Unless otherwise noted, all financial figures are unaudited,
presented in Canadian dollars (Cdn$), and have been prepared in
accordance with International Financial Reporting Standards,
specifically International Accounting Standard 34 Interim Financial
Reporting as issued by the International Accounting Standards
Board. Production volumes are presented on a working interest
basis, before royalties, except for Libya, which is on an
entitlement basis. Certain financial measures referred to in this
news release (funds from operations, operating earnings, 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). See the Non-GAAP
Financial Measures section of this news release. References to Oil
Sands operations exclude Suncor’s interests in Fort Hills and
Syncrude.
“Suncor’s integrated model has consistently generated positive
results through changing market conditions, including mandatory
production curtailments in Alberta, and the first quarter of 2019
was no different,” said Mark Little, president and chief operating
officer. “Funds from operations increased to $2.6 billion in
the first quarter of 2019 as we continue to execute on our
long‑term strategy.”
- Funds from operations were $2.585 billion ($1.64 per
common share) in the first quarter of 2019, compared to
$2.164 billion ($1.32 per common share) in the prior
year quarter.
- Cash flow provided by operating activities, which includes
changes in non-cash working capital, was $1.548 billion ($0.98
per common share) in the first quarter of 2019, compared to
$724 million ($0.44 per common share) in the prior year
quarter, reflecting the impact of higher commodity prices on
accounts receivable and inventory.
- Operating earnings were $1.209 billion ($0.77 per common
share) and net earnings were $1.470 billion ($0.93 per common
share) in the first quarter of 2019, compared to operating earnings
of $985 million ($0.60 per common share) and net earnings of
$789 million ($0.48 per common share) in the prior
year quarter.
- Refining and Marketing (R&M) delivered record quarterly
funds from operations and operating earnings of $1.253 billion
and $1.009 billion, respectively.
- Total Oil Sands production was 657,200 barrels per day
(bbls/d), compared to 571,700 bbls/d in the prior year
quarter. Increased production from the ramp up at Fort Hills and
improved Syncrude asset utilization of 90% more than offset the
impact of mandatory production curtailments implemented by the
Government of Alberta.
- Oil Sands operations achieved 98% upgrader utilization and
synthetic crude oil (SCO) production of 341,200 bbls/d,
despite the impact of mandatory production curtailments on bitumen
production.
- Hebron production in the first quarter increased to
18,300 bbls/d, net to the company, and is continuing to ramp
up following the completion of the fifth production well during
the quarter.
- First oil was achieved ahead of schedule at the Oda project
offshore Norway in the first quarter of 2019.
- The company distributed $662 million in dividends to
shareholders and repurchased $514 million of common shares in
the first quarter of 2019.
Financial Results
Operating Earnings
Suncor’s first quarter 2019 operating earnings were
$1.209 billion ($0.77 per common share), compared to
$985 million ($0.60 per common share) in the prior year
quarter, and included the impact of the Government of Alberta’s
mandatory production curtailments, as well as after‑tax insurance
proceeds of $264 million related to the company’s assets in
Libya. Operating earnings were also favourably influenced by an
inventory valuation gain associated with improving crude prices,
increased overall upstream production and sales volumes, narrower
heavy crude oil differentials and strong sales from the company’s
refining assets. These factors were offset by lower WTI benchmark
crude pricing and higher overall operating and transportation
costs, predominantly attributed to the production ramp up at Fort
Hills, an increase in share-based compensation costs and an
additional 5% working interest in Syncrude acquired partway through
the first quarter of 2018. Operating earnings were also
unfavourably impacted by higher royalties associated with the
improvement in both bitumen pricing and production.
The overall impact of crude oil and refined product inventory
valuation had a net positive impact on operating earnings of
$288 million in the first quarter of 2019, compared to
$86 million net positive impact in the prior year quarter. The
increase was due to a favourable first‑in, first‑out (FIFO)
inventory valuation adjustment associated with the consumption of
less expensive crude feedstock in R&M, partially offset by a
deferral of profit on intersegment sales from Oil Sands to R&M
remaining in inventory, recorded in the Corporate and Eliminations
segment.
