Suncor Energy Inc. · TSX:SU
Suncor Energy — Investor Day (November 2022)
58 slides from Suncor Energy's investor day presentation, Nov 29, 2022
Slide 1: 2022 Investor Day
2022 Investor Day November 29th, 2022 1
Slide 2: Agenda
Agenda 1 Safety Above All Else Highlights actions to date and go-forward action plan to drive improvement 2 The Suncor DNA Our strategic competitive advantage 2022 Investor Day Objective 3 2023 Guidance To outline Suncor’s competitive advantage, Overview of corporate guidance for 2023 results of the
Slide 3: Safety Above All Else
Safety Above All Else Kris Smith 3
Slide 4: Significant steps taken to improve safety & asset reliability
Significant steps taken to improve safety & asset reliability Stage 1 – diagnosing the problem • Third party global safety expert feedback and input • Benchmarking to global best practices with specific emphasis on mining Stage 2 – bolstering leadership capacity & orientation SAFETY ABOVE ALL ELSE •
Slide 5: Clear and accelerated plan moving us forward
Clear and accelerated plan moving us forward Stage 3 – structured approach to improving safety & asset reliability 1. Risk management and controls • Collision awareness and fatigue management systems implementation • Standardization of processes focused on major incidents and hazards per global expe
Slide 6: The Suncor DNA
The Suncor DNA Kris Smith 6
Slide 7: Physical integration to maximize value of every barrel
Deep regional Physical integration to maximize Oil Sands integration (see slide 33) value of every barrel ~28 year Oil Sands Reserve Life Index ~25 mmbbl storage Western Canada 0.91 1.21 Mbpd Mbpd Brent (E&P) Brent (E&P) ~15 mmbbl storage Eastern Canada National wholesale & retail network Gasoline &
Slide 8: No exploration risk and ~7 Bboe of 2P reserves
No exploration risk and ~7 Bboe of 2P reserves – deep reserve life Decline Reservoir Recovery Production Mix rate risk factor (2023E) E&P ~15% decline Mining Very low Very low Very high THE SUNCOR DNA Syncrude ~0% decline In Situ Low Low High Oil Sands Operations ~0% mining decline & Fort Hills ~12%
Slide 9: Strong balance sheet & industry leading cash returns
Strong balance sheet & industry leading cash returns ~60 %cumulative of 10yr AFFO (less sustaining capex) • Long history of industry leading cash returns to returned to shareholders shareholders, ~$20 billion (dividends + buybacks) or >1/3 of average market cap returned to shareholders Top over five
Slide 10: 2023 Guidance
2023 Guidance Kris Smith 10
Slide 11: 2023 corporate guidance
2023 corporate guidance1 2023E Notes Oil Sands Operations 385 – 425 Increased focus on integration and regionalization with an uplift to per barrel margins Syncrude 175 – 190 In-depth review complete, and multi-year performance improvement plan Fort Hills2 90 – 100 commenced. Includes incremental 21
Slide 12: 2023 capital budget
2023 capital budget1 ECONOMIC Economic investment ($M) INVESTMENT CAPITAL2 Decline mitigation ~1,100 – 1,200 Top quartile IRR E&P ~725 – 775 West White Rose: ~$400M; ~30% IRR projects to improve efficiency, flexibility & In Situ well pads ~375 – 425 Firebag and MacKay River well pads; ~30% IRR resil
Slide 13: Downstream Update & Retail Review
Downstream Update & Retail Review Kris Smith 13
Slide 14: Downstream advantage – industry best utilization & profitability
Downstream advantage – industry best utilization & profitability Refinery utilization vs. industry Industry leading profitability during pandemic Percent of refining capacity 2020 R&M (excluding rack forward) EBITDA per barrel2 Suncor US Average1 Cdn Average1 DOWNSTREAM UPDATE & RETAIL REVIEW 100 Ma
Slide 15: Value drivers of Canada's strongest retail network
Value drivers of Canada’s strongest retail network Maximizing margin across all channels Suncor • Petro-Canada recognized as the #1 fuel brand1 in Canada DOWNSTREAM UPDATE & RETAIL REVIEW with ~18% market share Retail • Largest industry loyalty program >3 million active members NYH 2-1-1 • National
Slide 16: Retail strategic review criteria and alternatives assessed
Retail strategic review criteria and alternatives assessed Criteria Hold, optimize & partner IPO Sale Value of retail cash flows DOWNSTREAM UPDATE & RETAIL REVIEW Value of integration Value of customer connection & energy transition Strategic Capital allocation and shareholder returns Hold Partnersh
