Suncor Energy Inc. Q1 2023 Earnings Call

May 9, 2023

Operator 2: Good day, and welcome to the Suncor Energy Q1 2023 Results Conference Call.

Okay.

And one.

Operator: Good day, and welcome to the Suncor Energy Q1 2023 Results Conference Call.

Good day and welcome to the Suncor Energy first quarter 2023 results conference call.

Operator 3: At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Troy Little, Vice President of Investor Relations. Please go ahead.

Operator: At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Troy Little, Vice President of Investor Relations. Please go ahead.

This time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw.

A question Press Star one again, please be advised that today's conference is being recorded.

I'd now like to hand, the conference over to your Speaker, Mr. Choi Lyttle, Vice President of Investor Relations. Please go ahead.

Troy Little: Thank you, operator, and good morning. Welcome to Suncor Energy's Q1 earnings call. 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 assumptions that are described in our Q1 earnings release, as well as in our current annual information form, both of which are available on SEDAR, EDGAR, and our website, Suncor.com. Certain financial measures referred to in these comments are not prescribed by Canadian generally accepted accounting principles. For a description of these financial measures, please see our Q1 earnings release. We will start with comments from Rich Kruger, President and Chief Executive Officer, followed by Kris Smith, Suncor's incoming Chief Financial Officer, and Alister Cowan, Suncor's current Chief Financial Officer.

Thank you operator and good morning.

Welcome to Suncor Energy's first quarter earnings call.

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 assumptions that are described in our first quarter earnings release as well as in our current annual information form.

Some of which are available on SEDAR, Edgar and our website Suncor Dot com.

Certain financial measures referred to in these comments are not prescribed by Canadian generally accepted accounting principles for a description of these financial measures. Please see our first quarter earnings release, we.

We will start with comments from rich Kruger, President and Chief Executive Officer, followed by Chris Smith, <unk> incoming Chief Financial Officer, and Alister Cowan <unk> current Chief Financial Officer.

Troy Little: Also on the call are three of our senior operating leaders, Peter Zebedee, Executive Vice President, Mining and Upgrading, Shelley Powell, Senior Vice President, In-situ and E&P, and Arnel Santos, Senior Vice President, Refining and Logistics. Following the formal remarks, we'll open up the call to questions. Now I'll hand it over to Rich to share his comments.

Also on the call are three of our senior operating leaders Peters.

Executive Vice President mining and upgrading Shelly Powell senior Vice President in situ in A&P Arnold Santos Senior Vice President of refining and logistics. Following the formal remarks, we'll open up the call and questions now I'll hand, it over to rich to share his comments.

Rich Kruger: Thanks, Troy. Good morning. Thanks for joining us. I know many of you on the line, and I look forward to reconnecting. For those of you that I don't know, maybe a very brief background. I come to Suncor with nearly 40 years in energy. 31 of those were with ExxonMobil around the world, and then the last 7 of those nearly 40 were with Imperial Oil here in Canada as their chairman and CEO. Background includes everything from operations, capital projects, commercial, corporate strategy, et cetera. Upstream, downstream, oil and gas, onshore, offshore, conventional, LNG, oil sands. The geography started out in North America, Southeast Asia, Middle East, West Africa, former Soviet Union, and now back to right where I am supposed to be, North America and Canada.

Thanks Ryan.

Good morning, Thanks for joining us I know many of you on the line and I look forward to reconnecting.

Those of you that I don't know, maybe a very brief background.

I have my I come to Suncor with nearly 40 years in energy.

One of those were with Exxon Mobil around the World and then the last seven of those nearly 40 were with Imperial oil here in Canada.

As their chairman and CEO .

Brown includes everything from operations capital projects commercial corporate strategy et cetera, upstream downstream oil and gas onshore offshore conventional LNG oil sands and the geography started out North America Southeast Asia Middle East West Africa, former Soviet Union and now back to.

To right, where I am supposed to be North America, and Canada. So what I would I would never say that ive seen and done at all but I think it's pretty fair to say that I've seen and done a lot.

Rich Kruger: You know, I would never say that I've seen and done it all, but I think it's pretty fair to say I've, you know, I've seen and done a lot. Personality, what can you expect from me? I strive to be quite clear. I hope you find me candid, transparent. I live in a fact-based world, and I tend to be, you know, quite focused. Last but not least, I consider myself to be reasonably decisive and very competitive. I play to win. My assessment, this is week six on the job. It's been quite a time. I see a very proud company here at Suncor, excellent people, quality assets, and some very unique competitive advantages, but I also see a company with untapped potential.

Personality, what can you expect for me.

I strive to be quite clear.

I Hope you find me candid and transparent.

I live in a fact based world and I tend to be quite focused.

Last but not least I consider myself to be reasonably decisive and are very competitive.

<unk>.

Play to win.

My assessment this week six on the job.

It's been quite a time.

I feel very proud company here at Suncor excellent people quality assets, some very unique competitive advantages, but I also see a company with untapped potential I see a gap between our current performance.

Rich Kruger: I see a gap between our current performance and what I would consider best in class in many areas. What is my objective? It's really quite simple, lead the company to be the best of the best, the undisputed industry leader, number one. I think in our business there's four kind of foundations or pillars that are key to that. Safety, operational integrity, reliability, and profitability. If you read the press release this morning, you probably noticed I said that two, if not three times. That's because I believe in it, and that's what I've learned over the course of my career. I strive for us to be a company that delivers on its commitments and delivers long-term, or superior long-term shareholder value. I never forget the shareholder. I can promise you that.

And what I would consider best in class and in many many areas. So you know so what does my objective, it's really quite simple lead the company to be the best of the best the undisputed industry leader number one.

I think in our business that are just for kind of foundations are pillars that are key to that safety operational integrity reliability and profitability. If you read the press release. This morning, you probably noticed I said that three.

Two if not three times I asked because I believe in it and that's what I've learned over the course of my career.

I strive for us to be a company that delivers on its commitments.

<unk> delivers long term, our superior long term shareholder value.

I never forget the shareholder and promise you that you know will this be easy now but.

Rich Kruger: You know, will this be easy? No. Quite frankly, I wouldn't have come out of retirement to be here, had it been easy. What can you expect from Suncor going forward? This focus on the fundamentals, starting with safety, operational integrity. You can expect an intense focus on costs, organizational efficiency, and operational support from our center. We will become a simpler and more focused organization, and I think it's important to note that we basically produce a series of commodities. Commodities subject to price cycles, and those who have the lowest cost structure have the greatest resiliency to compete in whatever business cycle we happen to be in. We will look hard at reducing spending where value isn't added, whether that's operating costs, OpEx, or CapEx.

Frankly, I wouldn't have come out of retirement to be here and I.

Had it been easy.

So what can you expect from Suncor going forward. This focus on the fundamentals starting with safety operational integrity.

Can expect an intense focus on cost.

Organizational efficiency and then operational support from our center.

We will become a simpler and more focused organization.

And I think it's important to note that we basically produced a series of commodities commodity subject to price cycles.

And those who have the lowest cost structure has the greatest resiliency to compete in whatever business cycle, we happen to be in.

We will look hard at reducing spending where value isn't added.

Whether that's operating costs opex or capex in terms of capital allocation philosophy for those that know me you've heard this before even a strong balance sheet very much believe in a reliable and growing dividend.

Rich Kruger: In terms of capital allocation philosophy, for those of you who know me, you've heard this before. Believe in a strong balance sheet. Very much believe in a reliable and growing dividend. Selective, high quality, well-timed investments, and returning surplus cash to shareholders. I believe in rewarding our shareholders for their faith and ongoing commitment to the company. Said succinctly, you can expect a lot of words around clarifying, simplifying, and focusing what we do, why we do it, and how we do it. I would end with last but not least, you can expect a sense of urgency. An urgency to improve, strengthen our competitiveness, produce results. My first five weeks on the job have been quite busy. I visited about 50% of our major facilities.

Selective high quality, well timed investments and returning surplus cash to shareholders.

I believe in rewarding our shareholders for their faith and ongoing commitment to the company. So since distinctly you can expect a lot of words around clarifying simplifying and focusing on what we do why we do it and how we do it.

And I would end with last but not least you can expect our sense of urgency and urgency to improve strengthen our competitiveness and produce results.

My first five weeks on the job been quite busy I visited about 50% of our major facilities I've met with with men and women who were hard hats and.

Rich Kruger: I met with men and women who wear hard hats and boots for a living, our workplace leaders. I've observed, I've listened, I've learned, I've started coaching. My general sense is this organization is ready. It is ready to respond. It is ready to step up and perform. I'm quite honored and excited to lead it, and I can assure you we won't leave anything on the table. With that, I'll turn it over to Chris.

Boots for a living our workplace leaders I've observed I've listened and learned if started coaching my general sense is this organization is ready it is ready to respond it is ready to step up and perform.

I'm, a quite honored and excited to lead it and I can assure you we won't leave anything on the table.

So with that I'll turn it over to Chris.

Kris Smith: All right. Thanks, Rich, and good morning, everyone. Well, first of all, I'd like to acknowledge all the achievements that our company and employees have made over the last nine months as I've handed the reins over to Rich as our permanent CEO. We took decisive action to address our safety performance and drive increased focus on operational excellence. We refocused our portfolio through the sale of our renewable power and international E&P assets in Norway and the UK. Meanwhile, we acquired an additional stake in Fort Hills at an attractive price and recently announced our transaction with TotalEnergies to acquire its Canadian upstream assets, including its stake in Fort Hills. We also presented a Fort Hills mine improvement plan in November that enables us to improve long-term asset performance and drive down unit costs. We continue to work across our entire portfolio to drive improved performance.

Alright, Thanks, rich and good morning, everyone.

Well first of all I'd like to acknowledge all of the achievements that our company unemployed that made over the last nine months as I've handed the reins over to rich as our permanent CEO .

Took decisive action to address our safety performance and drive increased focus on operational excellence.

We refocused our portfolio through the sale of our renewable power and international E&P assets in Norway and the UK.

