Suncor Energy Inc. · TSX:SU
Suncor Energy — Q3 2019 Earnings Presentation
40 slides from Suncor Energy's earnings presentation, Oct 30, 2019
Slide 1: Investor Information Q3 2019
INVESTOR INFORMATION Q3 2019 Published October 30, 2019
Slide 2: A resilient business focused on shareholder returns
2 A resilient business focused on shareholder returns Cash generation Funds flow growth progress Significant upside FFO1 sensitivity to WTI, based on TTM 2 actuals Strong potential FFO1 increase largely independent of market conditions (C$ billion) $14 FFO1 sensitivity to WTI based on TTM2 operating
Slide 3: Integrated across the value chain
3 Integrated across the value chain Long life, low decline assets 100% oil production High margin barrels Strong downstream markets Iconic Canadian retail brand 28+ years ~940 mbpd ~600 mbpd ~460 mbpd ~1750 2P Reserve Life Index1 Oil production nameplate Heavy upgrading nameplate Refining nameplate
Slide 4: Multi-year focus on structural free funds flow growth
4 Multi-year focus on structural free funds flow growth1,2 Increasing FFO3 ~5% CAGR4 anticipated (2019 – 2023) Production High return growth opportunities growth6 Free funds In situ replication Opportunistic share buybacks flow growth projects1,6 Maintain and grow the dividend Production Debottlenec
Slide 5: Suncor's competitive advantage
5 Suncor’s competitive advantage Long life, low decline Unique business Financial strength and low cost integration through market cycles ~785 mbpd 2019 production guidance midpoint5 ~1,000 mbpd of conversion capacity6 Resilient free funds flow8 ~31yrs ~600 mbpd of heavy upgrading capacity7 ~$93 ~$6
Slide 6: The foundation of our business
6 The foundation of our business Operational excellence Personal and Process Safety Journey to Zero – goal to eliminate all workplace incidents RELIABLE Reliability Continuously improve the reliability of our business Cost Management Continuous focus on structural cost reduction initiatives Environm
Slide 7: Capital discipline – flexible capital allocation plan
7 Capital discipline – flexible capital allocation plan1 US$10/bbl increase in Brent price would generate ~$2.4 billion of additional FFO 2 Capital commitment Discretionary capital (C$) Sustained Balance Production price sheet growth to Sustaining outlook* leverage Buyback4 20203 Dividend4 Capital1,
Slide 8: Free funds flow growth – Medium-term investment proposition
8 Free funds flow1 growth – Medium-term investment proposition2 Free funds flow1 improvement potential for years 2020 - 2023 inclusive3 Excluding commodity price changes & largely independent of production growth Identification structural free funds flow1 growth Scoping Total $2B $2.0B through margi
Slide 9: New Cogeneration Facility Sanctioning
9 New Cogeneration Facility Sanctioning1 Heat required for mining operations Economically Robust HIGH % IRR independent of oil price & pipeline egress TEEN 2 Natural gas INPUTS Water $1.4B Capital investment over 4 years Increase revenue from power sales 0 Lower sustaining capital by replacing aging
Slide 10: Disciplined cost management
10 Disciplined cost management History of structural cost reductions Medium-term cash operating Consistent reduction in Oil Sands operations cash operating costs (C$/bbl) (Fort Hills and Syncrude cash operating costs are not included) cost targets4 (C$/bbl) $40 Oil Sands1 Oil Sands ≤ $20/bbl $37.00
Slide 11: Generating discretionary free funds flow
11 Generating discretionary free funds flow 1 FFO2 consistently exceeds sustaining capital, associated capitalized interest and dividends (C$ 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 $
Slide 12: Returning value to shareholders
12 Returning value to shareholders Dividend increases1 for 17 consecutive years & opportunistic share buybacks2 17% $0.42 ~$5 billion ~$1.8 billion $2 billion Share repurchases Share repurchase Q1 2019 dividend Q3 2019 dividend per NCIB programs executed3 completed program commenced increase share (
Slide 13: Strong balance sheet
13 Strong balance sheet 1.5x Net debt to FFO1 Net debt to FFO1 1.3x under the previous leasing standard2 Has remained within target range throughout all price cycles Target < 3x 28% Total debt to capitalization 97.95 26% under the previous leasing standard2 94.20 93.00 Target 20-35% WTI $7.4B 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 funds flow Shareholder returns R
Slide 15: Strong return on capital employed moving into 2020
15 Strong return on capital employed1 moving into 2020 ROCE1 comparison 20% $100 15% Oil Sands Peers $80 $60 10% Suncor's spending on major capital projects $40 Fort Hills and Hebron completed 5% $20 0% $- -5% $(20) 2014 2015 2016 2017 2018 Q2 2019 The 50-year, long-life, low-decline TTM2 production
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 fuel3 Sales from Suncor refineries (~1%) W