Slide 17: Value of retail cash flows
Value of retail cash flows Downside • Stable, low-risk cash flow at 15%+ IRR 800 protection 40% • Strong fuel volumes/margins supplemented by DOWNSTREAM UPDATE & RETAIL REVIEW attractive non-fuel offerings 600 30% • Significant contribution to Downstream EBITDA % of EBITDA EBITDA ($M) • Provides sta
Slide 18: Long-term value of integration
Long-term value of integration • Gasoline demand will decline over time with EV penetration/acceptance and government regulation 8 DOWNSTREAM UPDATE & RETAIL REVIEW • Retail is a secure controlled highest margin demand Potential volume Suncor Canadian gasoline production (BL) channel that mitigates
Slide 19: Retail sale vs. hold – valuation assessment
Retail sale vs. hold – valuation assessment Potential sale value based on independent Potential net sale Inherent DCF market check proceeds to Suncor value to Suncor ($B) 8 8 DOWNSTREAM UPDATE & RETAIL REVIEW 9.5x 7 7 6 7.5x 6 5 7.0x 5 4 4 5.0x 3 3 2 2 1 1 0 0 Potential Taxes & Long-term Potential n
Slide 20: Global market check – lots of interest but not full cash
Global market check – lots of interest but not in a full cash transaction • Extensive global market check coordinated by independent advisors DOWNSTREAM UPDATE & RETAIL REVIEW Process overview • 17 strategic and financial parties involved (both solicited and unsolicited) • Scale and quality of netwo
Slide 21: Board conclusion – hold and optimize value of retail network
Board conclusion – hold and optimize value of the retail network Board views retail as key part of integrated Downstream business and overall company strategy – integration value, downside protection, long-term value in demand decline scenario DOWNSTREAM UPDATE & RETAIL REVIEW Full sale does not off
Slide 22: Accelerated optimization plan to deliver 40% increase in EBITDA by 2027
Accelerated optimization plan to deliver 40% increase in EBITDA by 2027 • Incremental annual capex of ~$100M over 5 years 1,000 DOWNSTREAM UPDATE & RETAIL REVIEW • Target >20% return on capital for a low volatility cash flow business +$270M per year 750 • High-grade key controlled locations with ful
Slide 23: Upstream Operational Deep Dive – In Situ and E&P
Upstream Operational Deep Dive – In Situ and E&P Shelley Powell 23
Slide 24: Safety above all else
Safety above all else Strengthening our culture and enabling our people UPSTREAM OPERATIONAL DEEP DIVE – IN SITU AND E&P Personal safety Process safety Personal safety improvements are focused on progressive industry Process safety, and by extension reliability efforts best practices aimed at Seriou
Slide 25: In Situ assets are strong industry performers
In Situ (253 kbpd capacity) assets are strong industry performers Firebag (215 kbpd) 100% In Situ recently produced its 1 billionth barrel! UPSTREAM OPERATIONAL DEEP DIVE – IN SITU AND E&P 90% Utilization 2021 record production and strong utilization 80% Low-cost debottlenecks added >20% (43 kbpd) 3
Slide 26: In Situ is a cost and capital leader
In Situ is a cost and capital leader Cash operating costs and 30 UPSTREAM OPERATIONAL DEEP DIVE – IN SITU AND E&P capital ($/bbl) 20 In Situ leads the industry on combined cost and capital on a five-year average and on an annual basis in 2021 10 6% better than closest peer 18% better than peer avera
Slide 27: And we keep finetuning our strengths
And we keep finetuning our strengths Steam efficiency Well pad capital efficiency Data analytics UPSTREAM OPERATIONAL DEEP DIVE – IN SITU AND E&P Improve steam utilization by reducing unplanned Productivity improvements to operate each well restrictions, bottlenecks and outages Wells 2014-2018 2019
Slide 28: Industry leading In Situ assets with track record of growth
Industry leading In Situ assets with track record of growth UPSTREAM OPERATIONAL DEEP DIVE – IN SITU AND E&P • >20% increased capacity in the last 10 years through debottlenecks • Firebag capacity increased by 6% in 2020 • Potential for additional 25 kbpd debottleneck at Firebag by 2027 • Firebag So
Slide 29: E&P – focusing closer to the Canadian core
E&P – focusing closer to the Canadian core UPSTREAM OPERATIONAL DEEP DIVE – IN SITU AND E&P Strategy 4 120 • Focus on returns and free funds flow, not reserves • Consistent free funds flow (FFF) generation with 100 high returns 3 • Early to mid-life assets Brent (US$/bbl) 80 $B 2 60 2023 focus • Pro