Net Earnings
Net earnings were $1.470 billion ($0.93 per common share)
in the first quarter of 2019, compared to net earnings of
$789 million ($0.48 per common share) in the prior year
quarter. In addition to the factors explained in operating earnings
above, net earnings for the first quarter of 2019 included a
$261 million unrealized after‑tax foreign exchange gain on the
revaluation of U.S. dollar denominated debt. Net earnings in
the prior year quarter included an unrealized after‑tax foreign
exchange loss of $329 million on the revaluation of
U.S. dollar denominated debt, and a $133 million non‑cash
after‑tax gain in the Exploration and Production (E&P) segment
associated with the exchange of the company’s mineral landholdings
in northeast British Columbia with Canbriam Energy Inc.
(Canbriam). The company’s investment in Canbriam was subsequently
written down to nil in the fourth quarter of 2018 following an
assessment of forward natural gas prices and the impact on
estimated future cash flows.
Funds from Operations and Cash Flow Provided By
Operating Activities
Funds from operations were $2.585 billion ($1.64 per common
share) in the first quarter of 2019, compared to
$2.164 billion ($1.32 per common share) in the first quarter
of 2018, and were influenced by the same factors impacting
operating earnings noted above.
Cash flow provided by operating activities was
$1.548 billion ($0.98 per common share) for the first quarter
of 2019, compared to $724 million ($0.44 per common share) for
the first quarter of 2018, reflecting the impact of higher
commodity prices on accounts receivable and inventory. In addition
to the items noted with respect to funds from operations, cash flow
provided by operating activities was further impacted by the use of
less cash in the company’s working capital balances in the current
quarter, as compared to the prior year quarter. This was due to a
decrease in taxes paid and a smaller increase in the company’s
inventory value, with the prior year quarter including a
substantial build of product inventory in preparation for the full
turnaround at the Edmonton refinery in the second quarter
of 2018.
Operating Results
Suncor’s total upstream production was 764,300 barrels of
oil equivalent per day (boe/d) during the first quarter of 2019,
compared to 689,400 boe/d in the prior year quarter, with the
increase primarily due to the ramp up of Fort Hills production,
improved asset reliability at Syncrude and the Hebron ramp up. This
was partially offset by the impact of mandatory production
curtailments in the province of Alberta, which took effect at the
beginning of the year.
“Our upgraders achieved strong reliability throughout the first
quarter and our refining business generated record funds from
operations, illustrating the resiliency of Suncor’s cash flow and
operational flexibility when broader industry challenges exist,”
said Mark Little.
Oil Sands operations production was 396,600 bbls/d in the
first quarter of 2019, compared to 404,800 bbls/d in the prior
year quarter. The decrease was due to mandatory production
curtailments, which primarily affected the company’s non-upgraded
bitumen sales as the company maximized the production of higher
value SCO barrels. Upgrader utilization improved to 98% in the
first quarter of 2019, compared to 80% in the prior year quarter,
with the prior year quarter being impacted by a weather‑related
outage. Higher upgrader utilization resulted in a decrease to total
Oil Sands operations production due to the approximate 20% yield
loss associated with the bitumen upgrading process.
Oil Sands operations cash operating costs per barrel were $29.95
in the first quarter of 2019, an increase from $26.85 in the prior
year quarter, reflecting the impact of mandatory production
curtailments and the change in production mix associated with a
higher proportion of SCO production and lower bitumen volumes, in
addition to an increase in operating, selling and general
(OS&G) costs. Oil Sands operations OS&G costs in the first
quarter of 2019 included an increase in overburden stripping
expenses during the optimal time of the year to complete this work.
The company expects the increase in this activity in the current
period to partially offset Oil Sands operations cash operating
costs in subsequent periods, bringing Oil Sands operations cash
operating costs per barrel in line with guidance for 2019. Total
Oil Sands operations cash operating costs were $1.074 billion,
compared to $982 million in the prior year quarter, and were
also impacted by higher natural gas pricing.
Suncor’s share of production from Fort Hills averaged
78,400 bbls/d in the first quarter of 2019, compared to
24,600 bbls/d in the prior year quarter, with the increase in
production attributed to the ramp up of operations throughout the
past year, partially offset by mandatory production curtailments.
