Q4 2021 Suncor Energy Inc Earnings Call

February 3, 2022

Speaker 1: Good day and thank you for standing by. Welcome to the Suncor Energy 4th Quarter 2021 Suncor Energy Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1 on your telephone. And if you require any assistance during the call, please press star 0.

Good day and thank you for standing by welcome to the Suncor Energy fourth quarter 2021 results conference call. At this time, all participants are in a listen only mode.

The speaker's presentation, there will be a question and answer session to ask a question during that session you will need to press star one on your telephone and if you require any assistance during the call. Please press star zero.

Speaker 1: I would now like to hand the conference over to your speaker today is to travel Bell Vice President of Investor Relations. Mr. Bell, the floor is yours.

I would now like to handle conference over to your speaker today, Mr. Trevor Bell Vice President of Investor Relations. Mr. Bill the floor is yours.

Speaker 2: Thank you, operator and good morning. Welcome to SunCore's fourth quarter earnings call. With me this morning, our Mark Little, President and Chief Executive Officer, and Al Sir Cowan Chief Financial Officer.

Thank you operator, and good morning, welcome to Suncor is fourth quarter earnings call with me. This morning are Mark Little President and Chief Executive Officer, and Alister Cowan Chief Financial Officer. Please note that today's comments contain forward looking information actual results may differ materially from the expected results because of various risk factors and <unk>.

Speaker 2: Please note that today's comments contain forward-looking information. The actual results may differ materially from the expected results because of various risk factors and assumptions that are described in our fourth quarter earnings release, as well as in our current annual information form. Both of those are available at Cedar, Edgar, and our website suncore.com.

Assumptions that are described in our fourth quarter earnings release as well as in our current annual information form.

Those are available at SEDAR, Edgar and our website Suncor Dot com.

Speaker 2: Certain financial measures referred to in these comments are not prescribed by Canadian GAAP. For a description of these financial measures, please see our fourth quarter earnings release.

Certain financial measures referred to in these comments are not prescribed by Canadian GAAP for a description of these financial measures. Please see our fourth quarter earnings release. Following the formal remarks, we'll open up the call to questions now I'll hand, it over to Mark for some opening remarks.

Speaker 2: Following formal remarks will open up the call to questions. Now I'll hand it over to Mark for some open-

Speaker 3: Great, thanks Trevor. And good morning, thank you for joining us.

Great. Thanks, Trevor and good morning, Thank you for joining us.

Speaker 3: I wanted to begin by talking about the incidents that we outlined in our recent press release. On many occasions inside the company and externally, I've talked about my personal commitment to safety above all else and our drive to operational excellence.

I wanted to begin by talking about the incidents that we outlined in our recent press release on many occasions inside the company and externally.

Talking about my personal commitment to safety above all else and our drive to operational excellence.

Speaker 3: I know that many are questioning our focus on this given the recent fatality and operational challenges.

I know that many are questioning our focus on this given the recent fatality and operational challenges.

Speaker 3: These outcomes are unacceptable and we know that we must do better.

These outcomes are unacceptable and we know that we must do better.

Speaker 3: I and the Suncor leadership team are deeply committed to engaging our workforce so everyone goes home safely every single day.

I am the Suncor a leadership team are deeply committed to engaging our workforce. So everyone goes home safely every single day.

Speaker 3: and improving the operating performance of our company.

And improving the operating performance of our company.

Speaker 3: I have a comprehensive plan endorsed by our board. We're executing this plan to address these concerns. Despite these challenges, we had several accomplishments in the quarter.

I have a comprehensive plan endorsed by our board we are executing this plan to address these concerns.

Despite these challenges we had several accomplishments in the quarter.

Speaker 3: We delivered the best quarter of adjusted funds from operations of $3.1 billion. On a per share basis, this is $2.17 per share and exceeds our previous quarterly per share record which was set in Q1 of 2014 by 11%.

We delivered the best quarter of adjusted funds from operations of $3 $1 billion.

On a per share basis. This is $2 17 per share and exceeds our previous quarterly per share record, which was set in Q1 of 2014 by 11%.

Speaker 3: We upgraded a combined 515,000 barrels per day of synthetic crude oil, which marks our third best quarterly result due to 99 and 90% utilization rates at base plant and sim crude respectively.

We upgraded a combined 515000 barrels per day of synthetic crude oil, which marks our third best quarterly result, due to 99%, 90% utilization rates at base plant and Syncrude, respectively.

Speaker 3: We produce 151,000 barrels per day of vitamin from our in situ operations and four hills, which resumed two train operations in mid-December.

We produced 151000 barrels per day of bitumen from our <unk> operations in Fort Hills, which resumed two train operations in mid December .

Speaker 3: Our ENP production of 77,000 barrels a day reflects the Golden Eagle disposition.

Our E&P production of 77000 barrels a day reflects the Golden Eagle disposition.

Speaker 3: In the downstream, we achieved nearly $800 million of adjusted funds from operations with 96% refinery utilization. And once again, our Canadian refineries outperformed the Canadian refinery average utilization.

In the downstream, we achieved nearly $800 million of adjusted funds from operations with 96% refinery utilization.

And once again, our Canadian refineries outperformed the Canadian refinery average utilizations.

Speaker 3: In terms of full-year results, we continue to strengthen the company by reducing our net debt by nearly $4 billion.

In terms of full year results, we continued to strengthen the company by reducing our net debt by nearly $4 billion.

Speaker 3: We returned nearly $4 billion of cash through the doubling of our dividend and share buybacks, and that's 40% of our adjusted funds from operations within the year.

We returned nearly $4 billion of cash through the doubling of our dividend and share buybacks and thats, 40% of our adjusted funds from operations within the year.

Speaker 3: Based on our average 2021 average market cap, that's a 10% cash return to our shareholders.

Based on our average 2021 average market cap, that's a 10% cash return to our shareholders.

Speaker 3: Looking at our 2021 full year performance, Suncourt generated adjusted funds from operations of $10.3 billion.

Looking at our 2021 full year performance Suncor generated adjusted funds from operations of $10 3 billion.

Speaker 3: Our regional oil sands assets contributed record annual funds from operations of $6.9 billion despite completing the largest maintenance program in our history.

Our regional oil sands assets contributed record annual funds from operations of $6 $9 billion. Despite completing the largest maintenance program in our history.

Speaker 3: These results reflect a creative investments, including increasing the utilization of our SunCore SIMCREED Interconnecting Pipeline, higher volumes from FireBagDeeBottleNext, improved margin capture through our trading logistics capabilities, and continued cash savings from reclamation using our past technology.

These results reflect accretive investments, including increasing the utilization of our suncor Syncrude interconnecting pipeline.

Volumes from fire bag de bottlenecks improved margin capture through our trading and logistics capabilities and continued cash savings from erectile about reclamation using our past technology.

Speaker 3: I'll now pass it to Alistair to go through the quarterly financial results.

I'll now pass it to Alister to go through the quarterly financial results.

Speaker 4: Thanks Mark. As you know, the adjusted funds from operations per share of $2.17 is an 11% improvement compared to your previous quarterly record.

Thanks, Mark as you noted our adjusted funds from operations per share of $2 17.

As an 11% improvement.

<unk> quarterly record.

Speaker 4: This reflects the value of our buyback program as we lowered our share count by approximately 6% during the year, acquiring and cancelling 84 million common shares at an average price of $27.45 Canadian per share.

This reflects the value of our buyback program as we lowered our share count by approximately 6% during the year acquiring new counseling easy 4 million common shares.

The average price of $27 45 Canadian personnel.

Let me walk through our results oil funds generated Q4 adjusted funds from operation.

Speaker 4: Let me walk through the results. Oil fans generated Q4 adjusted fans from operation.

Speaker 4: $2.2 billion with an average realization of $87 Canadian per bottle.

$2 $2 billion that average realization of 87 Canadian dollars per bottle.

Speaker 4: On an annual basis, oil sands cash operating costs of $25.90 per barrel for the full year ended up below the guided range while absorbing a $1 per gigajoule eco increase in natural gas prices versus that original guidance assumption.

On an annual basis oil sands cash operating cost of $25 90 per barrel for the full year ended up below the guided range.

Our being a $1 <unk> equal increase in natural gas prices versus our original guidance assumption.

Speaker 4: This equates to approximately $1 per barrel on cash cost.

This equates to approximately $1 per barrel on cost cost basis.

Speaker 4: Fort Hills 2021 cash operating costs of $41.35 per barrel reflects a one train operation for almost the entire year. And as we look to 2022, we're targeting cash operating costs of $25 per barrel at the midpoint with the two train operations.

<unk> 2021 cash operating costs of $41 75 per Boe.

So wondering in operation for almost entirely.

And as we look to 2022, we are targeting cash operating costs of $25 per barrel of the midpoint with the two train operation.

Speaker 4: Lastly, think through the annual cash operating cost of $35.20 per bottle with slightly above the gauge range impacted by the disamber operations.

Lastly includes annual cash operating cost of $75 20 per bottle with slightly above the guided range impacted by the December operational incidents the impact of higher natural gas prices was approximately <unk> 50 per Boe on a cash cost basis.

Speaker 4: The impact of high natural gas prices was approximately 50 cents per bottle on a cash cost.

Speaker 4: ENP delivered $425 million of adjusted funds from operations in the quarter, reflecting an average price realization of $102C per barrel.

E&P delivered $425 million of adjusted funds from operations in the quarter, reflecting an average price realization of 102 Canadian dollars per bottle.

Speaker 4: Moving to our downstream results, we generated $765 million of adjusted funds from operations with a 96% refinery reutilization.

Moving to our downstream results, we generated $765 million of adjusted funds from operations with a 96% refinery utilization.

Speaker 4: Although diesel demand is bites in normal rates, gasoline demand was lower by 10% versus Q4 2019. So you should renew COVID restrictions in Canada, particularly in Ontario and Quebec.

Although diesel demand is back to normal rates gasoline demand was lower by 10% versus Q4 2019 due to renewed COVID-19 restrictions in Canada, particularly in Ontario, and Quebec.

Speaker 4: Early in Q4 we were able to use our upgraded Burrard terminal to export product and maintain refinery sleep, given this temporary dip in domestic demand. But as you will appreciate, these are lower margin bottles on our domestic retail channel.

Early in Q4, we were able to use our upgraded for our terminals to export product to maintain refinery given.

Given this temporary dip in domestic demand.

As you will appreciate these are lower margin bottles in our domestic retail channels.

Speaker 4: I should note the advantage of logistics infrastructure and marketing teams provided during the severe BC flooding in Q4. We were able to keep our customers supplied across BC despite significant challenges that caught up all transportation links to Vancouver from the rest of Canada.

I should note the advantage of logistics infrastructure and our marketing teams provided during the severe BC funding in Q4, we were able to keep our customers supplied across BC. Despite significant challenges that cutoff all transportation links to Vancouver from the rest of Canada.

Speaker 4: A barrage terminal became an import terminal for refined products into Vancouver, keeping it supply.

Our <unk> terminal became an import terminal for refined products into Vancouver, keeping its supply.

Speaker 4: Our 2021 full year capital spend of $4.4 billion was within the provided guidance range, but higher than our previously communicated mid-point of $4.2 billion.

Our 2021 full year capital spend of $4 4 billion was within the provided guidance range, but higher than our previously communicated midpoint of $4 $2 billion.

Speaker 4: This was due to increased spend at Syncret of Firebag lead into the year as a result of the operational issues. The earlier receipt of materials for 2022 turner runs as we manage supply chain and accelerated progress payments on the cogent as milestones will achieve slightly faster than expect.

This was due to increased spend at Syncrude and firebug leads into the year as a result of the operational issues we had.

Earlier receipt of materials for 2022 turnarounds as we monitor supply chain and accelerating progress payments on the co Gen. As milestones are achieved slightly faster than expected.

Speaker 4: In terms of shareholders returns during the quarter, we'd return $1.2 billion to shareholders in the form of dividends and buybacks. And at the same time, we'd use their net debt by roughly $500 million.

In terms of shareholder returns during the quarter, we returned $1 2 billion.

As in the form of dividends and buybacks and at the same time reduce our net debt by roughly 500 million.

Speaker 4: On a full year basis, we returned nearly $4 billion to shareholders and repaid nearly $4 billion of debt. As a result, we reduced the number of outstanding shares back to 2015 levels and returned our dividends and net debt by falling back to 2019 levels.