And Meanwhile, we acquired an additional stake in Fort Hills at an attractive price and recently announced our transaction with total energies to acquire its Canadian upstream assets, including at stake in Fort Hills.

We also presented a Fort Hills mine improvement plan in November that enables us to improve long term asset performance and drive down unit costs.

And we continue to work across our entire portfolio to drive improved performance.

Kris Smith: Now, we have more work to do, but I'm confident that we will build on that momentum under Rich's leadership and deliver strong performance and results for our shareholders. I'm very excited about what the future holds for Suncor, and I look forward to working with all of you in my new role as CFO following our AGM. Now, before handing it over to Alistair, I would like to update you on three transactions we recently announced, as well as provide a brief operational update. As mentioned, two weeks ago, we announced the acquisition of TotalEnergies Canada for CAD 5.5 billion. The transaction, which remains subject to the exercise of a right of first refusal, includes a 50% non-operated working interest in Surmont and a 31.23% working interest in Fort Hills.

Now we have more work to do but I'm confident that we will build on that momentum under rich's leadership and deliver strong performance and results for our shareholders.

I'm very excited about what the future holds for Suncor and I look forward to working with all of you in my new role as CFO following our AGM.

Now before handing it over to Alastair I would like to update you on three transactions, we recently announced as well as provide a brief operational update.

As mentioned two weeks ago, we announced the acquisition of total energy, Canada for $5 $5 billion Canadian.

The transaction, which remains subject to the exercise of a right of first refusal includes a 50% non operated working interest in <unk> and a 31, 3% working interest in Fort Hills.

Kris Smith: This transaction adds 135,000 barrels per day of high-quality bitumen production capacity to our portfolio and strengthens our long-term free cash flow potential. The transaction is accretive to Adjusted Funds from Operations per share and delivers attractive returns at mid-cycle pricing. As for Surmont, it is a high-quality in situ asset with top quartile steam-oil ratios, a 50-year reserve life, and low cash operating costs per barrel, which will improve Suncor's cash margins and provide a reliable source of funds through the commodity cycle.

This transaction adds 135000 barrels per day of high quality bitumen production capacity to our portfolio and strengthens our long term free cash flow potential.

The transaction is accretive to adjusted funds from operations per share and delivers attractive returns at mid cycle pricing.

As for <unk>. It is a high quality and such you asset with top quartile steam oil ratios of 50 year reserve life and low cash operating cost per barrel, which will improve suncorp cash margins and provide a reliable source of funds through the commodity cycle.

Kris Smith: With the two recent acquisitions of additional Fort Hills interests between the Teck and TotalEnergies transactions totaling 46%, as well as bitumen production at our Firebag and Mackay River operations, Suncor will have sufficient owned bitumen volume with an oil sands reserve life of 29 years to keep the base mine upgraders full post the projected end of base mine life in the mid-2030s. In addition, Suncor has now eliminated the need to replace the base mine's production with new developments, which also provide optionality for future growth if that is the best use of investors' capital. The transaction will be fully funded via debt and is expected to close sometime in Q3.

With the two recent acquisitions of additional Fort Hills interests between the Tech and hotel transactions totaling 46% as well as bitumen production at our fire bag and Mackay River operations Suncor will have sufficient owned Benjamin volume with an oil Sands reserve life of 29 years to keep the baseline upgrader asphalt post the projected end of <unk>.

<unk> mine life in the mid 2030.

In addition, suncor is now eliminated the need to replace the base mines production with new developments, which also provide optionality for future growth if that isn't the best use of it is the best use of investors' capital.

The transaction will be fully funded via debt and is expected to close sometime in Q3.

Kris Smith: With a more resilient pro forma business supported by incremental production and cash flow potential, Suncor's board of directors intends to approve an increase in the quarterly dividend of approximately 10% after the close of the transaction as contemplated. Also, consistent with Suncor's strategy of refocusing on our core business, we announced the sale of our UK E&P assets at CAD 1.2 billion, including CAD 338 million in contingent payments and excluding working capital adjustments. The transaction is expected to close soon, and we look forward to it. Lastly, we announced last week that Suncor will become the primary long-term fuel supplier for Canadian Tire's retail fuel sites.

With a more resilient pro forma business supported by incremental production and cash flow potential some cores board of directors intends to approve an increase in the quarterly dividend of approximately 10%. After the close of the transaction that was contemplated.

Also consistent with Suncor strategy of refocusing on our core business, we announced the sale of our UK UK E&P assets.

Canadian $1 2 billion <unk>.

Including $338 million in contingent payments and excluding working capital adjustments.

The transaction is expected to close soon and we look forward to it.

And lastly, we announced last week, the Suncor will become the primary long term fuel supplier for Canadian tires retail fuel price.

Kris Smith: Consistent with the retail optimization plan presented in November, by bringing two iconic Canadian brands and loyalty programs together in Petro-Canada and Canadian Tire, this strategic partnership provides long-term value to Suncor by expanding our non-controlled retail fuel network and securing long-term supply to protect refinery utilization and maximize sales volumes. Now, switching to current operations, we're pleased to report that our Commerce City Refinery returned to service as scheduled at the end of Q1 after a progressive restart that commenced in February. For Terra Nova, the FPSO is undergoing additional work quayside in Bull Arm, Newfoundland, to ensure that it is ready for safe and reliable operation in the field. Based on this, and looking forward to the remainder of the year, we're removing any expected production from Terra Nova from our 2023 E&P production guidance.

Consistent with the retail optimization plan presented in November by bringing two iconic Canadian brands and loyalty programs, together and Petro, Canada and Canadian tire. This strategic partnership provides long term value to suncor by expanding our non controlled retail fuel network.

And securing long term supply to protect refinery utilization and maximize sales volumes.

Now switching to current operations. We're pleased to report that our Commerce City refinery returned to service as scheduled at the end of Q1 after progressive restart that commenced in February .

For Terra Nova <unk> is undergoing additional work side and bull arm Newfoundland to ensure that it is ready for safe and reliable operation in the field.

Based on this and looking forward to the remainder of the year, we are removing any expected production from turnover from our 2023 E&P production guidance.

Kris Smith: An updated plan for reaching first oil will be available after mid-year once we are further through the additional work. With the removal of production volumes from Terra Nova, as well as the impact of acquiring a lower-than-expected stake in Fort Hills with respect to the acquisition from Teck, and the potential early closing of the sale of our UK North Sea assets as expected, we expect to be near the bottom of our 2023 upstream production guidance range. Once we have further progressed the acquisition of Total's Canadian upstream assets, we will update shareholders further on production guidance for the year. Now, just before I close, I would like to thank Alister for his tremendous leadership as Suncor's CFO over these last nine years, and in particular, to thank him for his support of me over these last nine months. Congratulations, Alister.

An updated plan for reaching first oil will be available after mid year. Once we are further through the additional work.

Yeah.

With the removal of production volumes from Terra Nova as well as the impact of acquiring a lower than expected stake in Fort Hills with respect to the acquisition from Tech and the potential early closing of the sale of our UK North sea assets as expected we.

We expect to be near the bottom of our 2023 upstream production guidance range.

Once we have further progressed the acquisition of hotels Canadian upstream assets, we will update shareholders further on production guidance for the year.

Now just before I close I would like to thank Alastair for his tremendous leadership as such.

Core CFO over these last nine years and in particular.

Thank him for his support of me over these last nine months.

Kris Smith: I hope you enjoy a well-deserved retirement, but you still have a little bit more to do. Back over to you.

Congratulations Alistair I hope you enjoy a well deserved retirement, but you still have a little bit more to do so back over to you.

Alister Cowan: Thanks for the kind words, Chris. Yeah, a little bit more to do. I've certainly appreciated all of the relationships I've formed with members of the investment community over these last nine years while I've been at Suncor, as well as before that time. I'm very thankful for the support of my colleagues and the finance team during my time here. Now, enough of that and let's get on to the quarter highlights. Overall, we generated CAD 3 billion of adjusted funds from operations. The Oil Sands segment delivered CAD 2.6 billion of adjusted funds from operations, with production of 675,000 barrels per day. This performance reflects a new quarterly in-situ production record of 261,000 barrels per day and average base plant and Syncrude upgraded utilization of 93%.

Thanks for the kind words, Chris a little bit more today I certainly appreciate it.

All of the relationships so farm with members of the investment cumulatively over these last nine years.

Suncor as well as before that time.

And I'm very thankful for the support of my colleagues and the finance team.

During my time here.

There are enough of them, let's get onto the quarter highlights overall, we generated $3 billion of adjusted funds from operations.

Also on the segment delivered $2 6 billion of adjusted funds from operations.

Production of 675000 barrels per day.

This performance reflects reviewed quarterly and since your production record of 261000 barrels per day, and average base bonds and Syncrude upgrader utilization of 93%.

Alister Cowan: At Fort Hills, we completed the acquisition of the additional working interest of Teck Resources in early February, and production remains on track to ramp up in Q2 prior to starting a five-year turnaround in July, consistent with the restart plan. Oil Sands realizations averaged $91 per barrel or 89% of WTI. This reflects the $7 per barrel decrease in the benchmark WTI, offset by smaller US dollar, $1 per barrel narrowing in the WCS heavy differential versus Q4 of last year. Our E&P segment generated adjusted funds from operations of CAD 500 million with production of 67,000 barrels per day and an average price realization of $108 per barrel or 98% of Brent. Downstream generated adjusted funds from operations of CAD 1.2 billion on a FIFO basis.

At Fort Hills, we completed the acquisition of the additional working interest subtract resort season early February and production remains on track to ramp up in Q2 prior to starting a five year turnaround in July .

Justin.

Restart plan.

Oilsands realizations averaged $91 per barrel or 89% of <unk>.

This reflects a $7 <unk> per barrel decrease in the benchmark W. UTI offset by small U S dollar.

One U S dollar per barrel narrowing in the WCS heavy differentials versus Q4 of last year.

Our E&P segment generated adjusted funds from operations, so $500 million with production of 67000 barrels per day at an average price realization of $180 per barrel or 98% of brands.

