizations and
Slide 26: Oil Sands production expected to exceed 700 mbpd by 2019
26 Oil Sands production expected to exceed 700 mbpd by 20191 Debottlenecks, brownfield expansions and growth projects expected to raise total Oil Sands production from 463 mbpd (2015) to greater than 700 mbpd (2019). Firebag • Further potential debottleneck opportunities5 • 23 mbpd debottleneck comp
Slide 27: Bitumen integration neutralizes the impact of light/heavy differential
27 Bitumen integration neutralizes the impact of light/heavy differential In situ Bitumen1: ~230 mbpd Base Mine Bitumen1: ~290 mbpd Syncrude Bitumen1: ~185 mbpd In situ bitumen to All Base Mine All Syncrude upgrader: ~110 mbpd bitumen upgraded bitumen upgraded ~20% shrinkage ~15% shrinkage factor fa
Slide 28: Technology: a significant part of Suncor's history and future
28 Technology: a significant part of Suncor’s history and future OIL SANDS MINING 1967 – GCOS (Suncor) First oil sands mine production 1992 – Suncor first to phase in truck and shovel oil 2014 – First oil sands AHS pilot sands mining 1978 – Syncrude’s first oil from oil sands mining 1967 – Pioneers
Slide 29: Current technology development portfolio
29 Current technology development portfolio1 Reduce GHG emissions Reduce costs & improve Reduce tailings / water / intensity profitability land footprint Surface process (lean facility development) Enhanced SAGD recovery processes (steam + additives) In Situ Steam generation technology (e.g. DCSG2)
Slide 30: Track record of counter-cyclical acquisitions and divestments
30 Track record of counter-cyclical acquisitions ( ) and divestments ( ) $100 WTI $80 US$/bbl Non-core UK offshore Rosebank $60 Fort Hills, WI Petro-Canada 10% additional WI $40 Canadian Oil Sands $20 Murphy Syncrude WI $40 NYH 3-2-1 US$/bbl $30 Pioneer retail network $20 Valero Commerce City Conoco
Slide 31: Comparing typical attributes of North American oil plays
31 Comparing typical attributes of North American oil plays1 Illustrative annual cash flow profile based off nameplate capacity at Fort Hills of 98 mbpd (Suncor WI)2 Mining & Tight Oil SAGD Offshore Upgrading Initial Capital Low Medium High High Reinvestment Cycle Short Long Ultra long Medium Operat
Slide 32: High quality mining, in situ and upgrading oil sands portfolio
32 High quality mining, in situ and upgrading oil sands portfolio1 Base Plant Syncrude 350,000 bpd capacity Syncrude operated Suncor working interest 100% 188,000 bpd coking capacity (SU WI) 1,662 mmbbls 2P reserves Suncor working interest 53.74% 2,264 mmbbls 2P reserves (SU WI)2 Firebag Fort Hills
Slide 33: Offshore oil projects with ~415 million barrels of 2P reserves
33 Offshore oil projects with ~415 million barrels of 2P reserves1 Terra Nova Hibernia Suncor Energy operated ExxonMobil operated Suncor working interest 37.675% Suncor working interest 20.0%2 44.4 mmboe 2P reserves (SU WI) 92.0 mmboe 2P reserves (SU WI)3 White Rose Buzzard Husky Energy operated Nex
Slide 34: Canada's largest refining & marketing business
34 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 Receiving crude
Slide 35: Advisories
35 Advisories Forward-Looking Statements – This presentation contains risk of war, hostilities, civil insurrection, political instability and be considered in isolation or as a substitute for measures of certain “forward-looking statements” within the meaning of the terrorist threats; assumptions re
Slide 36: Slide Notes
36 Slide Notes Slide 2-------------------------------------------------------------------------- using combined Offshore and Oil Sands 2016 full year actual averages for each respective year. The 2017 (1) Production excludes North America onshore, Libya and production, mid-point of combined offshore
Slide 37: Slide Notes (continued)
37 Slide Notes (continued) Slide 8-------------------------------------------------------------------------- (4) Subsequent to Q4 2016, the $950 million COS credit Slide 16------------------------------------------------------------------------ (1) Global peers in alphabetical order, not necessarily
Slide 38: Slide Notes (continued)
38 Slide Notes (continued) Slide 23 continued--------------------------------------------------------- and was converted at $1.33 USD/CAD, the average the full list of technology projects being developed within (5) The upstream capital spending outlook includes exchange rate for the period. Suncor a
Slide 39: Slide Notes (continued)
39 Slide Notes (continued) Slide 32 ---------------------------------------------------------------- (1) Percentages indicate processing capabilities (1) Reserves are working interest before royalties. See (2) Wind farm capacities are gross. Includes working Reserves in the Advisories. The estimates
Slide 40: Investor Relations Contacts
Investor Relations Contacts Steve Douglas David Burdziuk Leigh MacComb Peter Walls Vice President IR Manager IR 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]