Fort Hills cash operating costs per barrel were $29.60 in the first
quarter of 2019, compared to $53.65 in the prior year quarter, with
the improvement primarily attributed to the increase in production,
despite the mandatory production curtailments.
Suncor’s share of Syncrude production was 182,200 bbls/d in
the first quarter of 2019, compared to 142,300 bbls/d in the
prior year quarter. The increase in production was primarily due to
stronger asset reliability, with the prior year quarter impacted by
a constrained bitumen feed line and the advancement of upgrader
maintenance, partially offset by the impact of mandatory production
curtailments. Upgrader utilization at Syncrude improved to 90% in
the first quarter of 2019, compared to 71% in the prior year
quarter. To help achieve this, Suncor allocated a portion of its
mandated production limit by the Alberta government to Syncrude,
which reduced lower value bitumen sales at Oil Sands
operations.
Syncrude cash operating costs per barrel were $37.05 in the
first quarter of 2019, a decrease from $50.75 in the prior year
quarter due to the combination of higher production and lower
OS&G costs resulting from a decrease in maintenance expenses,
partially offset by the increase in natural gas prices.
Production volumes at E&P were 107,100 boe/d in the
first quarter of 2019, compared to 117,700 boe/d in the prior
year quarter. The decrease in production was primarily due to the
continuing staged return of White Rose to full operations, as well
as natural declines in the United Kingdom, partially offset by
the increase in production from Hebron.
During the first quarter of 2019, the company received
$363 million in insurance proceeds for its Libyan assets
($264 million after‑tax). The proceeds may be subject to a
provisional repayment that may be dependent on the future
performance and cash flows from Suncor’s Libyan assets.
First oil was achieved ahead of schedule at the Oda project
offshore Norway in the first quarter of 2019 and is expected to
ramp up to an estimated peak of 10,500 bbls/d, net to Suncor,
in 2020. Suncor is a 30% partner in the project.
Refinery crude throughput was 444,900 bbls/d and refinery
utilization was 96% in the first quarter of 2019, compared to
453,500 bbls/d and a utilization rate of 98% in the prior year
quarter, with solid reliability achieved in both quarters. Refined
products sales increased in the first quarter of 2019 to
542,800 bbls/d, compared to 512,900 bbls/d in the prior
year quarter, with the increase attributed to record Canadian
wholesale sales volumes and higher retail sales volumes.
Strategy Update
Suncor’s 2019 capital program is focused on the enhancement and
optimization of the company’s operating asset performance, safety
and reliability, including projects focused on delivering increased
earnings and funds from operations through further cost savings and
structural margin improvements. In addition, the company is
developing step‑out opportunities and asset extensions within the
offshore business in E&P.
Excluding capitalized interest, the company invested
$875 million on capital expenditures in the first quarter of
2019, a decrease from $1.214 billion in the prior year
quarter. This was due primarily to the decrease in capital
associated with the staged completion and commissioning of the Fort
Hills extraction plants in the first half of 2018, as well as a
decrease in asset sustainment and maintenance capital associated
with lower overall planned maintenance preparation expenditures
following the execution of a more significant maintenance program
in the spring of 2018 at both Oil Sands and R&M. Although
capital spending was lower in the first quarter of 2019, the
company’s capital guidance range of $4.9 billion to
$5.6 billion remains unchanged.
Drilling activity at Hebron is ongoing, and production continues
to ramp up ahead of schedule. Other E&P activity in the first
quarter included development drilling at Hibernia, White Rose and
Buzzard, and development work on the West White Rose Project and
the Norwegian Oda and Fenja projects.
During the first quarter of 2019, Suncor’s Board of Directors
approved a 17% dividend increase and up to an additional
$2.0 billion in authority for share repurchases. Also in the
first quarter, the company continued to return value to
shareholders through dividends of $662 million, and a
repurchase of $514 million of shares under its normal course
issuer bid (NCIB).
Late in 2018, Suncor’s chief executive officer, Steve Williams,
announced that he will retire on May 2, 2019, the date of
Suncor’s Annual General Meeting. Mr. Williams will be replaced
by Mark Little, the company’s current president and chief operating
officer.