Slide 30: Upstream Operational Deep Dive – Mining & Upgrading
Upstream Operational Deep Dive – Mining & Upgrading Peter Zebedee 30
Slide 31: My observations, and the path to improvement
My observations, and the path to improvement UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING • Safety: strong control framework, need to strengthen leader competency • People • Leadership: reduce span of control per leader and hours exposed to process safety risks – key drivers to improve safety
Slide 32: Major leadership changes to drive performance
Major leadership changes to drive performance in specific areas Average of 25+ years of operational experience per leader across the team UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING Peter Zebedee EVP Operations – Mining & Upgrading Mar. 2022 VP Regional VP Fort Hills SVP Syncrude SVP Regiona
Slide 33: Integrated footprint of Oil Sands assets
Integrated footprint of Oil Sands assets UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING Strategy – maximize margins & keep upgraders full (90% utilization) • Optionality from multiple oil sands assets (mining & SAGD) • All sites are connected by pipeline: • Firebag & MacKay River – Base Plant •
Slide 34: Long history of improving Oil Sands operational reliability
Long history of improving Oil Sands operational reliability UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING Upgrading and Mining Assets (2018 - 2022E) Major Turnaround First oil • Base Plant upgrader steadily increased to 100% ~90% utilization through a focused multi-year Target 90% plan 75% • S
Slide 35: My focus
My focus 1 2 UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING Safety Mining performance Reduce exposure by lowering headcount in Mining & Upgrading Fort Hills – successfully lead through period of constrained mining towards larger resource (40+ year life) Leader competency and development Base Mi
Slide 36: Reduced exposure through workforce changes
1 Reduced exposure through workforce changes Workforce restructuring UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING 100% • Clarifying roles and sharpening accountability Mining & Upgrading employee headcount 99% ~4.5% • 15% contractor reduction completed since spring with reduction 20% expected
Slide 37: Mining – safety initiatives and focus areas
1 Mining – safety initiatives and focus areas UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING Top 10 Global Mining Risks • Critical controls assurance – prioritize top safety hazards 1. Mobile equipment and/ or personnel contact 2. Drowning • Human Operational Performance and Leadership Coaching
Slide 38: A history of improving safety controls
1 A history of improving safety controls Previously implemented In progress UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING Wi-fi Personal Gas Detectors within Upgrading (2016) Collision Awareness Random Drug & Alcohol Testing (2019) Driver Safety System (fatigue management) Tailings Dozer Infra
Slide 39: Centralized mine plan leveraging deep mining experience
2 Centralized mine plan leveraging deep mining experience UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING Decades of oil sands mining experience Base Plant (1967) • Standardize performance metrics and health measures to: Syncrude (1978) • Drive improvement through internal benchmarking • Optimiz
Slide 40: Syncrude – first detailed mining examination as new operator
2 Syncrude – first detailed mining examination as the new operator Production UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING Approaching 90% plant utilization Added flexibility via bitumen exports ~5 kbpd • Solid mining performance as full-year 2022E bitumen at record levels and 3% better than
Slide 41: Fort Hills
2 Fort Hills • Progression from South Pit to Centre and North Pits – UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING accelerated due to constrained mine area, limited contingency, water seeps and pit wall stability issues 2023 – 2025 • Increased mining activity limiting production • Advancement
Slide 42: Fort Hills – drivers to production revision
2 Fort Hills – drivers to production revision UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING 180 Robust plan to work through mine constraints • Ore inventory constraints 170 • Ore tonnage restriction 160 • Fluid containment constraints Gross production (kbpd) 150 Technical revisions • Updated a