Downstream generated adjusted funds from operations of $1 2 billion on a.

FIFO basis.

Alister Cowan: Excluding CAD 130 million of FIFO loss, this would be about CAD 1.3 billion on a LIFO basis. Refinery utilization averaged 79%, and margin capture was strong at 102%. Overall segment performance was in line with our expectations and obviously impacted by the downtime at the Commerce City Refinery that started at the end of Q4. Utilization at our Canadian refineries was a solid 94% during the quarter. During the quarter, we returned CAD 1.6 billion to shareholders, including CAD 700 million in dividends and CAD 900 million in share buybacks.

Excluding the $130 million of FIFO losses will be about $1 3 billion on a LIFO basis.

And finally utilization reached 79% and margin capture was strong at 102%.

Overall segment performance was in line with our expectations.

Obviously impacted by the downtime of the Commerce City refinery started at the end of Q4.

But utilization of our Canadian refineries was a solid quarter.

During the quarter.

During the quarter, we returned $1 $6 billion to shareholders, including $700 million in dividends and $900 million of share buybacks.

Alister Cowan: Suncor's net debt position as of quarter end was CAD 15.7 billion, which primarily reflects working capital use of CAD 2 billion and the earlier than expected closing of the acquisition of the stake in Fort Hills from Teck, which all in, including leases, was CAD 1 billion. Our final 2022 cash top-up payment was CAD 500 million, as we paid the majority of our cash taxes of CAD 4.2 billion throughout 2022. As Chris mentioned, we expect to receive the CAD 1.2 billion of gross proceeds from the sale of the UK E&P in the near term.

Gross and net debt position as of quarter end was $52 7 billion, which primarily reflects working capital use of $2 billion.

On the earlier than expected closing of the acquisition of the stake in Fort Hills from Tech Rich all in including leases was $1 billion.

Our final 2022 cash payment was $500 million.

We paid the majority of our cash taxes of $4 2 billion through 2022.

And as Chris mentioned, we expect to receive the $1 $2 billion of gross proceeds from the sale of the UK E&P in the near term.

Alister Cowan: As stated previously, with the acquisition of TotalEnergies' Canadian upstream assets, we're now expecting to remain at a 50/50 capital allocation between share buybacks and debt reduction until we return to CAD 12 billion of net debt, at which point we will switch to 75/25 allocation. With that, thank you all, and I'll turn you back to Rich.

As stated previously with the acquisition of Total's Canadian upstream assets.

Back to you to remain at a 50 50 capital allocation between share buybacks and debt reduction until we return to $12 billion of net debt for inspiring.

So a 70 525 allocation.

And with that thank you all and I'll turn it back to rich.

Rich Kruger: Before we get to your questions, I'd just like to commend Chris for his leadership over the last nine months of the focus he's brought to this business, particularly safety. I've seen that in each of my site visits. Also, I can assure you, Chris and I are gonna work very well together. We have been engaged since before I showed up or weeks before that, and I think we're gonna make a very strong team. Lastly, thank Alistair for his dedication and leadership for nearly a year. As is said, he'll be missed but not forgotten. Look forward to working with each of you and the investment community at large. With that, I'll turn it back to Troy to kick off our question period.

Before we get to your questions.

To commend Chris for his leadership over the last nine months.

The focus he has brought to this business, particularly safety I've seen that into my site visits.

And also.

I can assure you, Chris and I are going to work very well together.

We have been engaged since before I showed up.

Weeks before that.

I think we're going to make a very strong team and lastly, thank al surface dedication leadership for nearly a year as I said, you'll be missed but not forgotten and look forward to working with each of you and the investment community at large and with that I'll turn it back to Troy to kick off our question period.

Kris Smith: Thank you, Rich. I'll turn the call back to the operator to take some questions.

Thank you rich I'll turn the call back to the operator to take some questions.

Operator 3: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile the Q&A roster. Our first question will come from the line of Greg Pardy with RBC Capital Markets. Your line is open.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile the Q&A roster. Our first question will come from the line of Greg Pardy with RBC Capital Markets. Your line is open.

Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced so withdraw. Your question. Please press star one again, one moment, while we compile the Q&A roster.

And our first question will come from the line of Greg Pardy with RBC capital markets. Your line is open.

Greg Pardy: Yeah. Thanks very much. Good morning, everybody, and thanks for the rundown and indeed all the very best to you, Alister. Rich, welcome. You can't imagine how happy I am to have you back in the chair. A couple of quick ones. Rich, particularly as you've looked at the business, I'm wondering if there are areas upstream or downstream where you see low-hanging fruit from an operating performance perspective, so either higher throughputs or lower operating costs. If so, what those might be and how long you think some of that might be to achieve better performance?

Thanks, very much good morning, everybody and thanks for the thanks for the rundown and indeed, all the very best Alastair.

Rich and welcome you can't imagine how happy I am to have you back in the chair So a couple of quick ones.

So rich, particularly as you looked at the business.

Im wondering if there are areas upstream or downstream or you see low hanging fruit from an operating performance perspective to either higher throughput and lower operating costs.

And if so what those might be and how long do you think some of that might be to achieve better performance.

Rich Kruger: Greg, I missed you too, so it's good to be back. Thank you. You know, I've seen opportunities across the organization. You know, I think let me start on the Downstream a little bit. You know, there's a baseball analogy that I wanna share quickly is, you know, the Downstream here to here and in Canada has done very, very well. I'm a baseball fan, and somebody told me it's, you know, we weren't, we didn't hit a triple, we were born on third base. We have a lot of structural advantages right now, but what is important, are we operating to the best of our ability? I think as I look at the Downstream, I see reliability is still an opportunity.

Greg I missed you too so it's good to be back.

I do.

As.

I've seen opportunities across the organization and I think let me start on the downstream a little bit.

Yes.

It was a baseball analogy that I don't want to share a quick is.

The downstream here to hear any candidate has done very very well I'm a baseball fan and somebody told me, it's we werent.

We didn't hit a triple were born on third base, we have a lot of structural advantages right now, but what is important are we operating to the best of our ability and I think as I look at the downstream I see reliability is still an opportunity I think our cost structure.

Rich Kruger: I think our cost structure, turnaround performance. Turnarounds, we spend a lot of money, and the time offline. I think there it's just getting incrementally better at the fundamentals, the basics. In the upstream, I mean, you know, the mining's tough business. We know that. We've got aging mines. We've got more challenges on haul distances and things. I spent a lot of time with Peter in looking at his kind of improvement plans, all the way from reducing contractors to enhance efficiency and, you know, reduce cost, improving the performance of our fleet. You know, Greg, in those areas, I would say it's lots of little things.

Turnaround performance turnarounds, we spent a lot of money and of course, the time offline. So I think there is getting its just getting incrementally better at the fundamentals the basics in the upstream.

The mining mining tough business, we know that we've got ageing mines, we've got more challenges on haul distances and things, but I spent a lot of time with Peter in.

And looking at it as kind of improvement plans, all the way from reducing contractors to enter.

Enhance efficiency and.

And reduce cost.

Improving the performance of our fleet so Greg in those areas I would say, it's lots of little things and so I don't know if I'd, maybe describe as low hanging fruit, but I think theyre very tangible and things that we have and will continue to have a very intense focus on.

Rich Kruger: I don't know if I'd maybe describe them as low-hanging fruit, but I think they're very tangible and things that we have and will continue to have a very intense focus on. I hit at it in my comments, just fundamentally our cost structure is looking at ensuring that all our people, everybody above the operating units are focused on what they do to support the operating units. I think there's some low-hanging fruit there and really looking at what we do, how we do it. We've already, you know, we're making small improvements. I'll have more to say about that in the, you know, the next couple of months ahead. I, you know, wrapped up my comments with this sense of urgency.

I hit on it in my comments.

Fundamentally our cost structure is looking at ensuring that all our people everybody above the operating units.

<unk>.

Our focus on what they do to support and.

To support the operating units and I think.

I think there is some low hanging fruit there and really looking at what we do how we do it.

And we've already we're making small improvements I'll have more to say about that in the next couple of months ahead, but I wrapped up my comments with this sense of urgency.

Rich Kruger: We need to get on with it, and I don't see anything in my first five, six weeks that will prevent us from bringing about material improvement from inside, from focusing on those things that we control.

We need to get on we need to get on with it and I don't see anything in my first five six weeks that will prevent us from bringing about material improvement.

From inside from focusing on those things that we control.

Greg Pardy: Okay. Understood. The second quick one, well, maybe it's not a quick one. The pace at which you run the base mine is coming up a lot. There is a fairly defined view, it would seem, out there that it's really all about managing ARO, that you're gonna have to slow down the mine to manage ARO. How are you guys kind of thinking about that decision? Like, how should we think about how fast that base mine is gonna run over the next, you know, few years?

Okay understood and the second quick one and maybe it's not a quick one.

The pace at Ritchie, which you run the base mine, it's coming up a lot.

And there is a fairly defined deal it would seen out there and it's really all about managing arrow that youre going to have to slow down the mine to manage <unk>. How are you guys kind of thinking about that decision and like how should we think about how fast that baseline is going to run over the next few years.

Rich Kruger: Well, you know, I'm gonna turn it over to Peter here in a second to, you know, maybe give you a little bit more specific on it. I think if you know, you look at Chris describe the recent deal we've done, looking at longer term bitumen supply, 'cause the, you know, the most valuable barrel through an upgrader is the incremental barrel, the last barrel. It's much like a refinery. So ensuring that we utilize those facilities to the fullest. It becomes what's the most economic way to do that, whether it's continuing to mine and extend the life of the Base Mine, whether it's bringing a bitumen supply from outside the lease. I would say those are all kind of works in progress, but it's all about value.

Well I'm going to turn it over to Peter here in a second to maybe give you a little bit more specific on it but I think if you look at and you look at Chris described.

