Suncor released its 2019 corporate guidance today which includes a
capital program of between $4.9 and $5.6 billion and average
upstream production of 780,000 to 820,000 barrels of oil equivalent
per day (boe/d). The midpoints of these ranges represent a flat
capital spend compared to 2018 and a year over year production
increase of approximately 10%, including estimated mandatory
production curtailments, from approximately 730,000 boe/d in 2018.
The Government of Alberta has mandated compulsory production
curtailments across the industry starting Jan. 1, 2019. Although
considerable uncertainty on the impacts of the curtailment remains,
Suncor’s production guidance assumes the mandatory production
curtailments are in place for three months before declining to 30%
of initial levels for the remainder of 2019. This is consistent
with the Government of Alberta announcement.
Cash operating costs are artificially higher as they reflect the
impact on production from the Government of Alberta mandatory
production curtailments. Suncor's Oil Sands operations cash
operating costs per barrel is $24.00 - $26.50 (US $18.25 - $20.15)
reflecting lower 2019 planned maintenance and increased cost
efficiencies. Oil Sands operations cash operating costs exclude
Fort Hills and Syncrude. Fort Hills cash operating costs per barrel
are expected to be $23.00 - $26.00 (US $17.50 - $19.75) in its
first full year of operation while Syncrude cash operating costs
per barrel are expected to be $33.50 - $36.50 (US $25.50 -
$27.75).
“With Fort Hills successfully operating at target rates during
Q4 2018 and Hebron on track to increase production ahead of
schedule, our focus is on maintaining capital discipline and
ensuring safe and reliable operations while growing the free funds
flow of our business,” said Steve Williams, chief executive
officer. “As we look to 2019, the planned capital spend will
include low capital intensity, high- return projects aimed at
margin improvements, enhancing midstream logistics infrastructure
and cost reduction initiatives to be implemented in the 2020 to
2023 timeframe. All of these projects and the corresponding value
they represent are largely independent of market conditions and
egress constraints, positioning us well to continue returning
increasing free funds flow to shareholders through dividends and
share buybacks and strengthening the balance sheet.”
Suncor's 2019 capital range incorporates flexibility to respond
to volatile market conditions with the mid-point of the range
representing a flat capital spend and a lower investment in Alberta
year over year. The capital program is 63% allocated to planned
sustaining and maintenance activities to ensure continued safe,
reliable and efficient operations. The remaining 2019 capital
program is focused on low capital intensity, value-creating
projects such as the continued implementation of autonomous haul
trucks across Suncor’s operated assets, development of the Syncrude
bi-directional pipeline, further investment in midstream logistics
infrastructure, digital technology adoption and accelerated
deployment of Suncor’s new tailings technology, PASS (permanent
aquatic storage structure). Capital for previously sanctioned
E&P step-out developments will increase in line with the
anticipated spend profile. Projects such as the coke-fired boiler
replacement, Montreal coker and in-situ replication will continue
to be progressed to allow for informed sanction decisions at the
appropriate time.
“The market for Alberta’s heavy and synthetic crude oils has
been significantly impacted by the lack of market access out of the
region. As discussed on our Q3 earnings call, our strategy has been
to mitigate such volatility by significant investment in
integration between our upstream and downstream assets, such as
upgrading and refining capacity, along with commitments to
long-term take or pay pipeline access to markets, largely
mitigating impacts to our cash flow in situations such as the one
we are in,” said Mark Little, president and chief operating
officer. “Suncor has made long-term strategic investments to
mitigate risk and create economic value and jobs for Albertans and
Canadians.”
The Government of Alberta has announced a headline mandatory
production curtailment of 8.7% across the industry, effectively
imposing production caps for 2019. Suncor’s initial mandatory
production curtailment allocation is higher than this. The
disproportionate allocation of the production curtailment creates
several potential unintended consequences, which Suncor is
reviewing with the Government of Alberta and the Alberta Energy
Regulator (AER), including:
- Impact on safe and reliable facility operating levels,
especially during cold winter months when we typically operate at
high levels without planned maintenance. Suncor will not put the
safety of our employees and contractors at risk;
- Impact on crude oil upgraded and refined in Alberta, which has
limited impact on Alberta egress constraints;
- Failure to take account of historic and recent performance at
Syncrude following the unplanned shutdown earlier this year;
- Partial consideration for Fort Hills production following the
completion of start up at the end of Q3 2018;
- Impact on long-term take or pay pipeline commitments for access
to the US Gulf Coast; and
- Impact from the consumption of in-house diesel production used
in mining operations.
