Suncor Energy Inc. · TSX:SU
Suncor Energy — Q1 2018 Earnings Presentation
44 slides from Suncor Energy's earnings presentation, May 31, 2018
Slide 1: Suncor Energy Investor Information
Fort Hills first PFT oil Suncor Energy Investor Information Published May 31, 2018
Slide 2: Canada's leading integrated energy company
2 Canada’s leading integrated energy company $88B Enterprise value March 31, 2018 1 31+ years 2P Reserve life index as at Dec. 31, 2017 2 689mboepd 100% Oil production 462mbpd Refining capacity Q1 2018 3 513mbpd Product sales Q1 2018 ~1750 Retail sites In North America Fenja Golden Eagle Rosebank Od
Slide 3: Near-term investment proposition – growing shareholder returns
3 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$53.69 WTI, 0.78 C$/US$, US$18.40 NYH 3-2-1 crack spread 900 (C$ billion) $14 800 9%
Slide 4: The Suncor advantage
4 The Suncor advantage Financial flexibility Long life & low decline Strong balance sheet Cost and carbon competitive Financial — 1.7x A low ~36yrs $34.50 Oil Sands 2P 2017 sustaining capex Net debt to FFO1 Baa1 Reserve Life Index2 + cash cost / bbl3 50+ years of operations 16 years of dividend incr
Slide 5: FFO protection and growth through pricing cycles
5 FFO1 protection and growth through pricing cycles Upstream leveraged to crude price, while R&M protects FFO1 in the down cycle $98 $94 $93 Minimizing volatility WTI in all price cycles ($US/bbl) Optimizing value of all barrels and products $49 $51 $43 9.7 9.4 Maximizing FFO1 9.1 9.1 through contro
Slide 6: Structural FFO growth & capital allocation levers
6 Structural FFO1 growth & capital allocation levers Growth Opportunistic share buybacks Sustain the business and Increasing FFO continually grow the dividend 2018 – 2019 2024 forward2 Production growth Structural FFO growth Production growth Fort Hills & Hebron & balance sheet strength In situ repl
Slide 7: Medium-term investment proposition – free funds flow growth
7 Medium-term investment proposition – free funds flow growth1 Free funds flow2 improvement potential for years 2020 to 2023 inclusive3 Excluding commodity price changes Potential to deliver incremental free funds > $2.0B flow2 of >$500M/year Growth Margin Opex savings Sustaining capital Total value
Slide 8: The foundation of our strategy
8 The foundation of our strategy Operational excellence Optimizing the base business Autonomous Haul Trucks – operationalizing technology • Safety as a core value Less equipment, reduced human exposure & adding more layers of safety • Industry leading reliability ~10% productivity improvement1 by op
Slide 9: Disciplined cost management
9 Disciplined cost management Total OS&G ~5% below 2014 levels while production increased ~30% Consistent reductions in unit operating costs C$/bbl 40% Oil Sands1 E&P2 685 mbpd $37.05 30% $37.00 R&M3 $33.80 20% Production $27.85 $26.85 $26.50 10% $23.80 535 mbpd 0% $9.75B $9.92 $8.59 $10.03 $9.67 $8
Slide 10: Generating discretionary free funds flow
10 Generating discretionary free funds flow1 FFO2 consistently exceeds sustaining capital, associated capitalized interest and dividends (C$ billions) $12 Expected Impacts to 2018 FFO2 $10 Fort Hills & Hebron ramp-up $9.1 • Full opex costs $8 • Partial production Higher interest expense $6 $6.8 • Lo
Slide 11: Capital discipline – near-term flexible capital allocation plan
11 Capital discipline – near-term flexible capital allocation plan1 Sustained Production Growth Balance sheet price Capital 1 growth Dividend3 Buybacks3 post 2019 leverage metrics outlook to 20202 Defer $40 WTI $4.0B debottlenecking and Upper range None USD pre-engineering on replication Invest in G
Slide 12: Returning cash to shareholders
12 Returning cash to shareholders 16 consecutive years of dividend increases1 & opportunistic share buybacks with renewed NCIB2 6% Dividend + buyback yield3 70% 5-year TSR4 $1.8B Shares repurchased Trailing twelve months as of March 31st, 2018 Including reinvested dividends 90% of NCIB2 completed at
Slide 13: Strong balance sheet