The recent deal we've done looking at longer term bitumen supply. He is the most valuable barrel through an upgrader is the incremental barrel last barrel. It's much like a refinery is so ensuring that we utilize those facilities to the fullest and then it becomes what's the most economic way to do that.

And whether it's continuing to mine and extend the life of the base mine, whether it's bringing a bitumen supply from outside of the lease.

And I would say those are all kind of works in progress, but it's all about value. It's all about determining what is the most valuable barrel to fill up those upgrades with but.

Rich Kruger: It's all about determining what is the most valuable barrel to fill up those upgraders with. Peter, maybe if you wanna add any further color to my comments.

<unk>, maybe if you want to add any further color to my comments.

Peter Zebedee: Yeah. Maybe a little bit more information, Greg. I think in the short term, and I mean, you know, between now and 2026 and 2027, the rate of mining at Base Mine will continue as is. We'll be running to maximize volumes out of the Base Mine. This is a tailings-driven facility. Until we're able to open up our tailings plan, and we look to secure an additional piece of variability around potential for water management and recycle, we don't have a lot of ability in the short term to throttle the rate of mining. Post that, in our long-term plans, we are looking to see what the rate of mining is that'll maximize the value coming from the asset, taking into consideration our body, operating costs, et cetera.

A little bit more information, Greg I think in the short term in between.

Between now and 2026 and 27 the rate of mining that base mine will continue as is and so we will be running to maximize volumes out of the base mine. This is a tailings driven facility and so until we are able to open up our tailings plan and we look to secure.

An additional piece of variability around.

Central for water management and recycle.

We don't have a lot of ability in the short term to throttle the rate of mining pulse that in our long term plans, we are looking to see what the.

<unk> mining and subtle maximizes the value coming from the outset, taking into consideration your body operating costs et cetera.

Greg Pardy: Terrific. Thanks. Thanks to both.

Terrific. Thanks, Thanks to both thanks.

Rich Kruger: Thanks, Greg.

Thanks, Greg.

Operator 4: One moment for our next question. That will come from the line of Dennis Fong with CIBC. Your line is open.

Operator: One moment for our next question. That will come from the line of Dennis Fong with CIBC. Your line is open.

One moment for our next question.

And that will come from the line of Dennis Fong with CIBC. Your line is open.

Dennis Fong: Thank you. Good morning, everyone. Again, congratulations to Chris and Rich on your new roles, as well as Alistair for a well-deserved retirement. The first question I have is, during the quarter, it looks like you had about 5,500 barrels a day at Fort Hills production that was processed at the Base Plant upgraders and about 1,800 barrels a day of oil sands or the volumes that were processed at Syncrude. Can you talk about, I guess, some of the impacts of feeding those barrels through the various upgraders and processing facilities? Maybe what some of the considerations may be in the future for shifting the destination of barrels across your portfolio.

Thank you good morning, everyone and again congratulations to Chris then rich on your new roles as well as Alastair four.

A well deserved retirement.

The first question I had is during the quarter. It looks like you had about 5500 barrels a day of Fort Hills production that was processed at the base plant upgrade or isn't about 800 barrels a day of oil sands off the volumes that were processed 15 crude can you talk towards.

Again, some of the impact of feeding those barrels through the various upgrade or its and processing facilities and maybe what some of the considerations maybe in the future for shifting the destination of barrels across your portfolio.

Rich Kruger: Dennis, this is Rich. I'll maybe start out with that again, then I'll probably turn it to Peter for more specifics. It's all about value. I think one of the things I said in my opening comments is that I really look forward to what we're working with here is the unique competitive advantages that we have through the physical integration of our upstream, through our upgrading, and actually, quite frankly, all the way through refining and logistics. We've got an asset base that is quite hard. Well, it's unparalleled, and it's hard to replicate. Those kind of decisions are about incremental, you know, what are bitumen prices in the market? What's the sour crude? What's a synthetic price? And how can we move molecules around to maximize the value of each and every barrel.

Dennis This is rich I'll I'll, maybe start out with that again that I'll, probably turn it back to Peter for more specifics.

It's all about value and I think one of the things I said in my opening comments is that I really look forward to working with here is the unique competitive advantages that we have to the physical integration of our upstream through our upgrading and actually quite frankly, all the way through refining and logistics.

We've got a we've got an asset base that is quite hard it while it's unparalleled in its hard to replicate and so those kind of decisions are about incremental what.

Bitumen prices in the market, what's the sour crude which is a synthetic price and how can we move molecules around to maximize the value of each and every barrel, maybe I'll turn it to Peter though to kind of get into that like how do we really how do we do it and how real time are those decisions to make the most money.

Rich Kruger: Maybe I'll turn it to Peter, though, to kind of get into like how do we do it and how real time are those decisions to make the most money?

Peter Zebedee: Yeah, thanks, Rich, and thanks, Dennis. It is indeed a really dynamic process. Frankly, it is all about margin optimization and generating the maximum value for those molecules. Dennis, we really look at it, I would say, on three time horizons, you know, starting from the long range kind of the business planning process and the budgeting process that really optimizes extraction at all of the bitumen production facilities, the utilities, and takes into consideration major maintenance outages for the year. It's that kind of macro level planning. Then zooming in on much more of a short-term planning process where we look at production planning and consideration of all the risks we have in our facilities on kind of a, you know, 1 to 12-week time horizon.

Thanks, Rich and thanks, Dennis and it is indeed, a really dynamic process and frankly this is all about margin optimization and generating the maximum value for those molecules.

Dennis we really look at it I would say on three time horizons, starting from our long range kind of the business.

Planning process in the budgeting process that really optimizes extraction at all of the pitchman production facilities, the utilities and takes into consideration major maintenance outages for the year, so that kind of macro level planning and then zooming in on much more of a short term planning process, where we look at production planning and <unk>.

<unk> of all the risk we have in our facilities on kind of up 1% to 12 week time horizon and that really allows us to optimize on on market based conditions crude differentials logistics downstream demand et cetera, and then finally, it's really in the here and now it is that shift by shift optimization that is done by our production plant.

Peter Zebedee: That really allows us to optimize on market-based conditions, crude differentials, logistics, downstream demand, et cetera. Then finally, it's really in the here and now that shift-by-shift optimization that's done by our production planning team. We have an integrated production planning team across the upstream assets in the region and extending down into downstream into the refining, production coordinators on a 24-hour shift-by-shift basis. This is very dynamic, very real time, and it's all about making the most from the molecules that we produce.

<unk> team and we have an integrated production planning team across the upstream assets in the region and extending down into downstream into the refining and production coordinators on time for our ship by ship basis. So this is very dynamic very real time, and it's all about making the most from the molecules to be produced.

Dennis Fong: Great. Appreciate that color. Maybe shifting focus towards the downstream side and maybe a little bit more specifically, Commerce City. I know the facility itself was impacted by, we'll call it, a very unique circumstance with respect to winter conditions in the region. I was just curious as to whether or not there were any learnings from the events that occurred there, and if there were any changes to operations or operating procedures that were being implemented to maybe limit the risk of future kind of downtime as well as anything else across the rest of the platform? Thanks.

Great Great I appreciate that color.

Maybe shifting focus.

Towards the downstream side, and maybe a little bit more specifically commerce city I know the facility itself was impacted by we'll call. It a very unique circumstance with respect to winter conditions in the region. I was just curious as to whether or not there were any learnings from the events that occurred there and if there were any.

Changes to operations or operating procedures that were being implemented maybe limit the risk of future.

Downtime as well as anything else across the platform.

Rich Kruger: Yeah. You know, Dennis, Rich here again. You know, there have been a lot of learnings. I think, you know, the best organizations, whenever you have things like this happen, that's how you get better, is through the learning process. In fact, I'll say, just literally real-time, we went through a pretty comprehensive discussion with the Suncor board of directors yesterday on the learnings on it. You know, the learnings they fall into a variety of buckets, but you know, the competency of individual operators, have we had sufficient training? You know, the uniqueness of what happened, the temperature drop over the very short period was extreme.

Yes, Dennis rich here again.

<unk> been a lot of learnings and I think the best organizations whenever you have things like this happen.

That's how you get better is through the learning process in fact I'll say.

Literally real time, we went through a pretty comprehensive discussion with our the Suncorp board of directors yesterday on the learnings on it.

And the learnings that they fall into a variety of buckets.

The competency of individual operators have we had sufficient training in the uniqueness of what happened the temperature drop over the very very short period was an extreme if you look at the temperature range itself and the low ends of it that's not necessarily.

Rich Kruger: If you look at the temperature range itself and the low ends of it, that's not necessarily, you know, out of the, you know, the realm of history, but it's how fast the temperature changed and then what that impacted on control systems, steam generation, and our ability to keep things hot, keep things warm with that. As we lost steam capability, there was a little bit of a cascading effect, and the judgment was made. It was before I was here, but I look at it, and it's exactly the right judgment to take that entire facility down, and that was made out of concern, out of safety and operational integrity. That, you know, to me, was the right decision. Now you've got a facility in extremely cold weather that you're not able to be keeping warm anymore.

Out of the.

The realm of history, but it's how fast the temperature change and then what that impacted on control systems steam generation and our ability to keep things hot keep things warm with that and so as we lost steam capability. It was a little bit of a cascading effect and the.

Judgment was made it was before I was here, but I look at it I think it is.

Exactly the right judgment to take that entire facility down and that was made out of concern on our safety and operational integrity and that to me was the right decision, but now you've got a facility in extremely cold weather that you are not able to be keeping warm anymore and so it's kind of a damned. If you do damned if you don't.

Rich Kruger: It's kind of a damned if you do, damned if you don't. If you'd continued to operate, you'd run risk that in those extreme conditions, you could have some type of loss of primary containment and, you know, further escalating event. Also, you knew when shutting it down, now you've taken things to, you know, ambient temperature. I would say there have been a lot of learnings. What we're trying to do right now is take those learnings and incorporate it into the facility, whether it's operator capability and training, whether it's heat tracing, some, you know, things that we would do in preparation for the, you know, apparently every year, there's winter in Denver.