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 Firebag to basemine 80% 79% fully operational Suncor
Slide 22: Sustainability leadership
22 Sustainability leadership Improving GHG performance Investing in the energy transition Building Indigenous partnerships Goal to reduce corporate GHG emissions Investing in new technologies across our value Increasing the participation of Indigenous intensity by 30% by 20301 chain to reduce costs
Slide 23: Tailings reclamation – Reducing costs and footprint with PASS
23 Tailings reclamation – Reducing costs and footprint with PASS PASS technology aims to treat fluid tailings to accelerate reclamation and lower our environmental footprint at a lower cost Successful commercial implementation achieved in 2018 Suncor pioneered TROTM in 2010 (Tailings Reduction Opera
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 – 3,250 17% 410,000 – 425,000 Oil Sands operations E&P 1,000 – 1,150 97% 85,000 – 90,000 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 *All values net to Suncor In Situ Mining Firebag Base Plant 203,000 bpd capacity 350,000 bpd capacity Suncor WI 100% Suncor WI 100% 2,553 mmbbls 2P reserves1 1,418 mmbbls 2P reserves1 MacKay River Syncrude 38,000 bpd capacity Syncrude operated
Slide 27: In Situ Replication – Longer term organic growth
27 In Situ Replication1 – Longer term organic growth Targeting less than $50 WTI (USD) cost of capital breakeven 1 Planned phases of 40 mbpd next ~10 generation in situ facilities (replication) 3 Phases submitted for regulatory approval 7 2 approved and 5 pending approval 2024 Potential first oil fr
Slide 28: Canada's largest Refining & Marketing business
28 Canada’s largest Refining & Marketing business Edmonton refinery Sarnia refinery 142,000 bpd capacity1 85,000 bpd capacity1 100% oil sands feedstock2 ~80% oil sands feedstock2 Commerce City refinery Montreal refinery 98,000 bpd capacity1 137,000 bpd capacity1 ~20% oil sands feedstock2 ~30% oil sa
Slide 29: Refining & Marketing – Demonstrating cash flow resilience
29 Refining & Marketing – Demonstrating cash flow resilience R&M funds from operations1 WTI – WCS ($US/bbl) Refinery utilization vs. US average Suncor Capturing the value of widening differentials FFO ($C billions) Percent of refining capacity US Average2 26.30 Full turnaround 5 25.50 30 100% at the
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 100 • 6 mbbls/d anticipated net peak production Hebron • First oil expected 2021 80 White Rose 60 Hibernia Buzzard Phase 2 (UK) 40 Terra Nova • 29.89% workin
Slide 32: Long life, low decline reserves base
32 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 production g
Slide 33: Track record of counter-cyclical acquisitions and divestments
33 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 5% Syncrude WI 4 Murphy Oil $40 NYH 2-1-1 US$/bbl Pioneer r
Slide 34: Notes
34 Notes SuNCoR)
Slide 35: Advisories
35 Advisories Forward-Looking Statements – This presentation contains certain marketing operations (including credit risks); imprecision of reserves cash operating costs, mining cash operating costs, return on capital “forward-looking statements” within the meaning of the United States estimates and
Slide 36: Slide Notes
36 Slide Notes Slide 2-------------------------------------------------------------- capital expenditures plus well pad spend (inclusive of associated interest before royalties. See Reserves in the Advisories. (1) Funds from operations (FFO) is a non-GAAP financial measure. capitalized interest) bas
Slide 37: Slide Notes (continued)
37 Slide Notes (continued) Slide 7-------------------------------------------------------------- Annual emissions reduction estimate of 2.5MT represents See Non-GAAP Measures in the Advisories. (1) Based on current business plans, which are subject to change. combined project and provincial reductio
Slide 38: Slide Notes (continued)
38 Slide Notes (continued) Slide 12 continued----------------------------------------------- Slide 15------------------------------------------------------------ Slide 19------------------------------------------------------------ (5) Based on the weighted average number of shares outstanding in (1)
Slide 39: Slide Notes (continued)
39 Slide Notes (continued) Slide 23 ------------------------------------------------------------- target. See Forward-Looking Statements in the Advisories. as cash flow from operations) for E&P and subtracting E&P (1) MFT refers to mature fine tailings, which occur in the middle layer (2) Gross proj
Slide 40: Investor Relations contacts
Investor Relations contacts Trevor Bell Kate Charlton Valerie Roberts Kinga Uto Ben Harris Vice President IR Director IR Senior Analyst IR Senior ESG Analyst IR Analyst IR [email protected] [email protected] [email protected] [email protected] [email protected] Visit us at the Investor Centre o