13 Strong balance sheet Conservative debt targets Debt metrics - as at March 31, 2018 <3x Net debt to FFO1 1.7x Net debt to FFO1 20-30% Total debt to capitalization 28% Total debt to capitalization Investment grade credit rating $4.8B Liquidity A DBRS Rating Limited (A Low) Stable Cash & cash equiva
Slide 14: Suncor stacks up well versus oil sands peers and supermajors
14 Suncor stacks up well versus oil sands peers and supermajors Suncor delivers strong production growth while offering shareholder returns and balance sheet strength in line with the supermajors Production growth Strong balance sheet Shareholder returns Supermajors’ growth limited by their scale Ba
Slide 15: Track record of superior shareholder returns
15 Track record of superior shareholder returns Suncor’s cumulative total shareholder returns have outperformed the E&P1, majors2 and oil sands3 peer groups on a one, three and five year basis4 One year Three year Five year 20% 40% 80% Suncor (TSX) S&P Majors Suncor (TSX) Suncor (NYSE) 30% S&P 15% S
Slide 16: Resilient to Western Canadian L/H differential
16 Resilient to Western Canadian L/H1 differential Widening WTI-WCS differential from Q4 2017 had no impact on FFO2 in Q1 2018 2018 full year sensitivity remains ~$25 million decrease in FFO for +$1 WTI-WCS differential3 Royalty paid on bitumen Revenue made on the value of Suncor’s Minimizing exposu
Slide 17: Market access for Oil Sands production
17 Market access for Oil Sands production Logistical flexibility to move production to market including Fort Hills barrels Pipeline Current and forecasted gross pipeline capacity1 Feeder lines ~750 TMPL Fort McMurray 300 mbpd capacity1 142 TMEP (Proposed)2 Edmonton +590 mbpd capacity Hardisty Expres
Slide 18: Regional synergies for existing assets
18 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 19: Syncrude – near term focus areas to meet targets
19 Syncrude – near term focus areas to meet targets Suncor’s Baseplant upgrader reliability Multi year journey to reach >90% reliability 91% 90% 91% 83% Reliability step-change after 4 years 80% 81% Not a gradual profile 79% Excluding forest fire impact1 Alberta Suncor began the focus on upgrader re
Slide 20: Fort Hills – operational update
20 Fort Hills – operational update 54.11% 2018 guidance6 (Net to Suncor) Suncor working interest1 Metric Q1 Q2 Q3 Q4 105 mbpd Production (mbpd) 20-40 30-50 60-70 80-90 Nameplate capacity at Suncor working interest2 Opex5 $70-80 $40-50 $30-40 $20-30 (/bbl) January 27, 2018 First PFT3 oil Operations (
Slide 21: Fort Hills – ramp-up exceeding expectations
21 Fort Hills – ramp-up exceeding expectations Secondary extraction Mining FSU* Train 1 (Jan 27 start-up) Ore preparation SRU** Train 1 (Jan 27 start-up) Primary extraction FSU* Train 2 (Mar 23 start-up) Bitumen Bitumen shipped Froth SRU** Train 2 to market (Sept 2017 start-up) (April 26 start-up) Q
Slide 22: Fort Hills – designed for safe, reliable, low-cost ramp-up and operations
22 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 23: Fort Hills – leading edge extraction technologies
23 Fort Hills – leading edge extraction technologies Primary Extraction Built for high reliability and low cost operations Preparation of mined ore to create bitumen froth Redundancies designed into higher risk processes ~60% bitumen ~30% water All trucks are autonomous ready ~10% fine solids Plan t
Slide 24: In situ – cost reduction history and enhanced future designs
24 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 25: Replication – longer term organic growth
25 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 and 5 submitted 2023 Potential first oil from first phase Months expected between f
Slide 26: ESG leadership
26 ESG leadership Environment World class regulation GHG reduction Meaningful disclosure Alberta has some of the most stringent, >60% reduction in Oil Sands base plant GHG Issued first sustainability report in 1995 transparent, and compliance-focused intensity since 1990 regulatory practices in the
Slide 27: ESG highlights
27 ESG highlights Environment Social Governance Innovation in water technology East Tank Farm partnership Support for voluntary climate-related financial disclosures 9100 Water Technology Development Centre Largest business investment by The TCFD recommendations provide a • $165M industry collaborat