If you would have continued to operate you'd run risk that in these extreme conditions you could have some type of loss of primary containment.

Further escalating demand, but also you knew when shutting it down now you've taken things to ambient temperature. So I'd say theres been a lot of learnings and what we're trying to do right now is take those learnings and incorporated into the facility, whether its operator capability and training, whether it's heat tracing.

Things that we would do in preparation for the <unk>.

Currently every year Theres, a winter in Denver and.

Rich Kruger: For before the next season, so that if we were to experience something as unique as this, we would be far better equipped to handle it. Yes, lots of learnings, and we're plowing it right back into actions to ensure that this consequence doesn't happen again.

Before the next season, so that if we were to <unk>.

Experienced something is unique as this we would be far better equipped to handle it. So yes lots of learnings and we're plowing it right back into actions to ensure that this consequence doesn't happen again.

Okay.

Dennis Fong: Great. I appreciate the incremental color you provided there, Rich. I'll turn it back. Thanks.

Great I appreciate the incremental color you provided there rich I will turn it back thanks.

Operator 4: One moment for our next question. That will come from the line of Neil Mehta with Goldman Sachs. Your line is open.

Operator: One moment for our next question. That will come from the line of Neil Mehta with Goldman Sachs. Your line is open.

And one comment our next question.

And that will come from the line of Neil Mehta with Goldman Sachs. Your line is open.

Neil Mehta: Hey, welcome back, Rich. We missed you, sir.

Welcome back gradually we missed yes, sir.

Rich Kruger: Thank you, Neil. It's good to be back.

Thank you Neil good to be back alright, and congrats to everyone and Alistair on your retirement.

Neil Mehta: All right. Congrats to everyone, and Alistair on your retirement. The first question is just around the transactions, both Surmont and Fort Hills from Total. Maybe you could dive into what attracted you to this asset, why now, and dig more into the upside case associated with the deal and how you're mitigating some of the risks associated with it as well.

The first question is just around.

The transactions, both Fairmont and Ford.

Fort Hills from total maybe you could dive into what attracted you to this asset why now why.

Dig more into the upside case associated with the deal and how you're mitigating some of the risks associated with that.

Rich Kruger: I'll give you a little bit of color commentary, but I'm really gonna turn it over to Chris because Chris and Alistair were the ones that, you know, made this happen. I was brought into this thing literally within an hour of my announcement on 21 February, and by then, you know, things had moved along a little. As you know, we look at it's, we've talked about the long-term bitumen supply, the value in keeping up the upgraders full and the uplift you get from that. Now we have other internal alternatives. We've looked at those alternatives, whether they're developing, you know, incremental mining capacity or in situ. We looked at this and we saw that, you know, a significant value in it.

I'll give you a little bit of color commentary, but I'm really going to turn it over to Chris.

Chris analysis or the ones that made this happen.

I was brought.

Into this thing.

Literally within an hour of my announcement.

On February 21st and by then things had been.

So it had been things have moved along.

We look at it.

We've talked about the long term bitumen supply.

Value in keeping up the upgrader is full and the uplift you get from that now we have other internal alternatives.

We look at we looked at those alternatives, whether they're developing incremental mining capacity or in situ, but we looked at this and we saw that.

Rich Kruger: We saw a material dimension of risk management in it in terms of not having to plan and execute large scale capital projects. The timing of it brings barrels immediately and it's accretive. To me, it looked at it and it was pretty clear that this is a win-win. You know, why don't I ask Kris to comment any further on it?

<unk> value in it we saw a material a dimension of risk management.

In terms of not having to plan and execute large scale capital projects.

The timing of.

It brings barrels immediately and it's accretive.

So to me it looked at it it was pretty clear that this is a win win.

I'll ask Chris to comment any further on it.

Kris Smith: Well, thanks, Rich. I actually don't have too much more to add because I think you covered the major points. I mean, when we looked at the opportunity of this transaction, Neil, I mean, it was checking a lot of boxes for us. First of all, obviously we know the Fort Hills asset really well. We have a lot of confidence in the long-term value of that asset and the plan we have for it. Surmont is a high quality bitumen asset, as I mentioned in my remarks. We're also, you know, we're a very good operator in situ ourselves. We see a real opportunity to actually work with the operator and bring both of our advantages to that asset.

Thanks, Rich I actually don't have too much more to add because I think you covered the major points, maybe when we looked at Neal when we looked at the opportunity. This transaction I mean, it was checking a lot of boxes for US first of all obviously, we know the portals asset really well.

Have a lot of confidence in the long term value of that asset.

Plan, we have for it.

<unk> is a high quality bitumen asset as I mentioned in my remarks, we're also well.

A very good operator in such a ourselves we see a real opportunity to actually work with the operator and bring.

Both of our advantages to that asset and then as rich mentioned from a strategic as just a great strategic fit theres a lot of industrial logic.

Kris Smith: As Rich mentioned, you know, from a strategic, it's just a great strategic fit. There's a lot of industrial logic related to this transaction and long-term bitumen supply into the region. We saw it as a really nice fit for our portfolio. As Rich mentioned, accretive to shareholders. We see very good return, long-term returns from this investment at the price we paid. We just saw it attractive on all sorts of dimensions when we entered into the deal.

Weighted to this transaction and long term detriment supply into the region. So we saw as a really nice fit for our portfolio.

Rich mentioned accretive to shareholders.

We see very good return long term returns from this investment at the price. We paid so we just saw at attractive on all sorts of dimensions, when we entered into the deal.

Rich Kruger: You know, I'll make one other comment on it. You know, we're all aware that ConocoPhillips has a ROFR on Surmont. We reached out the morning of the announcement and, you know, one of the overriding messages is we would be a partner, a very willing partner, that would look to invest and grow value in this asset. We have tremendous respect for ConocoPhillips as an operator, and we think there would be synergies that we could bring that would add value to both the Surmont operation as well as our Firebag back and forth, that together we could make this more valuable than either of us individually. You know, we'll see what goes on in that. We would very much look forward to being in that partnership.

I'll make one other comment on it.

We're all aware that Conocophillips has a has a ROFO on for Mark.

We reached out the morning of the announcement.

What are the overriding messages as we would be a partner they're willing partner that would look to invest and grow value. In this asset we have tremendous respect for conocophillips as an operator, and we think there would be synergies that we could bring that would add value to both this remark opt.

<unk> as well as our fire back back and forth that together, we can make this more valuable than either of us individually.

So we'll see we'll see what goes on in that but we would very much look forward to being in that partnership.

Neil Mehta: Yeah, that makes sense. That's the follow-up, as you highlighted in the presentation, there are significant tax pools associated with this. To the extent that ConocoPhillips does execute a right of first refusal on Surmont only, do the tax pools exist at the asset level or they stay at the consolidated level? Does that make sense?

Yes that makes sense.

The follow up is as you.

In the presentation there are significant.

<unk> pools.

Associated with this to the.

That's kind of code does.

Execute a right of first refusal on Fairmont only.

The tax pools exist.

At the asset level or at.

At the consolidated level that makes sense.

Rich Kruger: You know, I'll do one comment, then I'll ask Alister if he wants to supplement it a little bit. You know, with the ROFR still out there, kind of anything that might happen in the future is kind of speculative, you know. If this, then that. I would say on, you know, all those remain to be seen. It kind of depends on what happens. You know, Alister, would you have anything you'd want to add there or-

Just one comment and then I'll ask Alastair if he wants to supplement a little bit but.

<unk>.

With the rules are still out there kind of anything that might happen in the future kind of speculative.

If this then that and I would say on all of those remain to be seen we just it kind of depends on what happens, but Allison would you have anything you'd want to add there are yes.

Alister Cowan: Yeah. No, you

Rich Kruger: For a later date.

Alister Cowan: No, you got it right. I mean, it depends on how it gets executed, what happens to the tax losses. They would, on the face of it, be lower by the amount of the ROFR. Beyond that, we have to see how it was executed.

For a later date no you got it right.

Right.

So the tax losses.

Phase b lower by the amount of the ROFO, but beyond that we obviously everyone's executed.

Rich Kruger: Yeah.

Neil Mehta: Note.

Got it.

Operator 4: One moment for our next question. That will come from the line of Doug Leggate with Bank of America. Your line is open.

Operator: One moment for our next question. That will come from the line of Doug Leggate with Bank of America. Your line is open.

And one moment for our next question.

Okay.

And that will come from the line of Doug <unk> with Bank of America. Your line is open.

Doug Leggate: Good morning, everyone. I love the exotic version, but congrats to all you guys. Alistair, I'm glad we were able to get our trip squeezed in before you walked away. Thanks for your time again. Guys, I wonder if I could follow up on Neil's question on the ROFR. I wanna be a bit more specific about the tax benefits that you guys are acquiring. Chris, this might be for you, given it's more of a kind of a technical accounting question. I'm trying to understand who owns the tax losses. Is it the Total entity that you're buying the shares of, or do the tax losses sit at the asset level?

Good morning, everyone I loved the exotic version, but congrats to all you guys and Alastair I'm glad we were able to get our trip squeeze than before you walked away. So thanks for your time again.

Guys I wonder if I could follow up on Neal's question on the on the roof, but I want to be a bit more specific about the tax.

Benefits that you guys are acquiring Christopher this might be for you. Given this is more of a kind of a technical accounting question, but I'm trying to understand who owns the tax losses.

Is it the total entity that you are buying the shares off or did it fall as he sits at the asset level in other words, if conical Phillips did preempt do you hold on to the majority of those types of losses or do they get transferred with the asset any technical.

Doug Leggate: In other words, if ConocoPhillips did preempt, do you hold on to the majority of those tax losses or do they get transferred with the asset? Any, you know, technical explanation of how that might work would be really appreciated.

Explanation of how that might work would be really appreciate it.

Kris Smith: Yeah. Thanks, Doug. So as you pointed out, we're doing a share transaction. We're purchasing the entity, so the tax pools are at the entity level. Now, as Alistair mentioned in his answer to the earlier question from Neil, I mean, certainly if the ROFR is triggered, it then is going to move into a different sort of transaction at an asset level. I think the tax pools are gonna be looked at quite differently, and they're gonna be lower. We're transacting at the entity level, so as we're looking at the tax pools, they're on that basis.