On a full year basis, we returned nearly $4 billion to shareholders and repaid nearly $4 billion of debt.

A result, we reduced the number of outstanding shares back to 2015 levels of return to the dividend.

Following back to 2019 levels.

Speaker 4: As it relates to our guidance, our only change is to the business environment for higher commodity prices, which of course increases our cash tax and royalty ranges slightly. We have also updated maintenance schedules for the year within the investor relations bank.

As it relates to our guidance, our only changes to the business environment for higher commodity prices, which of course increases our cash tax and royalty ranges slightly.

Also updated maintenance schedules for the year within the Investor Relations deck.

Speaker 4: That's the clinch of the fourth quarter. Suncourt's quarter's right to approve the renewal of the company's year repartist program for up to 5% of Suncourt's issued and their standing common shares as a January 1st 2022. This program will begin when the 2021 buyback program expires the figures of the seven 2022. I'll pass it back to Mark.

Subsequent to the fourth quarter Suncorp Board of directors approved the renewal of the company's share repurchase program for up to 5% of Suncor issued.

<unk> common shares as of January 31, 2022. This program will begin when the 2021 buyback program expires on February seven 2022.

I'll now pass it back to Mark for closing remarks.

Speaker 3: Thanks, Elser. Consistent with mines in the region, we too had some challenges in January at our mining operations, which resulted in a slower start to the year than we expected.

Thanks Alastair.

Consistent with mines in the region, we too had some challenges in January at our mining operations, which resulted in a slower start to the year than we expected.

Speaker 3: So, Q1 production will reflect this softness, including a reduction in shipping rates that's SIM crude as we're accelerating some major maintenance on our hydrotreating and hydrogen assets into the quarter to maximize our full-year production.

Q1.

Production will reflect the softness including a reduction in shipping rates at Syncrude as we are accelerating some major maintenance on our hydro trading in hydrogen assets into the quarter to maximize our full year production.

Speaker 3: As a result, we're expecting Q1 2022 production to be consistent with Q4 2021.

As a result, we're expecting Q1 2022 production to be consistent with Q4 2021.

Speaker 3: However, our 2022 production guidance remains intact.

However, our 2022 production guidance remains intact.

Speaker 3: As I currently look at each asset, its nameplate capacity, our base plant upgrader carried its fourth quarter 99% utilization momentum into January .

As I currently look at each asset its nameplate capacity our base plant upgrader carried its fourth quarter and 99% utilization momentum into January .

Speaker 3: and situ assets are operating over 95%.

And since you assets are operating over 95% Syncrude is operating over at 90% and we're working to stabilize Fort Hills and expect to achieve our annual production guidance for this asset.

Speaker 3: SyncRoot is operating over at 90%. And we're working to stabilize Ford Hills and expect to achieve our annual production guidance for this asset.

On the cost side, we will continue to drive down the cost structure of our business by increasing our workforce productivity by our targeted 10% through implementation of enterprise wide systems and processes continued digitization of our operations and capturing syncrude.

Speaker 3: On the cost side, we will continue to drive down the cost structure of our business.

Speaker 3: by increasing our workforce productivity by our targeted 10 percent through implementation of enterprise-wide systems and processes, continued digitization of our operations, and capturing syncrude synergies as we previously communicated.

Synergies as we've previously communicated.

Speaker 3: This is expected to result in a year over year controllable cost reduction across the company.

This is expected to result in a year over year controllable cost reduction across the company.

Speaker 3: Our capital program of $4.7 billion includes investments in highly accretive economic growth at Terra Nova slated to come online by the end of this year, in in situ well pads, 40 mile wind farm and the co-gen at base plant.

Our capital program of $4 $7 billion includes investments in highly accretive economic growth at Terra Nova slated to come online by the end of this year and and set you well pads 40 mile Wind farm and the co Gen at base plant.

Speaker 3: At the same time, we consistently evaluate all of our assets in the portfolio. We've initiated a sales process to determine interests for our Norwegian ENP assets.

At the same time, we consistently evaluate all of our assets in the portfolio. We've initiated a sales process to determine the interest for our Norwegian E&P assets.

Speaker 3: We also intend to assess market interest for part of our interest in the UK Rosebank development later this year as we move closer to sanction, which is consistent with our longer-term plan for this asset.

We also intend to SaaS market interest for part of our interest in the UK Rose Bank development. Later this year as we move closer to sanction, which is consistent with our longer term plan for this asset.

Speaker 3: In 2021, our capital allocation policies favored higher debt reduction, bringing the balance sheet back to 2019 level.

In 2021, our capital allocation policy favored higher debt reduction, bringing the balance sheet back to 2019 levels.

Speaker 3: This year will allocate free funds flow after the dividend and capital program evenly, so 50-50 between share buybacks and net debt reduction, which is expected to deliver an even higher rate of shareholder returns in 2022 versus 2021.

This year, we'll allocate free funds flow after the dividend and capital program evenly. So 50 50 between share buybacks and net debt reduction, which is expected to deliver an even higher rate of shareholder returns in 2022 versus 2021.

Speaker 3: As many are looking at the strong macro environment, SunCore is well positioned in 2022 to deliver higher production and substantial free funds flow increase with a clearly defined capital allocation framework that accelerate shareholder returns.

As many are looking at the strong macro environment Suncor is well positioned in 2022 to deliver higher production and substantial free funds flow increase with a clearly defined capital allocation framework that accelerate shareholder returns.

Speaker 3: My commitment to you is to further strengthen our operational excellence to improve some course performance. And with that,

My commitment to you is to further strengthen our operational excellence to improve <unk> performance.

And with that Trevor I'll turn it back to you.

Speaker 2: Thank you, Mark, and Alistair. I'll turn the call back to our operators, take some questions.

Thank you Mark and Alister I'll turn the call back to our operator to take some questions.

Thank you.

Speaker 1: Thank you. As a reminder, to ask a question, you will need to press Star 1 on your telephone. To fulfill your question, please press the pound key. Can I buy a Z-compile to Q&A roster?

As a reminder to ask a question you will need to press star one on your telephone to fulfill your question. Please press the pound key.

Compile the Q&A roster.

Speaker 1: And our first question comes from Neometta of Goldman Sachs. Your line is open.

And our first question comes from Neil Mehta of Goldman Sachs.

Your line is open.

Good morning team and happy new year Mark.

Speaker 5: now. Mark, I guess the first question in this where investors have certainly been focused here of last couple of weeks is around the culture of safe...

Thanks Neil.

I guess the first question and this is where investors have certainly been focused here over the last couple of weeks. It is around the culture of safety and I appreciated your comments here around the most recent incident, but just talk about what mechanisms and safeguards that you are putting in place.

Speaker 5: I appreciate your comments here around the most recent.

Speaker 5: talk about what mechanisms and safeguards that you're putting in place to mitigate these type of risks going forward and also the culture of accountability within Sankor and how you're holding onWHHope

To mitigate these type of risk going forward and also the culture of accountability within within Suncor and how you're holding.

Your team.

To higher standards.

Does that makes sense.

Yes, thanks Neil.

Speaker 3: It's obviously, I mean, as CEO , the accountability for safety and operational excellence is with me, period. Like, I own them.

It's.

Obviously, I mean as CEO the accountability for safety and operational excellence is with me period like I own this and so.

Speaker 3: And so several actions have been taken to address these concerns. In September , I re-aligned the leadership team to sharpen our focus at the executive level and at my leadership table on operations. And so we brought two more long experienced operators to the table.

Several actions have been taken to address these concerns in September I realigned the.

Leadership team to sharpen our focus at the executive level and at my leadership table on operations and so we brought two more long experienced operators to the table. So I have four of the executive leadership team focused on it might mix swing is accountable for all.

Speaker 3: So I have four of the executive leadership team focused on it. Mike McSween is accountable for all our minds and upgrading.

Of our mines and upgrading Shelley Powell is accountable for our in Sichuan E&P business, Chris Smith is actually accountable for our refining marketing and distribution system and Bruno Frank There is risks is accountable for the environmental health and safety the technical excellence at the <unk>.

Speaker 3: Shelly Powell is accountable for our in situ and EMP business.

Speaker 3: Chris Smith is actually accountable for our refining, marketing, and distribution system.

Speaker 3: And Bruno Frank here is accountable for the environmental health and safety the technical actions at the center, including things like operational risk management. Some of these are new groups that aligned with our assessment of global best practices last year. We also concluded last year.

Enter including things like operational risk management. Some of these are new groups that aligned with our assessment of global best practices last year.

We also concluded last year.

Speaker 3: assessment of the safety and field, particularly in Mines and particularly with the contractors.

Assessment of the safety and field, particularly in minds, and particularly with the contractors.

Speaker 3: So, and so we completed that independent review as a result of that, we've spent quite a bit of time reducing.

And so we completed that independent review as a result of that we've spent quite a bit of time, reducing the <unk>.

Speaker 3: prescriptive procedures which, quite frankly, we found out a lot of people are not using following or there was a gap between the practice and the actual procedures and we're closing the gap and with bigger engagement or more engagement with the front line.

Prescriptive procedures, which quite frankly, we found out a lot of people are not using and following or there was a gap between the practice and the actual procedures and we're closing the gap.

With bigger engagement or more engagement with the frontline.

Speaker 3: We're implementing standard risk assessments across all of our sites versus them being specific to the individual assets so that if we pick up something at one site, we can test that risk across all the other sites as well.

We're implementing standard risk assessments across all of our sites versus them being specific to the individual assets. So that if we pick up something at one site, we can pass that risk across all the other sites as well.

Speaker 3: And we're working on our culture and leadership engagement with the workforce at the frontline. And finally, we have been working on this plan for a period of time, but it's just essentially got finalized, is to implement collision and avoidance, mitigation and fatigue management on all our mine mobile equipment.

And we're working on our culture and leadership engagement with the workforce at the frontline and finally, we have been working on this plan for a period of time, but it's just essentially got finalized.

As to implement collision avoidance mitigation and fatigue management on all our main mobile equipment. We're.

Speaker 3: We're expecting that to be done in the next 18 to 24 months. This is a technology that's used globally in mining, but it is not used in oil sands. And so we'll be the first oil sands company to universally use this across all of the mines. And this is something that tech has really helped with in providing us some of their insights from their global experience around running the mines. So that's the plan.

We're expecting that to be done in the next 18 to 24 months. This is a technology that's used to globally and mining, but it is not used in oil sands and so it will be the first oil sands company to universally used this across all of the mines and this is something Thats Tech has really helped with and providing.

Some of their insights from their global experience around running the mines. So that's the plan.

Thank you Mark and then the follow up is just on capital returns you guys have been aggressive around the buyback obviously reset the dividend.

Speaker 5: The follow-up is just on capital returns. You guys have been aggressive around the buyback.

Speaker 5: higher, just talk about your framework for return of capital.

Or just talk about your framework for a return of capital this year and what type of cash return yield.

Speaker 5: what type of cash return yield can

And can investors expect.

Speaker 4: Alistair, do you want to talk to that? Yeah, I'll take that one. Morning, Neil. On the capital allocation, after dividends and the capex, we're allocating our pre-cash flow 50-50 between buybacks and debt reduction. So we would expect to see similar, if not higher, cash return to shareholders than you saw in 2021 based on constant prices.

So do you want to talk to that.

Morning, Neil.

On the capital allocation.

After dividends the Capex, we're allocating.

Free cash flow of 50 50 between buybacks debt reduction.

So we would expect to see similar if not higher cash returns to shareholders and you saw in 2021 based on current strip prices.

Okay.

Thank you.

Speaker 1: Our next question comes from Greg Party of RBC Capital Markets. Your line is open.

Our next question comes from Greg Pardy RBC capital markets. Your line is open.

Speaker 6: Thanks. Thanks. Good morning. And Mark, thanks for all the candidness and what sounds like a very well defined plan here as we go ahead.

Thanks, Thanks, Good morning, and Mark Thanks for all the Camden. This in what sounds like a very well defined plan here as we go ahead.

Speaker 6: I'll come back to the operations in a second. I wanted to just ask you about pathways. Completely shifting gears for a minute. You're a...

Look I'll come back to the operations in a second.

Wanted to just ask you about pathways completely shifting gears for a minute here.

Speaker 6: Founding partner there, obviously there is negotiations going on in terms of investment tax credit on.