Suncor’s production guidance reflects its current estimate of
how these will be resolved.
Additionally, the Government of Alberta intervention creates
long-term market uncertainty, and reduces any incentive for market
participants to invest in crude oil processing facilities or commit
to long-term transportation arrangements. In the short term,
the Government of Alberta action has resulted in winners and losers
in the market, shutting in valuable upgrading throughput and has
made transporting crude oil out of the province by rail
uneconomic. However, Suncor will continue to work
cooperatively with the Government of Alberta and the AER to both
identify and mitigate these concerns, and the company is working
hard to minimize associated contractor layoffs.
Suncor's corporate guidance provides management's outlook for
2019 in certain key areas of the company's business. Users of this
forward-looking information are cautioned that actual results may
vary materially from the targets disclosed. Readers are cautioned
against placing undue reliance on this guidance.
Capital Expenditures (C$ millions) (1) |
|
2019 Full Year Outlook December 14, 2018 |
% EconomicInvestment (2) |
|
Upstream Oil Sands |
3,050 |
- |
3,400 |
17 |
% |
Upstream E&P |
1,000 |
- |
1,200 |
97 |
% |
Total Upstream |
4,050 |
- |
4,600 |
38 |
% |
Downstream |
700 |
- |
775 |
23 |
% |
Corporate |
150 |
- |
225 |
53 |
% |
Total |
4,900 |
- |
5,600 |
37 |
% |
|
|
|
|
|
|
1) Capital
expenditures exclude capitalized interest of approximately $150
million. |
2) Economic
investment capital expenditures include capital investments that
result in an increase in value through adding reserves, improving
processing capacity, utilization, cost or margin, including
associated infrastructure. Balance of capital expenditures
represents asset sustainment and maintenance capital expenditures,
which include capital investments that deliver on existing value
by: |
- ensuring compliance or maintaining relations with regulators
and other stakeholders;
- maintaining current processing capacity; and
- delivering existing developed reserves.
|
|
2019 Full Year Outlook December 14,
2018 |
|
Suncor Total
Production (boe/d) (1) |
780,000 |
|
- |
820,000 |
|
Oil Sands Operations
(bbls/d) |
410,000 |
|
- |
440,000 |
|
Fort Hills (bbls/d)
Suncor working interest of 54.11% |
85,000 |
|
- |
95,000 |
|
Syncrude (bbls/d)
Suncor working interest of 58.74% |
160,000 |
|
- |
180,000 |
|
Exploration &
Production (boe/d) (1) |
105,000 |
|
- |
115,000 |
|
Suncor Refinery
Throughput (bbls/d) |
430,000 |
|
- |
450,000 |
|
Suncor Refinery
Utilization (2) |
93 |
% |
- |
97 |
% |
|
1) At the
time of publication, production in Libya continues to be affected
by political unrest and therefore no forward looking production for
Libya is factored into the Exploration and Production and Suncor
Total Production guidance. Production ranges for Oil Sands
operations, Fort Hills, Syncrude and Exploration and Production are
not intended to add to equal Suncor Total Production. |
2) Refinery
utilization is based on the following crude processing capacities:
Montreal - 137,000 bbls/d; Sarnia - 85,000 bbls/d; Edmonton –
142,000 bbls/d; and Commerce City - 98,000 bbls/d. |
For an updated Investor Relations presentation and the third
quarter Investor Relations deck, see
suncor.com/investor-centre.