Yeah. Thanks, Doug So as you as you pointed out we're doing a share transaction, we're purchasing the entity of the tax pools or at the entity level now is as Alastair mentioned in his answer to the earlier question from Neil I mean, certainly if the Rovers triggered as Ben is going to move into a different sort of transaction.

On asset level and that I think the tax pools are going to be looked at quite differently and they're going to be lower but we're transacting at the entity level. So as we're looking at the tax pools are on that basis.

Doug Leggate: Okay. We're gonna have to wait and see how it plays out. Are the tax pools split proportionally to the value of the assets included in, you know, in the transaction, sort of two-thirds, one-third?

Okay. So we're going to have to wait and see how it plays out.

<unk> splits proportionately to the value of the company.

Assets included in the transaction sort of two thirds one third.

Kris Smith: Oh, they're at, Doug, they're at the entity level.

They are at the entity level.

Doug Leggate: Okay. I'll wait and see how that plays out. I guess, Rich, my question for you is that obviously you're inheriting a lot of legacy reliability issues. Not all of those, or rather a large part of those one imagines are structurally related to the age of the mine. How do you anticipate closing some of those reliability gaps given the obvious, you know, more structural challenges of the mine life?

Okay.

Wait and see what how that plays out I guess rich. My question for you is that obviously you are inheriting a lot of legacy reliability issues not all of those or rather a large part of those one the margins are structurally is it to the age of the mine. So how do you anticipate.

Closing some of those reliability gaps given the obvious more structural as just starts with challenges of.

Of the mine life.

Rich Kruger: Well, first of all, Doug, I would say that, you know, advanced age is no excuse for poor performance, so I'm saying that a bit tongue in cheek. I think it's you take the mines, yes. What you're saying is obviously there's aging equipment. I think the issues are a little bit more things like haul distances and, you know, and ore quality in different areas. Because if you look at it, I was up with Peter just a couple weeks ago, and I went into the maintenance phase at each of the, you know, the Base Mine at Syncrude, Fort Hills. You talk about, you know, how we maintain things. We basically, like, rebuild trucks over time.

First of all Doug I would say that.

Advanced age is no no excuse for poor performance, so I'm, saying that a bit tongue in cheek.

The.

I think if you take take the minds, yes, what youre, saying is obviously theres aging equipment I think the issues are a little bit more things like haul distances and.

Or quality in different areas, because if you look at it I was up with Peter just a couple of weeks ago.

I went into the.

Maintenance space at each of the base mine at Syncrude Fort Hills, and you talk about how we maintain things we basically like rebuild trucks over time so.

Rich Kruger: A truck is not old because over a period of, you know, a relatively short time, it's rebuilt. Now upgraders are a different thing, but look at refineries. Refineries around the world have been operating, and they can operate very reliably despite age. It comes down to maintenance, it comes down to best practices, operational discipline. Yes, we have an aging mine set of assets, and yes, we have increased haul distances, but I think that just means we have to get smarter and more creative about how we manage costs and improve reliability. I really don't look at that as a limitation. Certainly, Peter doesn't either. I know we don't. We don't look at that as an excuse or as a, well, you know, a limitation on what we can achieve.

Truck is not all because over over a period of relatively short time, it's rebuilt and now upgrade or is there a different thing, but look at refineries refineries across around the world have been operating in and they can operate very reliably. Despite age it comes down to maintenance comes down to best practices opera.

Regional discipline and so yes, we have an aging.

Mind set of assets and yes, we have increased haul distances, but I think that just means we just have to get smarter and more creative about how we manage costs and improve reliability. So I really don't look at that as a certainly.

It certainly got Peter doesn't either I know, we don't we don't look at that as a as an excuse or as.

Well, we're a limitation on what we can achieve I think it just means we need to get more thoughtful and more creative.

Rich Kruger: I think it just means we need to get, you know, more thoughtful and more creative. It really means executing the fundamentals extremely well, our maintenance programs, our reliability programs, looking at risk-based work selection on turnarounds. It's just, you know, the blocking and tackling in our business that we've learned for decades, whether we've learned that in refining or whether you've learned it in mining, but executing extremely well. I hope, and I think you've heard in my comments, you know, that's gonna be our plan, looking at what we do, how we do them, and then ensuring that those folks that are not at the asset, that they're providing the highest level of support, whether that's for rotating equipment, whether that's, you know, near-term, mid-term or long-term mine planning.

Really means executing the fundamentals extremely well our maintenance programs, our reliability programs looking at risk based work selection on turnarounds.

The blocking and tackling in our business that we've learned for decades.

Whether we have learned that in refining or whether you've learned it in mining, but executing extremely well.

I hope and I think you've heard in my comments, that's going to be our plant looking at how we do the same what we do how we do and then ensuring that those folks that are not at the asset that they are providing the highest level of support whether thats for rotating equipment, whether that's near term midterm or long term mine.

Rich Kruger: It's really, you know, it's a focus on the basics, but just doing the basics extraordinarily well. I know, you know, it's kind of a long answer to it, but I just, you know, my premise is the age of our facilities and ultimately is not going to be a material inhibitor. Peter?

<unk> planning.

It's really it's a focus on the basics, but just doing the basics extraordinarily well so I don't know.

That's kind of a long answer to it but I.

<unk>.

And then I wrote my premise is the age of our facilities and ultimately is not going to be a material inhibitor.

Operator 4: Great perspective, Rich.

Doug Leggate: Great perspective, Rich.

Rich Kruger: Yep.

Operator 4: Thanks. Thanks and good luck. Peter, go ahead, please.

Doug Leggate: Thanks. Thanks and good luck. Peter, go ahead, please.

Peter Great perspective, thanks, Thanks, and good luck Peter go ahead. Please.

Rich Kruger: Anything you'd add to that, Peter?

Peter Zebedee: Well, I would just say, and especially in the mining operations, really our approach is threefold. You know, across our portfolio, we're moving 1.3 billion tons of material every single year to generate the products that we do. Little things make a big difference, and that means squeezing the efficiency out of our own operations every shift, every single day. It means reducing our exposure to more expensive tonnages via executed by a third-party contractor. I would say the last tranche of that really is around the implementation of new mining technologies like the autonomous trucking technology we have active in our Base Plant today and will be scaling up across all of our assets in the near future.

Anything you'd add to that Peter I would just say and especially in our mining operations are really our approach is threefold.

Our portfolio, we're moving $1 3 billion tons of material every single year to generate.

So we do.

So little things make a big difference and that means squeezing efficiency out of our own operations every shift every single day.

Means reducing our exposure to more expensive tonnages via executed by a third party contractor I would say the last tranche of that really is around the implementation of new mining technologies like the autonomous trucking technology, we have active and our base plant today, and we will be scaling up across all of our assets in the near future and Doug I'd Richard.

Rich Kruger: Doug, I—Rich again. You know, you got me going here, so I got to say one more thing. I think, you know, we haven't talked today so much, but our focus on safety and improving safety. Safety is a huge productivity driver. When you not only do we have a moral obligation to people, and we care about people, that's why, but it affects productivity. Activities that Peter has going on safety system, collision avoidance, fatigue management. We've talked about autonomous vehicles over time. All of these things not only ensure a safer workplace, but they provide a more productive workplace. I think those things, you know, they, safety, operational integrity, reliability and profitability, they are all very interlinked. I think the other things we're working on add to that same reliability aspect, in particularly in mining.

You got me going here, so I got to say one more thing I think we haven't talked today, so much but our focus on safety and improving safety safety is a huge productivity driver. When you not only do we have a moral obligation to people and we care about people thats why but it affects productivity.

So activities that Peter has going on and safety system collision avoidance fatigue management, we've talked about autonomous vehicles over time all of these things not only ensure a safer workplace.

But they provide a more productive workplace and so I think those things they safety operational integrity reliability and profitability here all very enteral interlinked.

So I think the other things we're working on add to that same reliability aspect, particularly in mining.

Operator 4: appreciate your answers, guys. Thanks so much.

Doug Leggate: appreciate your answers, guys. Thanks so much.

I appreciate your answers guys. Thanks, so much.

Rich Kruger: Yep. Thanks, Doug.

Thanks, Doug.

Operator 5: One moment for our next question. That will come from the line of Menno Hulshof with TD Securities. Your line is open.

Operator: One moment for our next question. That will come from the line of Menno Hulshof with TD Securities. Your line is open.

And one moment our next question.

And that will come from the line of Menno <unk> with TD Securities. Your line is open.

Menno Hulshof: Thanks, and good morning, everyone. Rich, you talked about driving clarity and simplification throughout the organization. Can you just elaborate on what is meant by that? It felt like those words were carefully selected. What specific steps could we see over the next year to achieve that?

Thanks, and good morning, everyone.

You talked about driving clarity.

Simplification throughout the organization can you just elaborate on what is meant by that it felt like those words were carefully selected and what specific.

Perhaps could we see over the next year or two to achieve that.

Rich Kruger: You give me too much credit, Menno. I don't know that they were carefully selected, but what I believe is I believe everybody in the organization needs to have a line of sight to how they support making money. I very much believe in making money. We are in business to make money and as much of it as possible. Everybody, starting with me, needs to see how they do that. That, well, you know, what I believe here, and just, you know, been here a short while, but I'm proof testing a lot of things, is that we can enhance our clarity about what the workforce does to support, whether it's safety, integrity, reliability, or profitability. I think we can eliminate work. I think we can do away with work that doesn't add value.

Can you give me too much credit Menno I don't know that they were carefully selected but the.

What I believe is I believe everybody in the organization needs to have a line of sight to how do they support making money and I very much believe in making money we're in business to make money and as much of it is possible and everybody starting with me needs to see how they do that.

And that.

So what I, what I believe here in just a short while but im proof testing a lot of things is that we can enhance our clarity about what the workforce does to support whether it's safety integrity reliability, our profitability and I think we can eliminate work.