Owning partner there obviously there is negotiations going on in terms of the investment tax credit on <unk>. So question is kind of twofold. How is how is it going and then secondly is how big do you think you can be I mean, we can't think of any other jurisdiction, where you've now got what six companies working together like this.

Speaker 6: CCUS, so the question is kind of twofold. A, how is it going? And then secondly is, how big do you think you can be? I mean, we can't think of any other jurisdiction where you've now got what, six companies working together like that.

Speaker 3: Yeah, Greg, great question. Thank you. Pathways, I think is going great. One of the things we've realized is I think we have the largest

Yes, Greg Great question. Thank you pathway, so I think it's going great.

Things we've realized this I think we have the largest.

Speaker 3: group and coalition of companies globally in our industry that are working to drive down emissions. So I'm very proud to be part of the team to be able to do that. We have a plan to take the entire industry to net zero by 2050. Canada's oil sands represent about 3% of the world's production. And I think it's going well. Basically the whole focus right now is...

Group a coalition of companies globally in our industry that are working to drive down emissions. So I'm very proud to be part of the team to be able to do that we have a plan to take the entire industry to net zero by 2050, Canada's oil sands represents about 3% of the world's production.

I think thats going well basically the whole focus right now is finalizing the pore space in Alberta. So we have a place to put the cotwo working out with the province, and also working with the federal and provincial government for us to co invest the returns that we're getting from the industry.

Speaker 3: finalizing the poor space in Alberta, so we have a place to put the CO2. We're working that with the province and also working with the federal and provincial government for us to co-invest the returns that we're getting from the industry into driving down the emissions to not only get to net zero, but to sustain the returns for decades to come at the industry. And I think those conversations are going well, but we still have a ways to go.

Two driving down the emissions to not only get to net zero, but the sustain the returns for decades to come up the industry.

And I think those conversations are going well, but that we still have a ways to go.

Speaker 6: Okay, great. Here's the mythic question. I just want to make sure I've got you straight. So it sounds like additional work just going on at synchrood in terms of, I don't know whether it's overburdened or maintenance. So a little soft to there, I think you mentioned and then four tails that think you're stabilizing. But did I hear you write sort of like overall production and first quarter similar to the fourth quarter? So I make sure I got that right.

Okay, Okay great.

Nitpick question I, just want to make sure I've got you stray.

Straight so it sounds like additional work just going on at Syncrude in terms of I don't know, whether its overburden or maintenance.

So a little softer there I think you mentioned and then short Hills I think you are stabilizing but did I hear you right sort of like overall production in first quarter similar to the fourth quarter is going to make sure I got that right.

Speaker 3: Yes, it is. And I mean, some of this is the softness in the air. And some of this is we've decided to take down the hydrotreaters and hydrogen at StimCrewd just to give us more run room and maximize production out of that asset in 2022. OK. All good. Thanks very much, Mark.

Yes, it is and I mean, some of this is the softness in the year and some of this is we've decided to take down the hydro treaters and hydrogen at Syncrude.

Just to give us more run room in and maximize production out of that asset in 2022.

All good thanks very much mark.

Thanks, Greg.

Thank you.

Speaker 1: Our next question comes from Phil Gresh of JP Morgan. Your line is open.

Our next question comes from Phil Gresh of Jpmorgan. Your line is open.

Speaker 7: Yes, hi, good morning. My first question is just following up a bit on Greg's question there, more specifically on Fort Hills. Could you just elaborate a bit more on where you stand today on Fort Hills production? And when you talk about stabilizing ramping, how you think about that cadence through the year, both on production, but also just on the cost-fci of the equation.

Yes, Hi, Good morning. My first question is just following up on Greg's question, there more specifically on Fort Hills could you just elaborate a bit more on where you stand today on Fort Hills production I mean, you talked about stabilizing ramping how you think about that cadence through the year. Both on production, but also just on the cost side of the equation.

Speaker 7: situation where you might start higher than the guidance on cost and work your way down and exit rate maybe even lower than your guidance, you know, because I know you ultimately want to get to a much lower level. So just any additional thoughts on Fort Hills.

And is this a situation where you might start higher than the guidance on costs and work your way down an exit rate, maybe even lower than your guidance because I know you ultimately want to get to a much lower level. So just any additional thoughts on Fort Hills.

Yes, thanks, Phil.

Speaker 3: Yeah, I mean, obviously, given the cold conditions, all the mine struggles coming in. So Fort Hills in January were

I mean, obviously given the cold conditions, all the mines struggled coming in so Fort Hills in January where we're a little bit below our annual range that we had in January but we think we'll make that stop the operations bouncing around a little bit quite frankly, where we're kind of somewhere between 70 and 106.

Speaker 3: We're a little bit below our annual range that we had in January , but we think we'll make this up. The operation's bouncing around a little bit. Quite frankly, we're kind of.

Speaker 3: somewhere between 70 and 106% utilization on the asset. And this is just getting lined out, that it's getting sorted out. And actually it's going quite well.

Percent utilization on the asset.

And this is just getting lined out that it is.

Getting sorted out and actually its going quite well.

Speaker 3: We have full expectations that we'll meet our guidance on this asset for the year, which is 90 percent of nameplate capacity. The focus is to get to mid-20s, so we'll be a little higher at the start of the year and a little lower at the back end.

We have full expectations that we will meet our guidance on this asset for the year.

Which is 90% of nameplate capacity and the focus is to get to mid Twenty's. So we'll be a little higher at the start of the year and a little lower at the backend.

Speaker 3: And the focus with the partners is, one, on the effectiveness, get the oil out of the ground, and then secondly, on efficiency, as you pointed out, around getting costs out. And both of them are getting worked actively through this. And I think we've had very good alignment with the owners on these priorities.

The focus with the partners is one on the effectiveness get the oil out of the ground and then secondly on efficiency as you pointed out around getting costs out and both of them are getting worked actively through this and I think we've had very good alignment with the owners on these priorities.

Okay got it thank you.

My second question just.

Speaker 7: were the net debt end of the year.

With where the net debt ended the year at about $16 billion.

Speaker 7: I know in October you had expected this to be closer to 15 billion

No in October you had expected it would be closer to $15 billion.

Speaker 7: uh... objected to the working capital uh... i don't know if the rest was December weather

Obviously I see the working capital I don't know if the rest of his December weather, but just.

Speaker 7: I'd love to hear Alistair's thoughts on kind of how you reconcile what you were hoping to achieve and where you finished, and then with any of these things like working capitals, does any of that reverse or is that just oil price effects? How do we think about that?

I'd love to hear Alistair just thoughts on kind of how you reconcile what youre, hoping to achieve and where you finished and then with any of these things like working capital is does any of that reverse or is that just oil price effects. How do we think about the progression from here.

Yes, Thanks, Phil It was a couple of issues.

Speaker 4: Yeah, thanks Phil. There was a couple of issues where we didn't quite get there as we expected. The first one, as you highlighted, was, you know, the issues with production.

We didn't quite get there and as we expected.

First one is you highlighted was the issues with production at Syncrude and Fort Hills.

Speaker 4: Thank you to 4L's and Firebox in December that we've highlighted.

Firebox already in December that we'd highlighted.

Speaker 4: There was also a couple of car goes and EMPs that were supposed to go away.

There was also a couple of cargoes in E&P that were supposed to go.

Speaker 4: At the end of the year they didn't quite get out there, they went out the first week of January , so that impacted...

We ended the year didn't quite get it really went out of the first week of January so that impacted the number as well then.

Speaker 4: the number as well. And then we had expected a slightly stronger Canadian dollar.

We had expected to be slightly stronger Canadian dollar.

Speaker 4: the end of the year, when I was probably a couple hundred million dollars on our net debt. That was really the main difference between where we expected to be and where we ended up. On the working count.

The end of the year and that was probably a couple of hundred million dollars and our net debt that was really the main difference between where we expect it to be and where we ended up.

On the working capital.

Speaker 7: As we move through the year, if our pricings are similar to what they are today, you're not going to see a lot of movement in working capital. We do have the cash tax payment going out in February in Q1, but that's the only kind of significant change I'd expect to see in working capital. Right. Okay. So as we look at 22, then you're talking about the 50, 50.

Move through the year, if oil prices are similar to what we are going.

Cielo to movement in working capital, we do have the cash tax payment going over in February in Q1, but that's the only kind of significant change I'd expect to see in working capital.

Right. Okay. So as we look at 'twenty two then.

You're about 50 50.

In terms of the ability to reduce debt further by that incremental 50% done that's the way we should frame that.

Yes, yes, okay got it thank you.

Thank you.

Speaker 1: And next we have Doug Leggett, the gate of Pink of America, and it's open.

And next we have Doug Leggate.

Nate.

Bank of America.

And it is open.

Speaker 8: And it's close enough. I'll happen to you from East Well, guys. It's, uh, Alistair knows New Year in Scotland goes on till June , but I'm delighted to be on the call. Um, guys, I've got two questions if I may. Mark, I want to change tactics a little bit. Ask about the internationalism.

Close enough how can you hear from me as well guys Alistair noticed new year in Scotland goes until June but.

I'm delighted to be on the call.

Guys I've got two questions. If I may Mark I wanted to talk just a little bit and ask you about the international business.

Speaker 8: Obviously you acquired your current assets in Norway a couple of years ago, now they're for sale. Rose Bank, you've talked about, what is the, what is the thought to the future longevity of the international assets given the oil environment, maybe an opportunistic time to think about sale and avoid that long term abandonment, especially now you've got buzzer two coming online.

Obviously, you acquired your current assets, Norway, I guess, a couple of years ago now they're for sale.

<unk> you've talked about what is the.

What is the thought to the future longevity of the international assets given the oil environment, maybe an opportunistic time to think about sale and avoid the long term.

Abandonment, especially now you've got Basel II coming online.

Okay.

Yes.

Speaker 3: Yeah, Doug, great question. It's interesting with our E&P business, as we've said before, when you look at our oil sands production, we are super highly concentrated.

Yes, Doug Great question, it's interesting with our E&P business as we've said before when you look at our oil Sands production. We are super highly concentrated you literally can drive to all our oil sands assets and two hours you could probably drive to all of them and so they're very concentrated so we've seen this as a great <unk>.

Speaker 3: You literally can drive to all our oil sands assets in two hours. You could probably drive to all of them.

Speaker 3: And so they're very concentrated. So we've seen this as a great diversification of kind of from a production perspective, really liquid barrels, brand price exposure, and not subject to all of the infrastructure logistics that are often challenging.

Diversification of kind of firm a production perspective really liquid barrels Brent price exposure and not subject to all of the infrastructure logistics that are often challenging.

Speaker 3: That said, you know, in Norway, we've been in Norway for a decade exploring and such, and a lot of these developments that are going on are developments that came from that work.

That said.

In Norway, we have been in Norway for a decade exploring in such in a lot of these developments that are going on our developments that came from that work associated with it I think our view is is that as time goes on we continue to refine and optimize our base business our view wise.

Speaker 3: associated with it. You know, I think our view is that as time goes on, we continue to refine and optimize our base business.

Speaker 3: Our view was as Norway is something that we should be exploring. With Rose Bank, we really wanted to try and get clear on the development plan and the path forward. Our view was as we would always step down and go down to about half of our current interest before we went to appropriation on this project.

Norway is something that we should be exploring with Roche bank, we really wanted to try and get clear on the development plan and the path forward. Our view was we would always stepped down and go down to about half of our current interest before we went to appropriation on this project the project actually looks really good in <unk>.

Speaker 3: The project actually looks really good and we think the operators doing a good job. In the big scope of it.

I think the operators doing a good job in the big scope of it.

B, we obviously have continued to be active on the east coast of Canada and in the North Sea.

Speaker 3: We obviously have continued to be active on the East Coast of Canada and in the North Sea. The North Sea has been less significant with the sale of gold and eagle, and we'll see how it goes with Norway. But our focus is primarily in our core integrated business. And so we're testing the waters on a few of these assets.

The North Sea has been less significant with the sale of Golden Eagle and we'll see how it goes with Norway.

Our focus is primarily in our core integrated business and so we're testing the waters on a few of these assets.

Speaker 8: Alright, we'll keep watching. I guess my second follow-up question is slide 8. Is obviously the whole story here posted?

Alright.

We'll keep watching.

I guess my second follow up question is slightly is obviously the whole story here post the syncrude operator ship in the trajectory through 2025.