Legal Advisory – Forward-Looking
Information
This news release contains certain forward-looking information
and forward-looking statements (collectively referred to herein as
"forward-looking statements") within the meaning of applicable
Canadian and U.S. securities laws. Forward-looking statements in
this news release include references to: Suncor's anticipated
capital spending program of between $4.9 and $5.6 billion (and
expectations of where that spending will be directed); Suncor's
expectations around production, including planned average upstream
production of 780,000 - 820,000 boe/d and planned ranges for Oil
Sands operations (410,000 - 440,000 bbls/d), Suncor's working
interest in Fort Hills (85,000 - 95,000 bbls/d), Suncor's working
interest in Syncrude (160,000 - 180,000 bbls/d) and Exploration and
Production (105,000 - 115,000 boe/d); Suncor's expected Oil Sands
operations cash operating costs, projected to be in the range of
$24.00 - $26.50 (US $18.25 - $20.15) per barrel; expected Fort
Hills cash operating costs, projected to be in the range of $23.00
- $26.00 (US $17.50 - $19.75) per barrel; expected Syncrude cash
operating costs, projected to be in the range of $33.50 - $36.50
(US $25.50 - $27.75) per barrel; Suncor's expected Refinery
Throughputs (430,000 - 450,000 bbls/d) and Utilization (93% - 97%);
the expected impact of the Government of Alberta mandatory
production curtailments; that Hebron is on track to increase
production ahead of schedule; Suncor’s focus on maintaining capital
discipline and ensuring safe and reliable operations while growing
the free funds flow of our business; the expectations that the
planned capital spend will include low capital intensity,
high-return projects and that these projects and the corresponding
value these projects represent are largely independent of market
conditions and egress constraints and that they will position the
company well to continue returning increasing free funds flow to
shareholders through dividends and share buybacks and strengthening
the balance sheet; the expectation of continued safe, reliable and
efficient operations; the expectation that capital for previously
sanctioned E&P step-out developments will increase in line with
the anticipated spend profile and that projects such as the
coke-fired boiler replacement, Montreal coker and in-situ
replication will continue to be progressed to allow for informed
sanction decisions at the appropriate time; Suncor’s strategy; and
potential unintended consequences of the disproportionate
allocation of the production curtailment. In addition, all other
statements and information about Suncor's strategy for growth,
expected and future expenditures or investment decisions, commodity
prices, costs, schedules, production volumes, operating and
financial results and the expected impact of future commitments are
forward-looking statements. Some of the forward-looking statements
may be identified by words like "guidance", "outlook", "will",
"expected", "estimated", "focus", “planned”, “believe” and similar
expressions.
Forward-looking statements are based on Suncor's current
expectations, estimates, projections and assumptions that were made
by the company in light of its information available at the time
the statement was made and consider Suncor's experience and its
perception of historical trends, including expectations and
assumptions concerning: the accuracy of reserves and resources
estimates; commodity prices and interest and foreign exchange
rates; the performance of assets and equipment; capital
efficiencies and cost-savings; applicable laws and government
policies; future production rates; the sufficiency of budgeted
capital expenditures in carrying out planned activities; the
availability and cost of labour, services and infrastructure; the
satisfaction by third parties of their obligations to Suncor; the
execution of projects; and the receipt, in a timely manner, of
regulatory and third-party approvals.
Forward-looking statements are not guarantees of future
performance and involve a number of risks and uncertainties, some
that are similar to other oil and gas companies and some that are
unique to Suncor. Suncor's actual results may differ materially
from those expressed or implied by its forward-looking statements,
so readers are cautioned not to place undue reliance on them.
Assumptions for the Oil Sands operations, Syncrude and Fort
Hills 2019 production outlook include those relating to reliability
and operational efficiency initiatives that the company expects
will minimize unplanned maintenance in 2019. Assumptions for the
Exploration and Production 2019 production outlook include those
relating to reservoir performance, drilling results and facility
reliability. Factors that could potentially impact Suncor's 2019
corporate guidance include, but are not limited to:
- Bitumen supply. Bitumen supply may be dependent on unplanned
maintenance of mine equipment and extraction plants, bitumen ore
grade quality, tailings storage and in situ reservoir
performance.
- Third-party infrastructure. Production estimates could be
negatively impacted by issues with third-party infrastructure,
including pipeline or power disruptions, that may result in the
apportionment of capacity, pipeline or third-party facility
shutdowns, which would affect the company's ability to produce or
market its crude oil.
- Performance of recently commissioned facilities or well pads.
Production rates while new equipment is being brought into service
are difficult to predict and can be impacted by unplanned
maintenance.
- Unplanned maintenance. Production estimates could be negatively
impacted if unplanned work is required at any of our mining,
extraction, upgrading, in situ processing, refining, natural gas
processing, pipeline, or offshore assets.
- Planned maintenance events. Production estimates, including
production mix, could be negatively impacted if planned maintenance
events are affected by unexpected events or are not executed
effectively. The successful execution of maintenance and start-up
of operations for offshore assets, in particular, may be impacted
by harsh weather conditions, particularly in the winter
season.