Slide 28: Appendix
Appendix SuNCoR)
Slide 29: 2018 Capital and production guidance
29 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 30: High quality mining, in situ and upgrading portfolio
30 High quality mining, in situ and upgrading portfolio1 Base Plant Syncrude 350,000 bpd capacity Syncrude operated Suncor working interest 100% 205,600 bpd coking capacity (SU WI) 1,488 mmbbls 2P reserves Suncor working interest 58.74% 1,370 mmbbls 2P reserves (SU WI)2 Firebag Fort Hills 203,000 bp
Slide 31: Typical attributes of North American oil plays
31 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 Very low Medium Very low Very high In situ Medium Low Low Low Low High Offshore High High Medium Very
Slide 32: Canada's largest Refining & Marketing business
32 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 33: Refining & Marketing – the value of integration
33 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 2017 2012 2013 2014 2015 2016 2017 Q1
Slide 34: Offshore with >415 million barrels of 2P reserves
34 1 Offshore with >415 million barrels of 2P reserves Terra Nova Hibernia Suncor Energy operated ExxonMobil operated Suncor working interest 37.675% Suncor working interest 20%2 41 mmboe 2P reserves (SU WI) 73 mmboe 2P reserves (SU WI) White Rose Buzzard Husky Energy operated Nexen Petroleum UK ope
Slide 35: E&P – delivering strong upstream value
35 E&P – delivering strong upstream value High quality assets High margin capture High value projects Low cost operations that produce Access to tidewater resulting in Upside potential with high return significant FFO1 significant leverage to Brent investment opportunities 10.03 9.67 Average project
Slide 36: Track record of counter-cyclical acquisitions and divestments
36 Track record of counter-cyclical acquisitions ( ) and divestments ( ) Total E&P Canada $100 WTI US$/bbl 1 10% Fort Hills WI $80 $ Non -core UK offshore Canadian Oil Sands 2 37% Syncrude WI $60 7 Petro -Canada 6 1 5 2 3 4 Rosebank $40 3 30% WI $20 Murphy Oil 4 5% Syncrude WI $40 NYH 3-2-1 US$/bbl
Slide 37: Notes
37 Notes SuNCoR)
Slide 38: Notes
38 Notes SuNCoR)
Slide 39: Advisories
39 Advisories Forward-Looking Statements – This presentation contains their obligations to Suncor; changes in royalty, tax, environmental with GAAP. All non-GAAP measures are included because certain “forward-looking statements” within the meaning of the and other laws or regulations or the interpre
Slide 40: Slide Notes
40 Slide Notes Slide 2------------------------------------------------------------- Advisories. during that period. (1) Market capitalization + debt - cash and cash equivalents. (8) Refers to average WTI crude prices for 2017 and estimated (8) IMO refers to International Maritime Organization. (2) A
Slide 41: Slide Notes (continued)
41 Slide Notes (continued) Slide 8--------------------------------------------------------------- associated capitalized interest) based on the company’s current period. Source of information: Factset. (1) Expected productivity improvements are consistent with results of business plans. Actual susta
Slide 42: Slide Notes (continued)
42 Slide Notes (continued) Slide 15------------------------------------------------------------ (4) Includes possible future opportunities currently being evaluated Statements in the Advisories. (1) E&P companies in alphabetical order: Anadarko Petroleum and which may be subject to Board of Director
Slide 43: Slide Notes (continued)
43 Slide Notes (continued) Slide 30------------------------------------------------------------ Suncor’s upstream production. (4) Based on 2018 business environment guidance released on (1) Reserves are working interest before royalties. See Reserves in (5) Brent averaged $66.80 USD for the period e
Slide 44: Investor Relations contacts
Investor Relations contacts Trevor Bell David Burdziuk Valerie Roberts Kinga Uto Ever Motis Vice President IR Director IR Senior Analyst IR Senior ESG Analyst IR Associate IR [email protected] [email protected] [email protected] [email protected] [email protected] Visit us at the Investor Centre