Speaker 8: Syncrewed operator ship and the trajectory you have through 2025. I don't know if I missed it, but I just wonder if you could give it an update at the end of 21. How do you see that trajectory? Any changes? Are you comfortable still that you don't track? And maybe how much of the two-possed billion dollars? The two-possed one-five billion dollars free cash funds increment, do you think you have now achieved a run rate at the end of 21? I'll leave it there. So

Don't know if I missed it but I just wonder if you could give us an update at the end of 'twenty. One how do you see that trajectory any changes are you comfortable still that youre on track and maybe how much of the two plus billion dollars.

<unk>, one $5 billion of free cash flow.

<unk>.

<unk> do you think.

<unk> achieved a run rate at the end of 'twenty, one and I'll leave it there. Thanks.

Why don't you start Alastair.

Speaker 4: Yeah, okay. Thanks, Doug. If you look at 2021.

Yeah, Okay. Thanks, Doug.

If you look at 2021 we achieved roughly $465 million.

Speaker 4: We achieved roughly $465 million off the $2.15 billion. And that really was driven out of...

The $2, one 5 billion not really was driven out of.

Speaker 4: margin capture in the upstream and the downstream business.

Margin capture in the.

Upstream the dentist.

<unk> business.

Speaker 4: uh... provided by our supply trading and marketing operation you can see that and some of the realizations we've been able to achieve particularly uh... in the downstream business

Provided by our supply and trading and marketing operation and you can see that in some of the realization we've been able to achieve particularly in the <unk>.

<unk> business.

Speaker 4: It's a reduction in our ARO spend around treating tailings, a couple hundred million. As we move into 2022, we're focusing on enhancing, and building on those margin enhancements as well as we expand, particularly in the product-streeting business. But we're beginning to achieve our cost reductions as we implement the rent-apprise wage.

The reduction in our own spend around treating tailings a couple hundred million dollars as we move into 2022.

We're focusing on answering building.

Building on those margin enhancements as well as we expand particularly in the prominent screening.

But we are beginning to achieve cost reductions as we implemented a range of <unk>.

Speaker 4: systems and processes in the first half of the year. So you'll see those cost reductions coming through in the second half of the year. We're targeting on top of the $465 million we achieved last year, another $400 million in 2020.

Our systems and processes in the first half of the year, So youll see those cost reductions coming through.

And half of the year.

We're targeting on top of the $465 million, we achieved last year another $400 million in 2022.

Speaker 3: Maybe I would just add to that, you know, one of the things about this is we really want to make sure we keep a huge focus on this because this is the key lever for driving shareholder returns.

Maybe I would just add to that.

One of the things about this is we really want to make sure. We keep our huge focus on this because this is a key lever for driving shareholder returns. So Bruno Frank here that I talked about that leads our central group is actually coordinating all of the projects and the stewardship. So that we're driving strong accountability and delivering those pro.

Speaker 3: So Bruno Francure that I talked about that leads our central group is actually coordinating all of the projects and the stewardship so that we're driving strong accountability in delivering those projects and driving the cash out for them. Alistair's team actually goes in and verifies that and our internal targets are actually greater than the $2 billion because we know that we've essentially done $2 billion on a risk basis. So I think the organizations make

<unk> and driving the cash out forum Alastair <unk> team actually goes in and verifies that and our internal.

Targets are actually greater than the $2 billion, because we know that we've essentially done $2 billion on a risk basis. So I think the organizations, making significant progress in the big event that we have coming up right now it's really the implementing standard wide process.

Speaker 3: you know, significant progress and the big event that we have coming up.

Speaker 3: right now is really the implementing standard wide processes across the company and leveraging technology to be able to improve productivity and drive down our cost structure.

Across the company and leveraging technology to be able to improve productivity and drive down our cost structure.

Speaker 9: Appreciate the entrance, guys. Thank you. Thanks, Dr.

I appreciate the answers guys. Thank you.

Thanks, Doug.

Thank you.

Speaker 1: And next we have Manav Gupta of Credit Suisse, your line is open.

And if we haven't Manav Gupta credit Suisse. Your line is open.

Speaker 1: Hey guys, my first question is a little bit on the return on capital employed. There was a good improvement versus last year. I think you've hit about 8.6. And I'm trying to understand a little bit as obviously you go forward and try and realize this incremental function of 2.1.5. Like, is there a targeted return of capital employed you want to achieve in the next three years or five years? It could give us some guidance or where you would like this number to eventually be in the next three to four.

Hey, guys. My first question is a little bit on the return on capital employed was it couldnt improvement versus last year I think you think about 8.6.

And then trying to understand a little bit has obviously that you go forward the triangle Ics incremental funds flow of 2.5 is their targeted return of capital employed you want to achieve in the next three years or five years. If you could give us some guidance on where you would like this number to eventually be in the next three to four years.

Yes, thanks for the question.

Speaker 3: Yeah, I mean, thanks for the question. I mean, our focus is to get this number to 12 to 15 percent. We're doing it through optimizing the business. We're doing it through investing in projects that are going to get us a 15 plus return associated with it. But that's what we're targeting.

Our focus is to get this number to 12% to 15% we're doing that through optimizing the business. We're doing that through investing in projects that are going to get US 15, plus return associated with it but that's what we're targeting.

Speaker 1: And a quick question here, a follow-up on Fortel's, as you stabilize operations, as you bring down the op cost, you increase the attractiveness of this asset, is there a desire somewhere to own a little more of it? I mean, there is a willing seller in one of your partners. Would the company consider increasing ownership at the right price?

Perfect and a quick question here to follow up on four hotels.

As you stabilize operations as Youll bring down.

The op cost in the attractive north mist.

This asset is that a desire somewhere to one a little more I think I mean, there is a willing seller and one of your partners would the company consider increasing your ownership at the right price.

Speaker 3: Yeah, Manav, I think we've been very consistent in saying that when we do M&A.

Yes manav.

I think we've been very consistent in saying that when we do M&A they have to be good quality assets. They have to be worth more in our hands on the way theyre held today and thirdly, it needs to be accretive to our shareholders. So are we open to do an M&A. Yes. We are just needs to be at the right price and you can apply that to a number of assets in our portfolio.

Speaker 3: They have to be good quality assets. They have to be worth more in our hands than the way they're held today. And thirdly, it needs to be a creative to our shareholders. So are we open to do an M&A? Yes, we are. It just needs to be at the right price. And you could apply that to a number of assets in our portfolio. The best part of this is we feel like our current portfolio of assets is complete. We don't have any major gaps, and so we don't have to do any M&A.

Leo.

That's part of that says we feel like our current portfolio of assets is complete we don't have any major gaps. So we don't have to do any M&A. So we're only going to do it. If this makes eminent sense for the shareholder.

Speaker 3: So we're only going to do it if this makes imminent sense for the shareholder.

Speaker 10: And a last very quick one is, you mentioned during 4Q there were lockdowns in Canada, gasoline demand did go down 10% versus 19%. Are we seeing a rebound of that? Because your refining is generally a big strength of yours. So if those lockdowns are abating, is there a possibility that gasoline demand does make a full recovery here, maybe in the first half of 2022?

Last very quick one as you mentioned during the <unk> the Lockdowns in Canada gasoline demand did go down 10% versus 19 are we seeing a rebound of that because you're defining is generally a big strength of yard. So if those lockdowns that are beating sort.

The possibility that gasoline demand does make a full recovery here maybe in the first half of 2022 and I'll leave it there.

Speaker 3: Yeah, Manav, I think actually in January , they got worse, not better, unfortunately.

Yes, Manav I think actually in January they got worse not better Unfortunately, but the beauty of it is I would say, particularly Alastair talked about Ontario, and Quebec, Thats, particularly true in Ontario, and Quebec, but.

Speaker 3: But the beauty of it, as I would say, and particularly, Alasdair talked about Ontario and Quebec. That's particularly true in Ontario and Quebec. But.

Speaker 3: Our view is, and you look at the jurisdictions in Canada, it looks like all of these lockdowns are rapidly coming to an end, or it's certainly getting less constrained.

Our view is and you look at the jurisdictions in Canada. It looks like all of these lockdowns are rapidly coming to an end or it's certainly getting less constraining and so we're starting to see demand coming back already and we're expecting to see as you get out to mid year normal demand. So we think this year it will be much stronger demand in <unk>.

Speaker 3: And so we're starting to see demand coming back already and we're expecting to see, you know, as you get out to mid-year normal demand.

Speaker 3: So we think this year will be much stronger demand in Canada than what we saw last year.

Then what we saw last year.

Thank you for taking my questions.

Thank you.

Speaker 1: And next we have Dennis Fong of CIBC World Market. Your line is open.

And next we have Dennis Fong of CIBC World markets. Your line is open.

Speaker 11: Good morning and thank you for taking my questions. The first one maybe is directed towards Alistair. It's really just around ideal capital structure and obviously such a large focus on the capital allocation between.

Good morning, and thank you for taking my questions. The first one maybe is directed towards Alastair.

It's really just around.

Ideal capital structure, and obviously, such a large focus on the capital allocation between debt repayment and the share buyback.

Speaker 11: Debra payment and the share buyback in our expectations you'll be able to

Our expectations youll be able to reach that 12% to $15 billion target closer to year end of this year, given the higher commodity prices happen to be just wanted to understand how aggressively you wanted to pursue the 9% to 12 by 2030 kind of after you hit kind of at this $12 billion to $15 billion target.

Speaker 11: reach that $12 to $15 billion target closer to year end this year given the higher the money prices happen to be. Just wanted to understand how aggressively you want to pursue the 9 to 12 by 2030 kind of after you hit kind of this $12 to $15 billion.

Speaker 4: Thanks Dennis. If you look at our capital allocation, it's predicated on having a strong balance sheet.

Yes, Thanks, Dennis if you will.

Looking at our capital allocation I mean, it is predicated on.

A strong balance sheet do you think.

Speaker 4: That important for this industry is we go forward and we want to be have a leading balance sheet in the industry. We want to be able to grow or dividend and a little break even.

That is important for this industry as we go forward and we want to be.

Our leading balance sheet in the industry, we wanted to be able to grow our dividend at a low breakeven around the $35 <unk>.

Speaker 4: around the $35 WTI that we've priced with talks about. But then we also want to be able to return cash to sales just through it.

So we price we've talked about but then we also want to be able to do.

Return cash to shareholders.

Speaker 4: a significant buyback program. And you see this executed on the drilling the last year. And we'll continue to do so in 2022. We set our debt targets, you know, a 2025 target. And I would agree with you that we have the opportunity to accelerate both buybacks and debt reduction with higher off prices and we'll be taking advantage of that in a family this year and going forward.

The significant buyback program.

And you've seen us execute them during the last year.

And we will continue to do so in 2022.

We said our debt targets.

In 2025 target.

I would agree with you that we have the opportunity to accelerate both buybacks and debt reduction from higher oil prices and we're taking advantage of that.

And we wish you and going forward.

Speaker 4: We will continue to drive the down if the price allows us to do that on a separate basis. So we're not stopping when we hit the 12 to 15. We'll continue on to our 20-Satty target and if we get it earlier, I would be very happy to see you get that earlier.

We will continue to drive that.

And the price.

Allows us to do that and accelerated basis. So we're not stopping when we hit.

<unk> 15, we will continue on to 2030 target and if we can.

I'd be very happy to see you again.

Earlier.

Great great.

Speaker 11: And then the second question that I have is maybe just a follow on to that the $2.15 billion of free funds flow rollout. I know that you indicated back with Q3.

Great.

And then the second question I have is maybe just a follow on to that.

$2, one 5 billion.

The slow rollout I know that.

You indicated back with Q3 results.

Speaker 11: the kind of realizations of $465 million in 2021 as well as another approximately $400 million here in 2022, all realizations of that.

The kind of realization of $465 million in 2021 as well as another approximately $400 million here in 2022, all realizations of that if we look at the schedule that you outlined at your Investor Day. There is maybe another 500 odd million dollars potentially namely from.

Speaker 11: If we look at the schedule that you outlined at your investor day, there's maybe another $500-odd million potentially, namely from 40 Mile coming online, mine optimization, as well as the implementation of digital. That coupled with the accelerated debt repayment, how should we be then thinking about the dividend level? As I know that that was one of the major considerations when you doubled your dividend back.

40 mile coming online mine optimization as well as the <unk>.

Mentation of digital.