- Commodity prices. Declines in commodity prices may alter our
production outlook and/or reduce our capital expenditure
plans.
- Foreign operations. Suncor's foreign operations and related
assets are subject to a number of political, economic and
socio-economic risks.
- Government Action. This guidance reflects the production
curtailments imposed by the Government of Alberta. Further action
by the Government of Alberta regarding production curtailment may
impact Suncor’s corporate guidance and such impact may be
material.
Suncor’s Management’s Discussion and Analysis dated October 31,
2018 (the “MD&A”), Suncor's most recently filed Annual
Information Form, Form 40-F and Annual Report to Shareholders and
other documents Suncor files from time to time with securities
regulatory authorities describe the risks, uncertainties, material
assumptions and other factors that could influence actual results
and such factors are incorporated herein by reference. Copies of
these documents are available without charge from Suncor at 150 6th
Avenue S.W., Calgary, Alberta T2P 3E3; by email request to
invest@suncor.com; by calling 1-800-558-9071; or by referring to
suncor.com/FinancialReports or to the company's profile on SEDAR at
sedar.com or EDGAR at sec.gov. Except as required by applicable
securities laws, Suncor disclaims any intention or obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
Oil Sands operations cash operating costs, Fort Hills cash
operating costs and Syncrude cash operating costs are not
prescribed by Canadian generally accepted accounting principles
("GAAP"). These non-GAAP financial measures are included because
management uses the information to analyze business performance on
a per barrel basis. These non-GAAP financial measures do not have
any standardized meaning and, therefore, are unlikely to be
comparable to similar measures presented by other companies. These
non-GAAP financial measures should not be considered in isolation
or as a substitute for measures of performance prepared in
accordance with GAAP. These non-GAAP financial measures are defined
in the Non-GAAP Financial Measures Advisory section of the MD&A
and for the period ended September 30, 2018, reconciled to the
comparable GAAP measure in the Segment Results and Analysis - Oil
Sands section of the MD&A. Oil Sands operations cash operating
costs of $24.00 - $26.50 (US $18.25 - $20.15) per barrel is based
on the assumptions that: (i) Suncor will produce 410,000 - 440,000
bbls/d at Oil Sands operations (of which 315,000 - 335,000 bbls/d
will be synthetic crude oil); and (ii) natural gas used at Suncor's
Oil Sands operations (AECO - C Spot ($CAD)) will be priced at an
average of $1.70/GJ over 2019. Fort Hills cash operating costs of
$23.00 - $26.00 (US $17.50 - $19.75) per barrel is based on the
assumptions that: (i) Fort Hills production (net to Suncor) will be
85,000 - 95,000 bbls/d; and (ii) natural gas used at Fort Hills
(AECO - C Spot ($CAD)) will be priced at an average of $1.70/GJ
over 2019. Syncrude cash operating costs of $33.50 - $36.50 (US
$25.50 - $27.75) per barrel is based on the assumptions that: (i)
Syncrude will produce 160,000 - 180,000 bbls/d of synthetic crude
oil (net to Suncor); and (ii) natural gas used at Syncrude (AECO -
C Spot ($CAD)) will be priced at an average of $1.70/GJ over 2019.
The Syncrude cash operating costs per barrel and Fort Hills cash
operating costs per barrel measures may not be fully comparable to
similar information calculated by other entities (including
Suncor's Oil Sands operations cash operating costs per barrel) due
to differing operations.
Suncor Energy is Canada's leading integrated energy company.
Suncor's operations include oil sands development and upgrading,
offshore oil and gas production, petroleum refining, and product
marketing under the Petro-Canada brand. A member of Dow Jones
Sustainability indexes, FTSE4Good and CDP, Suncor is working to
responsibly develop petroleum resources while also growing a
renewable energy portfolio. Suncor is listed on the UN Global
Compact 100 stock index. Suncor's common shares (symbol: SU) are
listed on the Toronto and New York stock exchanges.
For more information about Suncor, visit our web site at
suncor.com, follow us on Twitter @Suncor or together.suncor.com
Media inquiries:403-296-4000media@suncor.com
Investor inquiries:800-558-9071invest@suncor.com
All financial figures are in Canadian dollars
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