Slide 43: Fort Hills – lowering long-term cost & capital structure
2 Fort Hills – lowering long-term cost & capital structure UPSTREAM OPERATIONAL DEEP DIVE – MINING & UPGRADING 3 Operating costs • Costs improve in 2024-25 with productivity $300 M/yr (~$5/bbl) $40 improvements, mine maintenance cost reductions and contract mining services displaced with rental truc
Slide 44: Financial Outlook & Shareholder Returns
Financial Outlook & Shareholder Returns Alister Cowan 44
Slide 45: Revisiting commitments
Revisiting commitments Debottlenecks Firebag, Edmonton Refinery and Burrard Terminal completed FINANCIAL OUTLOOK & SHAREHOLDER RETURNS Interconnecting Pipelines (ICP) Completed and capturing incremental value 1 Supply & Trading Optimization Initial targets achieved and continuing to expand Permanent
Slide 46: Significant & structural margin enhancement
Significant & structural margin enhancement Debottlenecks Interconnecting Pipelines Supply & Trading Tailings Management (~$250 million1) (~$150 million1) (~$200 million1) (~$200 million1) FINANCIAL OUTLOOK & SHAREHOLDER RETURNS Firebag Online in 2020; Extensive midstream & Shortens reclamation 6% i
Slide 47: Cost structure – taking action to mitigate headwinds
Cost structure – taking action to mitigate headwinds Y/Y net impact Headwinds Actions taken (2023E vs. 2022E) Energy Flat FINANCIAL OUTLOOK & SHAREHOLDER RETURNS (~14%) ~$5/GJ AECO Partly offset by excess power revenues ~2% Materials, Inflation & rentals & other Supply chain management cost initiati
Slide 48: 2023 – a significant step up to shareholder returns
2023 – a significant step up to shareholder returns • ~14% LTM cash yield1 2023E cash flow priorities2 Excess funds FINANCIAL OUTLOOK & SHAREHOLDER RETURNS • Opportunities for future dividend growth: Debt Reduction 25% • Continued improvement in operational performance from existing assets Share 75%
Slide 49: Closing
Closing Kris Smith 49
Slide 50: Suncor's value proposition
Suncor’s value proposition Physical integration Operational excellence Growing shareholder returns Regional Oil Sands scale & Safety above all else Industry leading cash returns connectivity driving value (2012-22E) Industry best integrated Downstream 2 dividend increases in 2022 Maintain high relia
Slide 51: Appendix
Appendix 51
Slide 52: 2023 Capital & Production Guidance
2023 Capital & Production Guidance1 CAPITAL EXPENDITURES Capital2 Economic PRODUCTION & OPERATING COSTS Production4 Cash Operating Costs ($ millions) Investment3 (boepd) ($/bbl) Oil Sands 3,625 – 3,875 30% Oil Sands Operations 385,000 – 425,000 $30.00 – $33.00 E&P 725 – 775 100% Fort Hills5 (75.41%
Slide 53: Our GHG emissions objective – net zero by 2050
Our GHG emissions objective – net zero by 20501,2 GHG reduction approaches to 2030 10 Mt per year reduction by 20301,2 • Reduce our own emissions through energy Fuel switching Low-carbon up to 10 upMt to ~20% up to and alternate efficiency, fuel switching and CCUS power ~50% reduction ~20% products
Slide 54: Pathways Alliance
Pathways Alliance • Canada’s largest oil sands producers formed an unprecedented alliance to achieve net zero GHG emissions • Reduce annual emissions by 22 MT by 2030 • Three-phased plan1 focused on a foundational CCUS network, process improvements, energy efficiency, and electrification and fuel sw
Slide 55: Notes
Notes SUNCOR ENERGY 55
Slide 56: Advisories & Slide Notes
Advisories & Slide Notes Forward-Looking Statements – This presentation contains certain “forward- “proposed”, “seeking” and similar expressions. Forward-looking statements are Except as required by applicable securities laws, Suncor disclaims any intention looking statements” within the meaning of
Slide 57: Advisories & Slide Notes
Advisories & Slide Notes Reserves – Unless noted otherwise, reserves information presented herein for Suncor is presented as Suncor’s working interest (operating and non-operating) Slide 12 ------------------------------------------------------------------- Slide 48 ---------------------------------
Slide 58: Investor Relations contacts
Investor Relations contacts Troy Muhammad Christian Matilda Stacey Little Usman Leung Kragulj Hunter Vice President IR Director IR Manager IR Manager IR Coordinator IR [email protected] [email protected] [email protected] [email protected] [email protected] Visit us at the Investor Centre