That coupled with the accelerated debt repayment, how should we be then thinking about the dividend level as I know that that was one of the major considerations. When you doubled your dividend back in Q3.

Yes.

Speaker 3: Yeah, and Dennis, thanks for that. It's interesting. I mean, when we originally doubled our dividend, I think we said like,

And Dennis Thanks for that it's interesting I mean, when we originally doubled our dividend I think we said.

Speaker 3: Essentially, we were catching it up to debt reduction and share buybacks. We were kind of working on what we said at our investor day, our 2023 numbers for some of those pieces associated with it. So we gave 75% of what we had talked about achieving by 2025. Obviously, the macro environment has changed a lot. Everything is getting accelerated from debt repayment.

Essentially we were catching it up to debt reduction and share buybacks, we were kind of working on what we said at our Investor day, our 2023 numbers for for some of those pieces associated with it. So we gave 75% of what we had talked about achieving by 2025.

The macro environment has changed a lot everything is getting accelerated from debt repayments share buybacks as well as the dividend and so this is something that the board continues to work out of course, we're working to continue to achieve what we set as our 2025 targets, we're just expecting it to get accelerated.

Speaker 3: share bybacks as well as the dividend. And so, you know, this is something that the board continues to work out. Of course, we're working to continue to achieve what we said in

Speaker 3: as our 2025 targets, we're just expecting it to get accelerated.

Speaker 3: And the faster we go on our debt metrics and stuff, the better chance we have on achieving further increases in dividends.

And and.

The faster we go on our debt metrics and stuff the better chance we have on on achieving.

Further increases in dividends I'll start did you have anything to add to that.

Speaker 4: Alster, did you have anything to add to that? Yeah, I know. I think, Mark, we said when we doubled the dividend in October last year that we would not be looking at it in February . And the board considers the dividend in quarter. And that's a positive we can get to take cost out of our business and achieve $2 billion. Means we will come back and look at the dividend when it's appropriate. Okay.

I think mark.

When we doubled the dividend.

October last year.

We'd now be looking out in February .

The board considers the dividend every quarter.

Boston.

Three cost saver business and achieve $2 billion.

It means we will come back and look at the dividend when it's appropriate.

Great.

Appreciate you answering my questions. Thank you.

Speaker 3: Well, maybe just before we sign off, I just wanted to emphasize a couple of the points that I said at the start of this. Like,

Thanks, Josh well, maybe just before we sign off I just wanted to emphasize a couple of the points that I said at the start of this like.

Speaker 3: I know we need to do better. I have a plan and it's been endorsed by the board and in fact it's in execution and this is critical for us.

I know, we need to do better.

Have a plan and its been endorsed by the board and in fact, it's in execution.

This is critical for us.

Speaker 3: We think we have a great company and we're generating significant free cash flow and shareholder cash returns in 2021. And we expect both of these to be even higher as we get into 2022.

We think we have a great company and we're generating significant free cash flow and shareholder cash returns in 2021, and we expect both of these to be even higher as we get into 2022.

Speaker 2: And I'm strengthening the balance sheet, making investments for our future to support the continued growth in cash flow and shareholder returns for many years to come. So thanks for joining us today. I appreciate it. And with that, I'll turn it back to Trevor. Great. Thank you, Mark. Again, thanks everyone for joining us today. I know it's a busy season. We're around all day. If you have any other questions, thank you operator.

And strengthening the balance sheet, making investments for our future to support the continued growth in cash flow and shareholder returns for many years to come. So thanks for joining us today I appreciate it and with that I'll turn it back to Trevor great. Thank you Mark again, thanks, everyone for joining us today I know, it's a busy season, we're around all day, if you have any.

Other questions. Thank you operator.

Thank you.

Speaker 1: Everyone, this concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.

And this concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

Speaker 12: The.

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Speaker 1: Good day, and thank you for standing by. Welcome to the Suncor Energy fourth quarter 2021 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1 on your telephone. And if you require any assistance during the call, please press star 0.

Good day, and thank you for standing by and welcome to the Suncor energy fourth quarter 2021.

The conference call at this time, all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during that session you will need to press star one on your telephone.

If you require any assistance during the call. Please press star zero.

I would now like to handle conference over to your speaker today, Mr. Trevor Bell Vice President of Investor Relations. Mr. Bell the floor is yours.

Speaker 2: Thank you operator and good morning. Welcome to SunCore's fourth quarter earnings call. With me this morning, our Mark Little, President and Chief Executive Officer, and Al Sir Cowan Chief Financial Officer.

And assumptions that are described in our fourth quarter earnings release as well as in our current annual information form both of those are available at SEDAR, Edgar and our website Suncor Dot com certain financial measures referred to in these comments are not prescribed by Canadian GAAP for a description of these financial measures. Please see our fourth quarter earnings release.

Speaker 2: Certain financial measures referred to in these comments are not prescribed by Canadian Gap. For a description of these financial measures, please see our fourth quarter earnings release.

Speaker 2: Following formal remarks, we'll open up the call to questions. Now I'll hand it over to Mark for some open-

Following the formal remarks, we'll open up the call to questions now I'll hand, it over to Mark for some opening remarks.

Speaker 3: Great, thanks Trevor. And good morning. Thank you for joining us.

Great. Thanks, Trevor and good morning, Thank you for joining us.

Speaker 3: I wanted to begin by talking about the incidents that we outlined in our recent press release. On many occasions, inside the company and externally, I've talked about my personal commitment to safety above all else and our drive to operational excellence.

I wanted to begin by talking about the incidents that we outlined in our recent press release on many occasions inside the company and externally I've talked about my personal commitment to safety above all else and our drive to operational excellence.

Speaker 3: I know that many are questioning our focus on this given the recent fatality and operational challenges.

I know that many are questioning our focus on this given the recent fatality and operational challenges.

Speaker 3: These outcomes are unacceptable and we know that we must do better.

These outcomes are unacceptable and we know that we must do better.

Speaker 3: I and the Suncor leadership team are deeply committed to engaging our workforce so everyone goes home safely every single day.

I am the Suncor leadership team are deeply committed to engaging our workforce. So everyone goes home safely every single day and.

Speaker 3: and improving the operating performance of our company.

And improving the operating performance of our company.

Speaker 3: I have a comprehensive plan endorsed by our board. We're executing this plan to address these concerns. Despite these challenges, we had several accomplishments in the quarter.

I have a comprehensive plan endorsed by our board we're executing this plan to address these concerns.

Despite these challenges we had several accomplishments in the quarter.

We delivered the best quarter of adjusted funds from operations of $3 $1 million on a per share basis. This is $2 17 per share and exceeds our previous quarterly per share record, which was set in Q1 of 2014 by 11%.

Speaker 3: We upgraded a combined 515,000 barrels per day of synthetic crude oil, which marks our third best quarterly result due to 99 and 90% utilization rates at base plants and SIM crude respectively.

We upgraded a combined 515000 barrels per day of synthetic crude oil, which marks our third best quarterly result, due to 99%, 90% utilization rates at base plant and Syncrude, respectively.

Speaker 3: We produced 151,000 barrels per day of bitumen from our in-situ operations in Fort Hills, which resumed two-train operations in mid-December.

We produced 151000 barrels per day of bitumen from our <unk> operations in Fort Hills, which resumed two train operations in mid December .

Speaker 3: RE&P production of 77,000 barrels a day reflects the golden eagle disposition.

Our E&P production of 77000 barrels a day reflects the Golden Eagle disposition.

Speaker 3: And in the downstream, we achieved nearly $800 million of adjusted funds from operations with 96% refinery utilization. And once again, our Canadian refineries outperformed the Canadian refinery average utilization.

And in the downstream, we achieved nearly $800 million of adjusted funds from operations with 96% refinery utilization.

And once again, our Canadian refineries outperformed the Canadian refinery average utilizations.

Speaker 3: In terms of full year results, we continue to strengthen the company by reducing our net debt by nearly $4 billion.

In terms of full year results, we continued to strengthen the company by reducing our net debt by nearly $4 billion.

Speaker 3: We returned nearly $4 billion of cash through the doubling of our dividend and share buybacks, and that's 40% of our adjusted funds from operations within the year.

We returned nearly $4 billion of cash through the doubling of our dividend and share buybacks and thats, 40% of our adjusted funds from operations within the year.

Speaker 3: Based on our average 2021 average market cap, that's a 10% cash return to our shareholders.

Based on our average 2021 average market cap, that's a 10% cash return to our shareholders.

Speaker 3: Looking at our 2021 full year performance, some court generated adjusted funds from operations of $10.3 billion.

Looking at our 2021 full year performance Suncor generated adjusted funds from operations of $10 $3 billion.

Speaker 3: Our regional oil sands assets contributed record annual funds from operations of $6.9 billion despite completing the largest maintenance program in our history.

Our regional oil sands assets contributed record annual funds from operations of $6 $9 billion. Despite completing the largest maintenance program in our history.

Speaker 3: These results reflect accretive investments, including increasing the utilization of our Suncor Syncrude interconnecting pipeline, higher volumes from firebag de-bottlenecks, improved margin capture through our trading logistics capabilities, and continued cash savings from reclamation using our PASS technology.

These results reflect accretive investments, including increasing the utilization of our suncor Syncrude interconnecting pipeline.

Volumes from fire bag, the bottlenecks improved margin capture through our trading and logistics capabilities and continued cash savings from erectile about reclamation using our past technology.

Speaker 3: I'll now pass it to Alster to go through the quarterly financial results.

I'll now pass it to Alister to go through the quarterly financial results.

Speaker 4: Thanks, Mark. As you noted, our adjusted funds from operations per share of $2.17 is an 11% improvement compared to your previous quarterly record.

Thanks, Mark as you noted our adjusted funds from operations per share of $2 17.

It is an 11% improvement.

<unk> quarterly record.

This reflects the value of our buyback program as we lowered our share count by approximately 6% during the year acquiring new counseling 84 million common shares at an average price of $27 and 45 Canadian per share.

Let me walk through our results oil funds generated Q4 adjusted funds from operation.

Speaker 4: Let me walk through our results. Oil fans generated Q4 adjusted fans from operation.

Speaker 4: 2.2 billion dollars, with an average realization of 87 Canadian dollars per barrel.

And $2 $2 billion that average realization of 87 Canadian dollars per bottle.

Speaker 4: On an annual basis, oil sands cash operating costs of $25.90 per barrel for the full year ended up below the guided range, while absorbing a $1 per gigajoule eco-increase in natural gas prices versus our original guidance assumption.

On an annual basis oil sands cash operating costs were $25 90 per barrel for the full year ended up below the guided range.

Our being a $1 <unk> equal increase in natural gas prices versus our original guidance assumptions.

Speaker 4: This creates the approximately one dough per bar on cast callsubes.

This equates to approximately $1 per barrel on cash cost basis.

Speaker 4: Fort Hell's 2021 cash-elving costs of $41.35 per barrel reflects a 1-train operation for almost the entire year. And as we look to 2022, we're targeting cash-elving costs of $25 per barrel at the midpoint with the 2-train operation.

<unk> 2020 , one cash operating costs of $41 35 per Boe.

So wondering in operation for almost an entire year.

And as we look to 2022, we're targeting cash operating costs of $25 per barrel of the midpoint Institute training operation.

Speaker 4: Lastly, Sinclair's annual cash operating cost was $35.20 per bottle, which is slightly above the guided range impacted by the December operation on Sinclair.

Lastly, this includes annual cash operating cost was $75 20 per barrel was slightly above the guided range impacted by the December operational incidents the impact of higher natural gas prices was approximately 50 per Boe on a cash cost basis.

Speaker 4: The impact of higher natural gas prices was approximately $0.50 per bottle on a cash cost.

Speaker 4: The NPE delivered $425 million of adjusted funds from operations in the quarter, reflecting to get an outreach price realization of $102 Canadian dollars per barrel.

E&P delivered $425 million of adjusted funds from operations in the quarter, reflecting an average price realization of 102 Canadian dollars per bottle.

Speaker 4: Moving to our downstream results, we generated $765 million of adjusted funds from operations with a 96% refinery reutilization.

Moving to our downstream results, we generated $765 million of adjusted funds from operations with a 96% refinery utilization.

Speaker 4: Although diesel demand is back to normal rates, gasoline demand was lowered by 10% vs. Q4 2019 due to renewed COVID restrictions in Canada, particularly in Ontario and Quebec.