I think we can do away with work that doesn't add value I can I think we can look at things like service levels and service level of support but all with a keen eye on how it enhances bottom line business performance. So if my words came across as carefully selected theyre not really intended.

Rich Kruger: I think we can look at things like service levels and service level support, but all with a keen eye on how it enhances bottom line business performance. You know, if my words came across as carefully selected, they're not really intended. We're early in this, but I just see a lot of opportunity for organizational efficiency. If that's, you know, focusing on higher value activities, so be it. If that's eliminating low value-added work, awesome. It's combinations of all of that. I do think above the field in an organization, you can create an energy, a motivation through clarity and focus, that people can move mountains. I think fundamentally, you look at our business; our business has it kind of involves moving mountains in many cases.

We're early in this but I just see a lot of opportunity for organizational efficiency, that's focusing on higher value activities. So be it if thats, eliminating low value added work awesome.

Its combinations of all of that and I do think above the field in an organization you can create an energy or motivation through clarity and focus.

People can move mountains.

And I think fundamentally when you look at our business our business hazard.

Kind of involves moving mountains in many cases and I think this organization is ready for that I think they are asking for it and.

Rich Kruger: I think this organization is ready for that. I think they're asking for it, and that's exactly what I intend to provide.

That's exactly what I intend to provide.

Menno Hulshof: Okay. Thanks for that, Rich. Having seen all of the inner workings at Exxon and Imperial for decades, are there any best practices that have been shortlisted for rollout at Suncor over the near to midterm? I guess as a follow-up to that, do you think there are ways that Suncor and Imperial could work together even more effectively?

Okay. Thanks for that rich and then and then having seen all of the inner workings at Exxon and Imperial for decades are there any best practices that have been shortlisted for rollout at suncor over the near to mid term and I guess as a follow up to that do you think there are ways that suncorp.

And in theory could work together, even more effectively.

Rich Kruger: Yeah, I think I'm a big believer in benchmarking and best practices. You know, how do you know if you're the best unless you know, unless you've got some kind of a scorecard to it? When I think of best practices, you know, whether it's safety systems, integrity systems, there's kind of three categories I think about. First, the system design itself. Is it a quality system? In my short time here, I think we have quality systems. Our safety systems, our operational excellence systems, I think are quality. Now, can they be improved? Can they be made better to implement? Absolutely. Are they as simple as they can be to apply in the field? Those are questions. But we have sound systems.

Yes, I think I'm, a big believer in.

And benchmarking and best practices, how do you how do you know if you have the best unless you unless you got some kind of a scorecard to it and so what I think are best practices.

Whether it's safety systems integrity systems, Theres kind of three categories I think about first the <unk>.

System design itself is it a quality system and in my short time here I think we have quality systems. Our safety systems are operational excellent systems I think our quality now can they can they be improves can they be made better to implement absolutely are they are they.

As simple as they can be to apply in the field those are questions, but we have sound systems. So then you get into the application of a system, that's where in a short time, but I've seen variability.

Rich Kruger: You get into the application of the system. That's where in a short time, but I've seen variability in how well we've applied systems at different sites. My vision there would be we reduce variability to the highest standard of performance. Once you have a quality system, once you've applied that system, it comes into the effectiveness. Are your systems delivering the intended result? That's where you put that, you know, that return feedback loop in place to enhance the system, strengthen the leadership that goes with the applicability to produce better results. On the application of what I think are our quality systems, we have work to do to reduce variability. Along with that is measuring the execution quality, the effectiveness of our application.

And how well we've applied systems at different sites and my vision, there would be we reduce variability to the highest highest standard of performance and once you have a quality system. Once you've applied that system then it comes into the effectiveness.

Are your system is delivering the intended result, and Thats, where you put that that return feedback loop in place to enhance the system strengthened the leadership that goes with the applicability to produce better results. So on the application of what I think are our quality systems we.

Have work to do to reduce variability and then along with that is measuring the execution quality of the effectiveness of our application. Those are the two areas, where I plan to focus on.

Rich Kruger: Those are the two areas where I plan to focus on, you know, early on. Other best practices, I think. I'm a big one for learning. You look over the lease line to learn. For collaboration, whether that's in, you know, operating refineries, whether that's in operation of mines, I believe that for the oil sands, well, for Suncor to be a winner in the oil sands, the oil sands also has to win and compete on the world stage. You know, the consumer, when they put a nozzle in a car, a truck, or the side of an airplane, quite frankly, they don't really think about where that motor gas, diesel or jet comes from. Does it come from an oil sand, West Texas Intermediate at all?

Early on and other best practices I think in.

The big one for learning Youll look you look over the over the lease line to learn and for collaboration whether that's in whether that's in operation refineries, whether that's an operator seen at mines I believe that for the oil sands well for suncor to be a winner in the oil sands.

The oil Sands also has to win and compete on the world stage the consumer when they put a nozzle in a car.

Our truck side of an airplane.

Frankly, they don't really think about where that low gas diesel or jet comes drugs that come from and all sad West, Texas intermediate all so we have to be globally competitive.

Rich Kruger: We have to be globally competitive in the oil sands, and then our goal is to be the best of the best in the oil sands. To be globally competitive, that comes with collaboration. I think Pathways is a great example of that. I think there's other more fundamental examples of how do we run and operate mines? How do we, you know, how do we maintain, you know, dikes and dams and tailings? How do we collaborate with the federal and provincial governments on sound public policies that achieve the objectives, but also ensure or maintain the competitiveness of what is a critical industry for not only Alberta, but Canada overall.

The oil Sands and then our goal is to be the best of the best in the oil sands so to be globally competitive that comes with collaboration and I think pathways as a great example of that but I think theres other more fundamental examples of how do we run and operate mines, how do we.

How do we maintain.

Dykes and dams and tailings how do we how do we collaborate with the.

Federal and provincial governments unsound sound public policies that achieves the objectives, but also ensure our maintain the competitiveness of what is a critical industry for not only Alberta, Canada. Overall, so that's a long and you got me gone their minerals.

Rich Kruger: You got me going there, Mino, on a topic I'm passionate about, but I think collaboration and application of standards and best practices is very much a part of a winning formula.

On a topic I'm passionate about but I think collaboration and application of standards and best practices is very much a part of a winning formula.

Menno Hulshof: Appreciate the thoughts, Rich. I'll turn it back.

I appreciate the thoughts rich I will turn it back.

Rich Kruger: One moment for our next question. That will come from the line of Harry Mateer with Barclays. Your line is open.

Operator: One moment for our next question. That will come from the line of Harry Mateer with Barclays. Your line is open.

One moment for our next question.

And that will come from the line of Harry Mateer with Barclays. Your line is now open.

Speaker 18: Thank you. Good morning. First one, I see slide four about the capital allocation, and it looks mostly similar to what the company had up previously. You know, at the same time, Suncor's coming out of the gates with a, you know, a debt-funded acquisition and going above the CAD 12 to 15 billion net debt range, at least for a period of time. You know, Rich, for the credit investor community, would like to get your perspective on the balance sheet, how you think about optimal leverage for Suncor, and perhaps where in the investment grade category you think the right place is for Suncor's ratings to be.

Bradley Matt: Thank you. Good morning. First one, I see slide four about the capital allocation, and it looks mostly similar to what the company had up previously. You know, at the same time, Suncor's coming out of the gates with a, you know, a debt-funded acquisition and going above the CAD 12 to 15 billion net debt range, at least for a period of time. You know, Rich, for the credit investor community, would like to get your perspective on the balance sheet, how you think about optimal leverage for Suncor, and perhaps where in the investment grade category you think the right place is for Suncor's ratings to be.

Thank you good morning.

First one I see slide four about the capital allocation.

Mostly similar to what the company had previously but at the same time some of course coming out of the gates with a debt funded.

Acquisition and going above the $12 billion to $15 billion that range at least for a period of time, so rich for the credit Investor community would like to get your respective on the balance sheet. How do you think about optimal leverage for suncor.

Perhaps where.

And the investment grade category I think the right places for Suncor as ratings to be.

Rich Kruger: Yeah, I think, you know, some of the specificity of what you've asked for maybe is beyond what I can comment on today. You know, just fundamentally, I think I believe in a strong balance sheet. We produce a basket of commodities. Prices go up and down, and how you have the resiliency to get through the inevitable cycles is by having, you know, a strong balance sheet. When I look at, you know, covering what my priorities are, the care and feeding of the existing asset base, the sustaining expenditures are, you know, you need to do those in the short term and the long term. As I commented, a reliable and growing dividend. High dividend is very, very important to me.

Yes, I think I think some of the specificity of what you've asked for maybe it's beyond what I can comment on today, but.

Fundamentally I think I believe in a strong balance sheet, we produce a basket of commodities prices go up and down and how you have the resiliency to get through the inevitable cycles is by having a strong balance sheet.

And when I look at covering what my priorities are the.

Karen feeding of the existing asset base sustaining expenditures are you need to do those in the short term and the long term.

As I commented it reliable and growing dividend.

Dividend is very very important to me so I want to ensure that we have a cost structure, which includes.

Rich Kruger: I want to ensure that we have a cost structure which includes, you know, level of debt and financing costs on debt so that we can withstand those ups and downs and financially, you know, deliver. Maybe you dial back on high-quality investments at periods of low prices. Maybe you use, you know, the flywheel of returning surplus cash to shareholders as modified, but that you don't put at risk taking care of what you already have, and you can still continue with a reliable and growing dividend, you know, in periods of up and down. Maintaining a strong credit rating is key, obviously, for, you know, the cost. I think coming out of Daisy is a bit of a reflection on confidence that I have in the corporation. I think that's all important.

Our level of debt and financing cost on debt. So that we can withstand those ups and downs and financially deliver maybe you dialed back on high quality investments at periods of low prices may be you used the flywheel flywheel.

Returning surplus cash to shareholders is modified.