“I want to thank the dedicated and talented team at Suncor for
our many accomplishments over the years, and I have the utmost
confidence in Mark as he leads this company into the future.” said
Steve Williams, chief executive officer. “The strategy we’ve
implemented demonstrates economic, environmental and social
leadership, and our value‑added investments have created
opportunities for thousands of employees and contractors, while
also generating significant economic benefit for our shareholders,
Albertans, and Canadians.”
Operating Earnings Reconciliation(1)
|
Three months ended March 31 |
|
($ millions) |
2019 |
|
2018 |
|
Net earnings |
1 470 |
|
789 |
|
Unrealized foreign exchange (gain) loss on U.S. dollar
denominated debt |
(261 |
) |
329 |
|
Non‑cash gain on asset exchange(2) |
— |
|
(133 |
) |
Operating earnings(1) |
1 209 |
|
985 |
|
(1) Operating earnings is a non‑GAAP financial measure.
All reconciling items are presented on an after‑tax basis. See the
Non‑GAAP Financial Measures section of this news release.
(2) In 2018, the company recorded an after‑tax gain of
$133 million for the disposal of the company’s mineral
landholdings in northeast British Columbia in exchange for an
equity stake in Canbriam. The company’s investment in Canbriam was
subsequently written down to nil in the fourth quarter of 2018
following the company’s assessment of forward natural gas prices
and the impact on estimated future cash flows.
Corporate Guidance
Suncor has updated its full year business environment outlook
assumptions to reflect average actual year‑to‑date realized prices
plus forward curve pricing. WCS at Hardisty has been updated to
US$45.00 from US$33.00 and New York Harbor 3‑2‑1 crack
has been updated to US$17.00 from US$18.50. As a result of the
improvement in WCS at Hardisty pricing, Syncrude Crown Royalties
has been updated to 9% – 12% from 5% – 8%. In addition,
current income tax expense has been updated to
$1.4 billion – $1.7 billion from
$1.1 billion – $1.4 billion, reflecting the impact
of commodity price changes and taxes payable on the insurance
proceeds. For further details and advisories regarding Suncor’s
2019 corporate guidance, see www.suncor.com/guidance.
Normal Course Issuer Bid
The Toronto Stock Exchange (TSX) accepted a notice filed by
Suncor of its intention to renew its NCIB to continue to purchase
shares under its previously announced buyback program through the
facilities of the TSX, New York Stock Exchange and/or
alternative trading platforms. The notice provides that, beginning
May 6, 2019 and ending May 5, 2020, Suncor may purchase
for cancellation up to 50,252,231 common shares, which is equal to
approximately 3% of Suncor’s issued and outstanding common shares.
As at April 30, 2019, Suncor had 1,570,983,561 common shares
issued and outstanding.
The actual number of common shares that may be purchased and the
timing of any such purchases will be determined by Suncor. Suncor
believes that, depending on the trading price of its common shares
and other relevant factors, purchasing its own common shares
represents an attractive investment opportunity and is in the best
interests of the company and its shareholders. The company does not
expect the decision to allocate cash to repurchase shares will
affect its long‑term growth strategy. Pursuant to Suncor’s previous
NCIB, as amended on November 19, 2018, Suncor agreed that it
will not purchase more than 81,695,830 common shares between
May 4, 2018 and May 3, 2019. Between May 4, 2018 and
April 30, 2019 and pursuant to Suncor’s previous NCIB
(as amended), Suncor repurchased 69,255,256 shares on the open
market for approximately $3.26 billion, at a weighted average price
of $47.07 per share.
Subject to the block purchase exemption that is available to
Suncor for regular open market purchases under the NCIB, Suncor
will limit daily purchases of Suncor common shares on the TSX in
connection with the NCIB to no more than 25% (1,025,697) of the
average daily trading volume of Suncor’s common shares on the TSX
during any trading day. Purchases under the NCIB will be made
through open market purchases at market price, as well as by other
means as may be permitted by the TSX and securities regulatory
authorities, including by private agreements. Purchases made by
private agreement under an issuer bid exemption order issued by a
securities regulatory authority will be at a discount to the
prevailing market price as provided in the exemption order. In the
future, Suncor expects to enter into an automatic share purchase
plan in relation to purchases made in connection with
the NCIB.