Although diesel demand is back to normal rates gasoline demand was lower by 10% versus Q4 2019 due to renewed COVID-19 restrictions in Canada, particularly in Ontario, and Quebec.

Speaker 4: Early in Q4 we were able to use an upgraded barrage terminal to export product and maintain refinery throughput given this temporary dip in domestic demand. But as you will appreciate these as lower margin bottles and domestic retail channels.

Early in Q4, we were able to use our upgraded for our terminals to export product to maintain refinery throughput given this temporary dip in domestic demand, but as you will appreciate these are lower margin bottles in our domestic retail channels.

I should note the advantage of logistics infrastructure and our marketing teams provided during the severe flooding in Q4, where you want to add.

To keep our customers supplied across BC, despite significant challenges that cut off all transportation links to Vancouver from the rest of Canada.

Speaker 4: A Varav Chamano became an import terminal for refined products in Javankuva keeping it supplied.

Gaurav terminal became an import terminal for refined product in the Vancouver, keeping it supplied.

Speaker 4: Our 2021 full year capital spend of $4.4 billion was within the provided guidance range but higher than our previously communicated midpoint of $4.2 billion.

Are turning 21 full year capital spend of $4 4 billion.

And the provided guidance range, but higher than our previously communicated midpoint of $4 $2 billion.

Speaker 4: This was due to increased spend at Syncrude and Firebag late into the year as a result of the operational issues, the earlier receipt of materials for 2022 turnarounds as we manage the supply chain, and accelerated progress payments on the cogen as milestones were achieved slightly faster than expected.

This was due to increased spend at Syncrude and firebug leads into the year as a result of the operational issues.

Earlier receipt of materials for 2022 turnarounds as we monitor supply chain and accelerating progress payments on the cogent as milestones are achieved slightly faster than expected.

Speaker 4: In terms of shareholders returns during the quarter, we return $1.2 billion to shareholders in the form of dividends and buybacks. And at the same time, we use their net day by roughly $500 million.

In terms of shareholder returns during the quarter, we returned $1 2 billion.

To shareholders in the form of dividends and buybacks and at the same time reduced our net debt by roughly 500 million.

On a full year basis, we returned nearly $4 billion to shareholders and repaid nearly $4 billion of debt.

As a result, we reduced the number of outstanding shares back to 2015 levels return the dividend.

Borrowings back too.

2019 levels.

Speaker 4: As it relates to a guidance, our only change is to the business environment for higher commodity prices, which of course increases our cash tax and royalty ranges slightly. We have also updated maintenance schedules for the year within the investor relations day.

As it relates to our guidance, our only changes to the business environment for higher commodity prices, which of course increases our cash tax and royalty ranges slightly we've also updated maintenance schedules for the year within the Investor relations deck.

Speaker 4: Subsequent to the fourth quarter, Suncor's Board of Directors approved a renewal of the company's share repurchase program for up to 5% of Suncor's issued and outstanding common shares as of January 31st, 2022. This program will begin when the 2021 buyback program expires on February 7th, 2022. I'll now pass it back to Mark.

Subsequent to the fourth quarter Suncor Board of directors approved a renewal of the company's share repurchase program for up to 5% of Southern Cross issued.

<unk> common shares as of January 31, 2022. This program will begin when the 2021 buyback program expires on February seven 2022.

I'll now pass it back to Mark for closing remarks.

Speaker 3: Thanks, Elster. Consistent with mines in the region, we too had some challenges in January at our mining operations, which resulted in a slower start to the year than we expected.

Thanks, Alastair consistent.

Consistent with mines in the region, we too had some challenges in January at our mining operations, which resulted in a slower start to the year than we expected.

Speaker 3: Q1 production will reflect this softness, including a reduction in shipping rates at SimCrude as we're accelerating some major maintenance on our hydrotreating and hydrogen assets into the quarter to maximize our full-year production.

Q1 production will reflect the softness including a reduction in shipping rates at Syncrude as we are accelerating some major maintenance on our hydro trading in hydrogen assets into the quarter to maximize our full year production.

Speaker 3: As a result, we're expecting Q1 2022 production to be consistent with Q4 2021.

As a result, we're expecting Q1 2022 production to be consistent with Q4 <unk>.

'twenty one.

Speaker 3: However, our 2022 production guidance remains intact.

However, our 2022 production guidance remains intact.

Speaker 3: As I currently look at each asset, its nameplate capacity, our base plant upgrade carried its fourth quarter, 99% utilization momentum into January .

As I currently look at each asset its nameplate capacity our base plant upgrader carried at <unk> fourth quarter, and 99% utilization momentum into January .

Speaker 3: In situ assets are operating over 95%.

And since you assets are operating over 95%.

Speaker 3: Syncrude is operating over at 90 percent and we're working to stabilize Fort Hills and expect to achieve our annual production guidance for this asset.

Syncrude is operating over at 90% and we're working to stabilize Fort Hills and expect to achieve our annual production guidance for this asset.

Speaker 3: On the cost side, we will continue to drive down the cost structure of our business.

Speaker 3: by increasing our workforce productivity by our targeted 10% through implementation of enterprise-wide systems and processes, continued digitization of our operations, and capturing synchrored synergies as we previously communicated.

Synergies as we've previously communicated.

Speaker 3: This is expected to result in a year over year controllable cost reduction across the company.

This is expected to result in a year over year controllable cost reduction across the company.

Speaker 3: Our capital program of $4.7 billion includes investments in highly accretive economic growth at Terra Nova, slated to come online by the end of this year, and in situ well pads, 40-mile wind farm, and the Cogenit base plant.

Our capital program of $4 $7 billion includes investments in highly accretive economic growth at Terra Nova slated to come online by the end of this year and then set you well pads 40 mile Wind farm and the co Gen base plant.

Speaker 3: At the same time, we consistently evaluate all of our assets in the portfolio. We've initiated a sales process to determine interests for our Norwegian ENP assets.

At the same time, we consistently evaluate all of our assets in the portfolio. We've initiated a sales process that determined interest for our Norwegian E&P assets.

Speaker 3: We also intend to assess market interest for part of our interest in the UK Rose Bank development later this year as we move closer to sanction, which is consistent with our longer-term plan for this asset.

Speaker 3: In 2021, our capital allocation policy favored higher debt reduction, bringing the balance sheet back to 2019 levels.

In 2021, our capital allocation policies favored higher debt reduction, bringing the balance sheet back to 2019 levels.

Speaker 3: This year, we'll allocate free funds flow after the dividend and capital program evenly, so 50-50 between share buybacks and net debt reduction, which is expected to deliver an even higher rate of shareholder returns in 2022 versus 2021.

Speaker 3: My commitment to you is to further strengthen our operational excellence to improve some course performance. And with that,

My commitment to you is to further strengthen our operational excellence to improve <unk> performance.

And with that Trevor I'll turn it back to you.

Speaker 2: Thank you, Mark and Alistair. I'll turn the call back to our operators to take some questions.

Thank you Mark and Alister I'll turn the call back to our operator to take some questions.

Thank you.

Speaker 1: Thank you. As a reminder, to ask a question, you will need to press Star 1 on your telephone. To fulfill your question, please press the pound key. Can I buy as we compile the Q&A roster?

As a reminder to ask a question you will need to press star one on your telephone to withdraw.

Your question. Please press the pound key.

Compile the Q&A roster.

Speaker 1: And our first question comes from Neo Meta of Goldman Sachs. Your line is open.

And our first question comes from Neil Mehta of Goldman Sachs.

Your line is open.

Good morning team and happy new year Mark.

Thanks Neil.

Speaker 5: Mark, I guess the first question, and this is where investors have certainly been focused here over the last couple of weeks, is around the culture of safety.

I guess the first question and this is where investors have certainly been focused here over the last couple of weeks is is around the culture of safety and I appreciated your comments here around the most recent incident, but just talk about what mechanisms and safeguards that you are putting in place.

Speaker 5: We appreciated your comments here around the most recent.

Speaker 5: Let's talk about what mechanisms and safeguards that you're putting in place to mitigate these type of risks going forward and also the culture of accountability within Suncor and how you're holding.

To mitigate these type of risk going forward and also the culture of accountability within within Suncor and how you're holding.

Your team.

To higher standards.

That makes sense.

Yes, thanks Neil.

Speaker 3: It's obviously, I mean, it's CEO that accountability for safety and operational excellence is with me. Period. Like I own this.

It's.

Obviously, I mean as CEO the accountability for safety and operational excellence is with me period like I own. This.

Speaker 3: And so several actions have been taken to address these concerns. In September , I realigned the leadership team to sharpen our focus at the executive level and at my leadership table on operations. And so we brought two more long-experienced operators to the table.

And so several actions have been taken to address these concerns in September I realigned the.

Our leadership team to sharpen our focus at the executive level and at my leadership table on operations and so we brought two more long experienced operators to the table. So I have four of the executive leadership team focused on it might mix swing is accountable for all.

Speaker 3: So I have four of the executive leadership team focused on it. Mike McSween is accountable for all our minds and upgrading.

Our minds and upgrading Shelley Powell is accountable for our in Sichuan E&P business, Chris Smith is actually accountable for our refining marketing and distribution system and Bruno Frank There is risk is accountable for the environmental health and safety of the technical excellence at the <unk>.

Speaker 3: Shelly Powell is accountable for our in situ and in P business.

Speaker 3: Chris Smith is actually accountable for our refining, marketing, and distribution system.

Enter including things like operational risk management. Some of these are new groups that aligned with our assessment of global best practices last year.

We also concluded last year.

Speaker 3: Assessment of the safety and field particularly in minds and particularly with the contractors

SaaS meant.

The safety and field, particularly in minds, and particularly with the contractors.

Speaker 3: So, and so we completed that independent review as a result of that we've spent quite a bit of time reducing.

And so we completed that independent review as a result of that we've spent quite a bit of time, reducing the <unk>.

Speaker 3: prescriptive procedures, which quite frankly, we found out a lot of people are not using and following or there was a gap between the practice and the actual procedures and we're closing the gap and with bigger engagement or more engagement with the front line.

Prescriptive procedures, which quite frankly, we found out a lot of people are not using and following or there was a gap between the practice and the actual procedures and we're closing the gap.

With bigger engagement or more engagement with the frontline.

Speaker 3: And we're working on our culture and leadership engagement with the workforce at the front line. And finally, we have been working on this plan for a period of time, but it's just essentially got finalized, is to implement collision avoidance mitigation and fatigue management on all our mind mobile equipment.

On all our main mobile equipment we're.

We're expecting that to be done in the next 18 to 24 months. This is a technology that's used globally in mining, but it is not used in oil sands and so it will be the first oil sands company to universally used this across all of the mines and and this is something Thats pack has really helped with that and providing.

Some of their insights from their global experience around running the mines. So that's the plan.

Thank you Mark and as a follow up is just on capital returns you guys have been aggressive around the buyback obviously reset the dividend.

Speaker 5: The follow-up is just on capital returns. You guys have been aggressive around the buyback.

Speaker 5: just talk about your framework for return of capital.

Or just talk about your framework for a return of capital this year and what type of cash return yield.

Speaker 5: what type of cash return yield can

And can investors expect.

Speaker 4: Alistair, do you want to talk to that? Yeah, I'll take that one. Morning, Neil. On the capital allocation, you know, after dividends and the CapEx, we're allocating our free cash flow 50-50 between buybacks and debt reduction. So we would expect to see similar, if not higher, cash return to shareholders than you saw in 2021 based on current stock prices.

So do you want to talk to that.

Morning, Neil.

On the capital allocation.

After dividends the Capex, we're allocating.

Free cash flow 50, 50 between buybacks debt reduction.

So we would expect to see similar if not higher cash returns to shareholders and you saw in 2021 based on current strip prices.

Okay.

Thank you.

Speaker 1: Our next question comes from Greg Party of RBC Capital Markets. Your line is open.

Our next question comes from Greg Pardy RBC capital markets. Your line is open.

Speaker 6: Thanks. Good morning. Mark, thanks for all the candidness and what sounds like a very well-defined plan here as we go ahead. Look, I'll come back to the operations in a second. I wanted to just ask you about Pathways, completely shifting gears for a minute. You're a founding partner there. Obviously, there's negotiations going on in terms of an investment tax credit on

Thanks, Thanks, Good morning, and Mark Thanks for all the candidates and what sounds like a very well defined plan here as we go ahead.

Look I'll come back to the operations in a second.

Wanted to just ask you about pathways completely shifting gears for a minute here.

Founding partner, there, obviously theres negotiations going on in terms of investment tax credit on <unk> question is kind of twofold. A how is how is it going and then secondly is how big do you think you can be I mean, we can't think of any other jurisdiction, where you've now got what six companies working together like this.

Speaker 3: Yeah Greg, great question. Thank you. Pathways I think is going great. One of the things we've realized is I think we have the largest...

Yes, Greg Great question. Thank you pathway. So I think it's going great. One of the things we've realized this I think we have the largest.

Speaker 3: a group and coalition of companies globally in our industry that are working to drive down emissions. So I'm very proud to be part of the team to be able to do that. We have a plan to take the entire industry to net zero by 2050. Canada's oil sands represent about 3% of the world's production. And I think it's going well. Basically, the whole focus right now is.

It is oil sands represents about 3% of the world's production and I think thats going well basically the whole focus right now is finalizing the pore space in Alberta. So we have a place to put the cotwo working out with the province, and also working with the federal and provincial government for us to Cowen.

Speaker 3: finalizing the poor space in Alberta, so we have a place to put the CO2, we're working that with the province, and also working with the federal and provincial government for us to co-invest the returns that we're getting from the industry into driving down the emissions to not only get to net zero, but to sustain the returns for decades to come of the industry. And I think those conversations are going well, but we still have a ways to go.

<unk> the returns that we're getting from the industry into driving down the emissions to not only get to net zero, but the sustain the returns for decades to come up the industry.

And I think those conversations are going well, but that we still have a ways to go.

Speaker 6: Okay, great. Here's the nitpick question. I just want to make sure I've got you straight. So it sounds like additional work is going on at Syncrude in terms of, I don't know, whether it's overburden or maintenance. So a little softer there, I think you mentioned, and then Fort Hills, I think you're stabilizing. But did I hear you right, sort of like overall production in first quarter similar to the fourth quarter? So I want to make sure I got that right.

Okay, Okay, great Here's the Nitpick question just wanted make sure I've got your.

Straight so it sounds like additional work just going on at Syncrude in terms of I don't know, whether its overburden or maintenance.

So a little softer there I think you mentioned and then Fort Hills I think you are stabilizing but did I hear you right sort of like overall production in first quarter similar to the fourth quarter is going to make sure I got that right.

Speaker 3: Yes, it is. And I mean, some of this is the softness in the air and some of this is we've decided to take down the hydrotreaters and hydrogen at Syncrude, just to give us more run room and maximize production out of that asset in 2022. Okay, all good. Thanks very much, Mark.

Yes. It is I mean, some of this is the softness in the air and some of this is we've decided to take down the hydro treaters and hydrogen at Syncrude.

Just to give us more run room in and maximize production out of that asset in 2022.

All good thanks very much mark.

Thanks, Greg.

Thank you.

Speaker 1: Our next question comes from Phil Gresh of J.P. Morgan, your line is open.

Our next question comes from Phil Gresh of Jpmorgan. Your line is open.

Speaker 7: Yes, hi, good morning. My first question is just following up a bit on Greg's question there, more specifically on Fort Hills. Could you just elaborate a bit more on where you stand today on Fort Hills production? I mean, you talk about stabilizing, ramping, how you think about that cadence through the year, both on production, but also just on the cost side of the equation.

Yes, Hi, Good morning. My first question is just following up on Greg's question, there more specifically on Fort Hills could you just elaborate a bit more on where you stand today on Fort Hills production and when you talk about stabilizing ramping how you think about that cadence through the year. Both on production, but also just on the cost side of the equation.

And is this a situation where you.

<unk> start higher than the guidance on costs and work your way down an exit rate, maybe even lower than your guidance because I know you ultimately want to get into a much lower level. So just any additional thoughts on Fort Hills.

Yes, thanks, Phil.

Speaker 3: Yeah, I mean, obviously, given the cold conditions, all the mines struggled coming in. So Fort Hills in January were

I mean, obviously given the cold conditions, all the mines struggled coming in so Fort Hills in January where we're a little bit below our annual range that we had in January but we think we will make this up the operations bouncing around a little bit quite frankly, where we're kind of somewhere between 70 and 106.

Speaker 3: We're a little bit below our annual range that we had in January , but we think we'll make this up. The operation is bouncing around a little bit. Quite frankly, we're kind of

Speaker 3: somewhere between 70 and 106% utilization on the asset. And this is just getting lined out. It's getting sorted out and actually it's going quite well.

6% utilization on the asset.

And this is just getting lined out that it's getting sorted out and actually its going quite well.

Speaker 3: We have full expectations that we'll meet our guidance on this asset for the year, which is 90% of nameplate capacity, and the focus is to get to mid-20s, so we'll be a little higher at the start of the year and a little lower at the back end.

We have full expectations that will meet our guidance on this asset for the year, we're at which is 90% of nameplate capacity and the focus is to get to mid Twenty's. So we'll be a little higher at the start of the year and a little lower at the backend.

Speaker 3: And the focus with the partners is, one, on the effectiveness, get the oil out of the ground, and then secondly on efficiency, as you pointed out, around getting costs out. And both of them are getting worked actively through this. And I think we've had very good alignment with the owners on these priorities.

Okay got it thank you.

My second question just.

Speaker 7: That's where the net debt ended the year.

With where the net debt ended the year well ahead of 116 billion.

Speaker 7: I know in October you had expected it to be closer to $15 billion.

I know in October you had expected it would be closer to $15 billion.

Speaker 7: uh... obviously i think the working capital i don't know if the rest was December weather

Obviously I see the working capital I don't know if the rest of his December weather, but just.

Speaker 7: I'd love to hear Alistair's thoughts on kind of how you reconcile what you were hoping to achieve and where you finished. And then with any of these things like working capitals, does any of that reverse or is that just oil price effects? How do we think about that?

I love to hear Alastair thoughts and kind of how you reconcile what youre, hoping to achieve and where you finished and then with any of these things like working capital is does any of that reverse or is that just oil price effects. How do we think about the progression from here.

Yes, Thanks, Phil It was a couple of issues.

Speaker 4: Yeah, thanks Phil. There was a couple of issues where we didn't quite get there as we expected. The first one, as you highlighted, was, you know, the issues with production.

We didn't quite go as we expected.

First one is you highlighted the issues with production at Syncrude for ALS and <unk>.

Speaker 4: Thank you to Forels and Firebox Ari and December that we've highlighted. There was also a couple of car goes in EMP that were supposed to go away.

Firebox Hillary in December that we've highlighted.

There was also a couple of cargoes that e&ps are supposed to go.

Speaker 4: At the end of the year, it didn't quite get out there. They went out the first week of January , so that impacted.

We ended the year didn't quite get it really went out of the first week in January so that impacted.

Speaker 4: the number as well. And then we had expected a slightly stronger Canadian dollar.

Number as well then.

We had expected to be slightly stronger Canadian dollar.

Speaker 4: the end of the year when I was probably a couple hundred million dollars on our net debt. That was really the main difference between where we expected to be and where we ended up.

The end of the year when that was probably a couple of hundred million dollars and our net debt. So that was really the main difference between where we expected to be and where we ended up.

Working capital.

Speaker 7: As we move through the year, if all prices are similar to what they are today, you're not going to see a lot of movement in working capital. We do have the cash tax payment going out in February in Q1, but that's the only kind of significant change I'd expect to see in working capital. Right. Okay. So as we look at 2022 then, you're talking about the 50-50.

As we move through the year if oil prices are similar to what we are to do you.

Cielo to movement in working capital, we do have the cash tax payment going over in February in Q1, but that's the only kind of significant change I'd expect to see in working capital.

Right. Okay. So as we look at 'twenty two than you are.

You're about 50 50.

In terms of the ability to reduce debt further by that incremental 50% done that's the way we should frame that.

Yes, yes, okay got it thank you.

Yes.

Thank you.

Speaker 1: And next we have Doug Leggett, sorry, the gate of Bank of America and it's open.

And next we have Doug Leggate.

<unk> of Bank of America.

And is open.

Speaker 8: It's close enough. Happy New Year from me as well, guys. Alistair knows New Year in Scotland goes on until June but I'm delighted to be on the call. Guys, I've got two questions if I may. Mark, I want to change tack just a little bit and ask you about the international business.

Close enough how can you hear from me as well guys Alastair noticed new year in Scotland goes until June but.

I'm delighted to be on the call.

Guys I've got two questions. If I may Mark I wanted to talk just a little bit and ask you about the international business.

Speaker 8: Obviously, you acquired your current assets in Norway a couple of years ago, now they're for sale. What is the thought to the future longevity of the international assets, given the oil environment may be an opportunistic time to think about sale and avoid that long-term abandonment, especially now you've got Buzzer II coming online?

Obviously, you acquired your current assets, Norway, I guess, a couple of years ago now they're for sale.

<unk> you've talked about what is the.

What is the thought to the future longevity of the international assets given the oil environment, maybe an opportunistic time to thinking about sale and avoid the long term.

Abandonment, especially now you've got Basel III coming online.

Okay.

Yes.

Speaker 3: Yeah, Doug, great question. It's interesting with our E&P business, as we've said before, when you look at our oil sands production, we are super highly concentrated.

Speaker 3: You literally can drive to all our O-Sense assets in two hours. You can probably drive to all of them.

Speaker 3: And so they're very concentrated. So we've seen this as a great diversification of kind of from a production perspective, really liquid barrels, Brent price exposure, and not subject to all of the infrastructure logistics that are often challenging.

<unk> kind of affirm our production perspective, really liquid barrels Brent price exposure and not subject to all of the infrastructure logistics that are often challenging.

Speaker 3: uh... that you know we've been in norway we've been in norway for a decade exploring and such and a lot of these developments that are going on are developments that came from that work

That said.

Speaker 3: associated with it. I think our view is that as time goes on, we continue to refine and optimize our base business.

Speaker 3: Our view was that Norway is something that we should be exploring. With Rosebank, we really wanted to try and get clear on the development plan and the path forward. Our view was that we would always step down and go down to about half of our current interest before we went to appropriation on this project.

Speaker 3: The project actually looks really good and we think the operators doing a good job. In the big scope of it,

Thank the operator is doing a good job in the big scope of it.

Speaker 3: We obviously have continued to be active on the east coast of Canada and in the North Sea. The North Sea has been less significant with the sale of Golden Eagle and we'll see how it goes with Norway, but our focus is primarily in our core integrated business and so we're testing the waters on a few of these assets.

B, we obviously have continued to be active on the east coast of Canada and in the North Sea.

The North Sea has been less significant with the sale of Golden Eagle and we'll see how it goes with Norway.

Our focus is primarily in our core integrated business and so we're testing the waters on a few of these assets.

Speaker 8: I guess my second follow-up question is slide 8 is obviously the whole story here post the

We'll keep watching.

My second follow up question is slightly is obviously the whole story here post.

Speaker 8: synchroed operatorship and the trajectory you have through 2025. I don't know if I missed it, but I just wonder if you could give us an update. At the end of 2021, how do you see that trajectory? Any changes? Are you comfortable still that you're on track and maybe how much of the $2.15 billion free cash funds increment do you think you have now achieved a run rate at the end of 2021? I'll leave it there.

Syncrude operator ship in the trajectory through 2025.

I know if I missed it but I just wonder if you could give us an update at the end of 'twenty. One how do you see that trajectory on any changes are you comfortable still that youre on track and maybe how much of the two possibilities.

One $5 billion free cash flow.

<unk>.

Do you think.

Ill now achieved run rates at the end of 'twenty, one and I'll leave it there. Thanks.

Why don't you start Alastair.

Speaker 4: Yeah, okay. Thanks, Doug. If you look at 2021.

Yes, okay.

Doug.

If you look at 2021 we would see roughly $465 million.

Speaker 4: We achieved roughly $465 million of the 2.15 billion. Not really was given out of...

The $2, one 5 billion not really was driven out of.

Speaker 4: margin capture in the upstream and the downstream business.

Margin capture in the upstream.

During the soup business.

Speaker 4: provided by our supply and trading and marketing operation. And you can see that in some of the realizations we've been able to achieve, particularly in the Dying Seam business.

Provided by our supply and trading and marketing operation and you can see that in some of the realization we've been able to achieve particularly.