Non-GAAP Financial Measures
Operating earnings is defined in the Non‑GAAP Financial Measures
Advisory section of Suncor’s management’s discussion and analysis
dated May 1, 2019 (the MD&A) and reconciled to the GAAP measure
above and in the Consolidated Financial Information section of the
MD&A. Oil Sands operations cash operating costs, Fort Hills
cash operating costs and Syncrude cash operating costs are defined
in the Non-GAAP Financial Measures Advisory section of the MD&A
and reconciled to GAAP measures in the Segment Results and Analysis
section of the MD&A. Funds from operations is defined and
reconciled to the GAAP measure in the Non‑GAAP Financial Measures
Advisory section of the MD&A. These non-GAAP financial measures
are included because management uses this information to analyze
business performance, leverage and liquidity and it may be useful
to investors on the same basis. These non-GAAP measures do not have
any standardized meaning and therefore are unlikely to be
comparable to similar measures presented by other companies and
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with GAAP.
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: the company’s expectation
that increase in overburden stripping expenses included in Oil
Sands operations cash operating costs in the first quarter of 2019
will partially offset Oil Sands operations cash operating costs in
subsequent periods, bringing Oil Sands operations cash operating
costs per barrel in line with guidance for 2019; the expectation
that the Oda project will ramp up to an estimated peak production
of 10,500 bbls/d, net to Suncor, in 2020; the focus of Suncor’s
2019 capital program on enhancement and optimization of the
company’s operating asset performance, safety and reliability,
including projects focused on delivering increased earnings and
funds from operations through further cost savings and structural
margin improvements, and statements regarding the step-out
opportunities and asset extensions within the offshore business in
E&P being developed; statements about the company’s share
repurchase program, including the company’s belief that, depending
on the trading price of its common shares and other relevant
factors, purchasing its own common shares represents an attractive
investment opportunity and is in the best interests of the company
and its shareholders, that the company does not expect the decision
to allocate cash to repurchase shares will affect its long-term
growth strategy, and the expectation of entering into an automatic
share purchase plan in connection with the NCIB; Suncor’s capital
guidance range of $4.9 billion to $5.6 billion; and Suncor’s
outlook for Syncrude Crown Royalties and current income tax expense
and business environment outlook assumptions for WCS at Hardisty
and New York Harbor 3-2-1 crack. 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
and information may be identified by words like “expects”,
“anticipates”, “will”, “estimates”, “plans”, “scheduled”,
“intends”, “believes”, “projects”, “indicates”, “could”, “focus”,
“vision”, “goal”, “outlook”, “proposed”, “target”, “objective”,
“continue”, “should”, “may” 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
development and 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.
Suncor’s Annual Information Form, Form 40-F and Annual Report to
Shareholders, each dated February 28, 2019, the MD&A, 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 calling 1-800-558-9071,
or by email request to invest@suncor.com or by referring 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.
Legal Advisory – BOEs
Certain natural gas volumes have been converted to barrels of
oil equivalent (boe) on the basis of one barrel to six thousand
cubic feet. Any figure presented in boe may be misleading,
particularly if used in isolation. A conversion ratio of one bbl of
crude oil or natural gas liquids to six thousand cubic feet of
natural gas is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a
value equivalency at the wellhead. Given that the value ratio based
on the current price of crude oil as compared to natural gas is
significantly different from the energy equivalency of 6:1,
utilizing a conversion on a 6:1 basis may be misleading as an
indication of value.
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 website at
suncor.com, follow us on Twitter @Suncor or together.suncor.com
A full copy of Suncor's first quarter 2019 Report to
Shareholders and the financial statements and notes (unaudited) can
be downloaded at
suncor.com/investor-centre/financial-reports.
Suncor’s updated Investor Relations presentation is available
online, visit suncor.com/investor-centre.
To listen to the webcast discussing Suncor's first quarter
results, visit suncor.com/webcasts.
Media inquiries:403-296-4000media@suncor.com
Investor inquiries:800-558-9071invest@suncor.com
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