<unk> business.

Speaker 4: It's a reduction in our ARO spend around treating tailings, a couple of hundred million. As we move into 2022, we're focusing on enhancing and building on those margin enhancements as well as we expand, particularly in the products trading business, but we're beginning to achieve our cost reductions as we implement our enterprise-wide.

It's a reduction in our own spend around treating tailings a couple of hundred million dollars as we move into 2022.

We're focusing on enhancing and.

Building on those margin enhancements as well as we expand particularly in the product screening.

Business, but we're beginning to achieve our cost reductions as we implemented a range of <unk>.

Systems and processes in the first half of the year, So youll see those cost reductions coming through.

And half of the year.

We're targeting on top of a $465 million, we achieved last year another $400 million in 2022.

Maybe I would just add to that.

<unk> and driving the cash out forum Alastair <unk> team actually goes in and verify that and our internal targets are actually greater than the $2 billion. Because we know that we've essentially done $2 billion on a risk basis. So I think the organization is making significant progress and the.

Speaker 3: you know, significant progress and the big event that we have coming up.

Big event that we have coming up right now is really the implementing standard wide processes across the company and leveraging technology to be able to improve productivity and drive down our cost structure.

Speaker 3: right now is really the implementing standard wide processes across the company and leveraging technology to be able to improve productivity and drive down our cost to that foundation,

Speaker 9: Appreciate the answers, guys. Thank you. Thanks, Doug.

I appreciate the answers guys. Thank you.

Thanks, Doug.

Thank you.

Speaker 1: And next we have Manav Gupta of Credit Suisse, your line is open.

And next we have Manav Gupta credit Suisse. Your line is open.

Speaker 10: Hey guys, my first question is a little bit on the return on capital employed. There was a good improvement versus last year, I think you hit about 8.6, and I'm trying to understand a little bit as obviously you go forward and try and realize this incremental funds flow up to 1.5, like is there a targeted return of capital employed you want to achieve in the next three years or five years? If you could give us some guidance or where you would like this number to eventually be in the next three to four years. Thank you.

Hey, guys. My first question is a little bit on the return on capital employed there wasn't couldnt improvement versus last year. I think you think about 8.6 and I'm trying to understand a little bit has obviously that you go forward the triangle Ics Incrementals funds roughly 1.5 is there targeted.

Targeted return of capital employed you want to achieve in the next three years or five years, if you could give us some guidance on where you would like this number to eventually be in the next three to four years.

Yes, thanks for the question.

Speaker 10: And a quick question here, follow-up on Fortel's, as you stabilize operations, as you bring down the op-cost, you increase the attractiveness of this asset, is there a desire somewhere to own a little more of it? I mean, there is a willing seller in one of your partners. Would the company consider increasing ownership at the right price?

Perfect and a quick question here to follow up on hotels.

<unk> stabilized operations as you bring down.

The op cost increase the attractiveness of this asset is that a design of somewhere to one a little more update I mean, there is a willing seller and one of your partners would the company consider increasing your ownership at the right price.

Speaker 3: Yeah, Manav, what we've I think we've been very consistent in saying that when we do M&A

Yes manav.

I think we've been very consistent in saying that when we do M&A they have to be good quality assets. They have to be worth more in our hands on the way theyre held today and thirdly, it needs to be accretive to our shareholders. So are we open to doing M&A. Yes. We are it just needs to be at the right price and you can apply that to a number of assets in our portfolio.

Speaker 3: They have to be good quality assets. They have to be worth more in our hands than the way they're held today. And thirdly, it needs to be accretive to our shareholders. So are we open to do an M&A? Yes, we are. It just needs to be at the right price. And you can apply that to a number of assets in our portfolio. The best part of this is we feel like our current portfolio of assets is complete. We don't have any major gaps. And so we don't have to do any M&A.

So the debt part of that says we feel like our current portfolio of assets is complete we don't have any major gaps. So we don't have to do any M&A. So we're only going to do it. If this makes eminent sense for the shareholder.

Speaker 3: So, we're only going to do it if this makes imminent sense for the shareholder.

Speaker 10: And last very quick one is you mentioned during 4Q there were lock downs in Canada Yasoline demand did go down 10% versus 19. Are we seeing a rebound of that because your refining is generally a big strength of your So if those lockdowns are abating, is there a possibility that gasoline demand does make a full recovery here? Maybe in the first half of 2022 and I leave

Thank you and then last quick one is you mentioned during <unk> the Lockdowns in Canada gasoline demand did go down 10% versus 19 are we seeing a rebound of that because you're defining is generally a big strength of yard. So if those lockdowns at a beating.

Is it a possibility that gasoline demand does make a full recovery here maybe in the first half of 2022 and I'll leave it there.

Speaker 3: Yeah, Manav, I think actually in January they got worse, not better, unfortunately.

Yes, Manav I think actually in January they got worse not better Unfortunately, but the beauty of it is I would say and particularly Alastair talked about Ontario, and Quebec, Thats, particularly true in Ontario, and Quebec, but.

Speaker 3: But the beauty of it, as I would say, in particularly Elser, talked about Ontario and Quebec, that's particularly true in Ontario, Quebec. But...

Speaker 3: Our view is, and you look at the jurisdictions in Canada, it looks like all of these lockdowns are rapidly coming to an end, or it's certainly getting less constrained.

Speaker 3: And so we're starting to see demand coming back already. And we're expecting to see, you know, as you get out to mid-year normal demand.

Speaker 3: So we think this year will be much stronger demand in Canada than what we saw last year.

Canada than what we saw last year.

Thank you for taking my questions.

Thank you.

Speaker 1: And next we have Dennis Fong of CIBC World Market. Your line is open.

And next we have Dennis Fong of CIBC World markets. Your line is open.

Good morning, and thank you for taking my questions. The first one maybe is directed towards Alastair.

It's really just around.

Ideal capital structure, and obviously, such a large focus on the capital allocation between debt repayment and the share buyback.

Speaker 11: debt repayment and the shared buyback. In our expectations, you'll be able to

Our expectations youll be able to reach that $12 billion to $15 billion target closer to year end of this year, given the higher commodity prices happen to be just wanted to understand how aggressively you wanted to pursue the 9% to 12 by 2030 kind of after you hit kind of at this $12 billion to $15 billion target.

Speaker 11: reach that $12 to $15 billion target closer to year-end of this year, given the higher commodity prices happen to be. I just wanted to understand how aggressively you want to pursue the $9 to $12 by 2030, after you hit this $12 to $15 billion target.

Speaker 4: Yeah, thanks, Dennis. If you look at our capital allocation, I mean, it's predicated on, you know, having a strong balance sheet, you think that's

Yes, Thanks, Dennis if you look at our capital allocation I mean, it is predicated on.

Having a strong balance sheet, giving us net.

Speaker 4: very important for this industry as we go forward and we want to have a leading balance sheet in the industry. We want to be able to grow our dividend at a low break-even.

Important for this industry as we go forward and we want to be.

Of our leading balance sheet in the industry, we wanted to be able to grow our dividend at a low breakeven.

Speaker 4: around the $35 WTI that we've priced, we've talked about, but then we also want to be able to return cash-to-share holders through it.

The $75 of UTI.

Price, we've talked about but then we also want to be able to do.

Returning cash to shareholders.

Speaker 4: a significant buyback program. You've seen it executed on that during the last year, and will continue to do so in 2022. We set our debt targets, you know, a 2025 target, and I would agree with you that we have the opportunity to accelerate both buybacks and debt reduction with higher oil prices, and we'll be taking advantage of that certainly this year and going forward.

He has significant buyback program.

<unk> executed on during the last year.

And we will continue to do so in 2022.

We said our debt targets.

In 2025 target.

And I would agree with you that we have the opportunity to accelerate both buybacks and debt reduction from higher oil prices and where are we taking advantage of that and so and we've issued in going forward.

Speaker 4: We will continue to drive the debt down if the price allows us to do that on an accelerated basis. So we're not stopping when we hit the $12,000 to $15,000, we'll continue on to our $20,000 to $30,000 target. And if we get there earlier, I would be very happy to see you get there earlier.

We will continue to drive that.

And the price.

Allows us to do that in an accelerated basis. So we're not stopping when we hit 12.

12 to 15, we will continue on to 2030 target and if we can be.

I'll be very happy to do that.

Yeah.

Great great.

Speaker 11: Great. And then the second question that I have is maybe just a follow-on to that, the $2.15 billion of free funds flow rollout. I know that you indicated back with Q3,

Great.

And then the second question I have is maybe just a follow on to that.

$2, one 5 billion.

Free funds flow rollout I know that.

You indicated back with Q3 results.

Speaker 11: the kind of realizations of $465 million in 2021, as well as another approximately $400 million here in 2022, all realizations of that.

The kind of realizations of $465 million in 2021 as well as another approximately $400 million here in 2022, all realizations of that if we look at the schedule that you outlined at your Investor Day. There is maybe another 500 odd million dollars potentially namely from.

Speaker 11: If we look at the schedule that you outlined at your investor day, there's maybe another $500 odd million potentially, namely from 40 Mile coming online, mine optimization, as well as the implementation of digital. That coupled with the accelerated debt repayment, how should we be then thinking about the dividend level? As I know that that was one of the major considerations when you doubled your dividend back.

40 mile coming online mine optimization as well as the <unk>.

Implementation of digital.

That coupled with the accelerated debt repayment and how should we be then thinking about the dividend level as I know that that was one of the major considerations. When you doubled your dividend back in Q3.

Yes.

Speaker 3: Yeah, I wouldn't. And Dennis, thanks for that. It's interesting. I mean, when we originally doubled our dividend, I think we said like.

And Dennis Thanks for that.

Interestingly when we originally doubled our dividend I think we said.

Speaker 3: Share buybacks as well as the dividend and so you know this is something that the board continues to work out of course We're working to continue to achieve what we said in

Speaker 3: as our 2025 targets, we're just expecting it to get accelerated.

Speaker 3: and uh... and you know the faster we go on our debt metrics and stuff the better chance we have on on achieving uh... further increases in dividend

And and.

The faster we go on our debt metrics and stuff the better chance we have on on achieving.

Further increases in dividends Alastair did you have anything to add to that yes.

Speaker 4: Alistair, did you have anything to add to that? Yeah, no, I think, Mark, we said when we doubled the dividend in October last year that, you know, we would now be looking at it in February , and the board considers the dividend every quarter, and the faster we can get to take costs out of our business and achieve that $2 billion means we will come back and look at the dividend when it's appropriate.

I think mark.

When we doubled the dividend.

October last year.

We'd now be looking out in February .

The board considers the dividend every quarter on Costa Rica.

<unk> cost saver business and achieve $2 billion.

It means we will come back and look at the dividend when it's appropriate.

Great I.

Really appreciate you answering my questions. Thank you.

Speaker 3: Dennis? Well, maybe just before we sign off, I just wanted to emphasize a couple of the points that I said at the start of this.

Thanks, Josh.

Maybe just before we sign off I just wanted to emphasize a couple of the points that I said at the start of this like.

Speaker 3: I know we need to do better. I have a plan and it's been endorsed by the board and in fact it's in execution and and this is critical for us.

I know, we need to do better I have a plan and its been endorsed by the board and in fact, that's in execution and this is critical for us.

Speaker 3: We think we have a great company and we're generating significant free cash flow and shareholder cash returns in 2021, and we expect both of these to be even higher as we get into 2022.

We think we have a great company and we're generating significant free cash flow and shareholder cash returns in 2021, and we expect both of these to be even higher as we get into 2022.

Speaker 2: And I'm strengthening the balance sheet, making investments for our future to support the continued growth in cash flow and shareholder returns for many years to come. So thanks for joining us today. I appreciate it. And with that, I'll turn it back to Trevor. Great, thank you, Mark. Again, thanks everyone for joining us today. I know it's a busy season. We're around all day if you have any other questions. Thank you, operator.

Strengthening the balance sheet, making investments for our future to support the continued growth in cash flow and shareholder returns for many years to come. So thanks for joining us today I appreciate it and with that I'll turn it back to Trevor great. Thank you Mark again, thanks, everyone for joining us today I know, it's a busy season, we're around all day, if you have any other.

Questions.

Operator.

Yes.

Thank you.

Speaker 1: Everyone, this concludes today's conference call. Thank you all for participating. You may now disconnect, and have a pleasant day.

Everyone. This concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.

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