But that you don't put at risk taking care of what you already have and you can still continue with a reliable and growing dividend in periods of up and down maintaining our strong credit ratings is key obviously for the cost and I think coming out of the Daisy is a bit of a reflection.

Confidence that having the corporation and I.

That's all that's all important is maintaining our ability to borrow when we can and should leverage for opportunities keeping a strong credit rating our credibility in the marketplace and then getting our cost structure, where we can we can withstand the inevitable ups and downs you see in our business. It's the business we've chosen.

Rich Kruger: Maintaining our ability to borrow when we can and should leverage for opportunities, keeping a strong credit rating, our credibility in the marketplace, and then getting our cost structure where we can, you know, we can withstand the inevitable ups and downs you see in our business. It's the business we've chosen. You know, I'm not sure if I was specific enough for you. Alistair, if you have anything else to add or bolster that or refute it.

I am not hearing I'm not sure if I was specific enough for Ya Alastair if you have anything else to add or bolster that or or reviewed it.

Alister Cowan: No, actually, I think you summarized it very well. I would just, you know, emphasize the work the rating agencies went through our Total acquisition, and no changes to our ratings. I think that demonstrates their commitment to a strong balance sheet and getting the debt back down in a relatively short order.

You summarized it very well.

I emphasize the word.

Really agencies with C R.

Two tile acquisition and no changes or arrangements I think that demonstrates our commitment.

Balance sheet and getting the debt back down in a relatively short order.

Rich Kruger: Yeah. Exactly.

Exactly.

Speaker 18: Okay, thanks for that. You know, follow-up, I'm not sure for Alistair or Chris, but, you know, given the planned debt financing you've noted in the slides, I mean, Suncor has a pretty clean maturity slate in the next couple of years. You know, how are you thinking about staggering that financing? Are you comfortable issuing some longer-term debt? Or, you know, are you thinking more like issuing shorter-dated notes or bank debt to provide a bit of a glide path to gross debt reduction in the next couple of years?

Bradley Matt: Okay, thanks for that. You know, follow-up, I'm not sure for Alistair or Chris, but, you know, given the planned debt financing you've noted in the slides, I mean, Suncor has a pretty clean maturity slate in the next couple of years. You know, how are you thinking about staggering that financing? Are you comfortable issuing some longer-term debt? Or, you know, are you thinking more like issuing shorter-dated notes or bank debt to provide a bit of a glide path to gross debt reduction in the next couple of years?

Okay. Thanks for that and then a follow up I'm not sure for Alastair, Chris, but you know given the planned debt financing.

You've noted in the slides I mean suncor.

Is it a pretty clean maturity slate in the next couple of years. So yeah. How are you thinking about staggering that financing or are you comfortable issuing some longer term debt or are you thinking more like issuing shorter dated notes or bank debt to provide a bit of a glide path to gross debt reduction in the next couple of years.

Alister Cowan: Yeah, as you noted, Harry, you know, our maturities have been in the short term, we've essentially taken most of those out with the debt buyback last year. We'll focus more on the shorter end. Obviously, we think we can accelerate the debt repayments, so we'll be focusing on our ability to be able to repay debt as quickly as we can. We will issue some longer-term stuff as part of the package, but the focus will be on the shorter end.

Yes.

However, our maturities.

Sure.

In the short term what do you think you're taking most of those over the buyback last year.

We will focus more on the shorter end, obviously, we think we can accelerate the debt repayments that we'll be focusing on our ability.

To be able to repay debt as quickly as we can and we've always used the longer terms, though.

As part of the package.

Focus will be on our own.

<unk>.

Speaker 18: Okay. Thanks very much.

Bradley Matt: Okay. Thanks very much.

Okay. Thanks very much.

Rich Kruger: Thanks, Harry.

Thanks Jerry.

Speaker 19: We do have time for one final question, and that will come from the line of Roger Read with Wells Fargo Securities. Your line is open.

Operator: We do have time for one final question, and that will come from the line of Roger Read with Wells Fargo Securities. Your line is open.

Okay.

And we do have time for one final question.

And that will come from the line of Roger read with Wells Fargo Securities. Your line is open.

Speaker 20: Yeah. Thanks for working me in here. Guess what I'd like to really kind of understand, Rich and Chris, is, you know, so much of the forward focus is gonna be on reliability, safety, and the general systems are in. How much visibility do you have today or certainty do you have of what needs to be done in terms of, you know, making things work the way you want them to work and improving the overall performance? What I'm really just getting at is, you know, you had the Investor Day at the end of last year, and then we've had obviously some pretty significant changes here at the top. I just wanna kind of understand, you know, are we looking at something that, you know, should really be a very quick impact?

Roger Read: Yeah. Thanks for working me in here. Guess what I'd like to really kind of understand, Rich and Chris, is, you know, so much of the forward focus is gonna be on reliability, safety, and the general systems are in. How much visibility do you have today or certainty do you have of what needs to be done in terms of, you know, making things work the way you want them to work and improving the overall performance? What I'm really just getting at is, you know, you had the Investor Day at the end of last year, and then we've had obviously some pretty significant changes here at the top. I just wanna kind of understand, you know, are we looking at something that, you know, should really be a very quick impact?

Yes, Thanks for working me in here.

I guess, what I'd like to really kind of understand rich interest is.

So much of the Ford focus is going to be on reliability safety and general systems are in how much.

Visibility do you have today or certainty do you have what needs to be done in terms of making things work. The way you want them to work and improving the overall performance and what I'm really just getting at is there.

At the Investor day at the end of last year, and then we've had obviously some pretty significant changes here at the top and I just want to kind of understand.

Are we looking at something that should really be.

Speaker 20: are we looking at things that, well, let's think about it more as a 2024, 2025 kind of event? Anything you can do to help us with the timeline, I'd appreciate.

Roger Read: are we looking at things that, well, let's think about it more as a 2024, 2025 kind of event? Anything you can do to help us with the timeline, I'd appreciate.

Quick impact are we looking at things that well, let's think about it more is it $24 25 kind of event.

Anything you can do to help us with the timeline I'd appreciate it.

Rich Kruger: Yeah. You know, I think in terms of what needs to be done, a lot of it is not, you know, and I don't mean to oversimplify it, but it's not rocket science either. It gets back to, and I know looking down the table at the, you know, the executive VPs and the senior VPs responsible for our operations. It's the kind of things we talked about. It's applying, you know, Well, it's executing our work exceedingly well. That is not necessarily complicated. It's ensuring that people have the skills, abilities, the time, the support to do what we know it takes to operate and maintain facilities. Yes, it is also getting smarter and looking for creative financial solutions, whether that's our, you know, our truck fleet at Fort Hills, for example, or getting better at, you know, the turnaround expenditures.

Yes.

Thank you in terms of what needs to be done.

A lot of it is not and you know and I don't mean to oversimplify it but it's not rocket science, either it gets back to and I know Im looking down the table at the.

The executive team as senior Vps responsible for our operations. It's the kind of things we talked about it's applying best practices well executing our work.

<unk> well that is not in necessarily complicated, it's ensuring that people have the skills and abilities to time the support.

Do what we know it takes to operate and maintain facilities. Yes. It is also getting smarter and looking for creative financial solutions and whether that's our our truck fleet at Fort Hills for example, or we're getting better at the turnaround expenditures we spend for example.

Rich Kruger: We spend, for example, nearly CAD 1 billion a year on plant turnarounds across our massive asset base. Well, it seems like that should be something we become really, really good at because you save money, and if you shorten timelines through risk-based work selection, you get online quicker, and you start making money while you take facilities down. You know, I think I would love to be able to say, you know, how fast and what to expect. I'm just, you know, Roger, I'm not there yet.

Nearly a $1 billion a year.

Turnarounds.

Our massive asset base well it seems like that should be something we become really really good at because <unk> saved money and way to shorten timelines do risk based worked selection you get online quicker and you start making money while you take facilities down so I think I would love to be.

Able to say, how fast and what to expect I am just Roger I'm not there yet, but I think the the.

Rich Kruger: I think what we need to do and what we need to focus on, and equally important, what we need to be sure we don't focus on to allow the attention to where the biggest bang for the buck is. I think that's getting clearer and clearer. I think the senior leadership team and I are rapidly getting aligned on that. In terms of, we will be pursuing any and all improvement opportunities with a sense of urgency. I know I didn't give you a timeline or numbers, but this is, when you started saying, you know, 24, 25, that ain't my timeline. You know, there's no better time than the present. I think, you know, I would hope that we start seeing.

What we need to do and what we need to focus on and equally important what we what we need to be sure. We don't focus on to allow that to allow the attention to where the biggest bang for the bucket I think thats getting clearer and clearer I think the senior leadership team and I are rapidly did.

<unk> aligned on that.

And in terms of we will be pursuing any and all improvement.

Opportunities with a sense of urgency I know I didn't give you a timeline or numbers, but this is when you started saying 'twenty four 'twenty five.

Hey, my timeline.

There's no better time than the present and so I think I would hope that we start seeing hope's not a very good strategy by the way. So I would expect that we will start to see incremental improvements.

Rich Kruger: Hope's not a very good strategy, by the way. You know, I would expect that we will start to see incremental improvements, you know, with time, and that time's not, you know, just the future. That's sooner rather than later. I just signed you guys up to deliver, folks.

With time and that times not just in future that's sooner rather than later.

I just signed yet deliver songs.

Speaker 20: Yeah, no, I appreciate it.

Roger Read: Yeah, no, I appreciate it.

Rich Kruger: I'm looking at my team down there, and I just signed them up. I can tell there's a little tightness being formed down there at the end of the table, but they're all smiling, so that's a good thing.

I'm looking at my team down there and I just signed them up I can tell there is a little tightness.

For them down there at the end of the table, but they're all smiling. So that's a good thing.

Speaker 20: Yeah, I appreciate that. Yeah, just as a quick follow-up, it's been kind of hammered already, but the ROFR that Conoco has, if they exercise that, it obviously alters the transaction. Would we anticipate, you know, then you would, obviously with a lot less debt, would be likely to move back to a 75/25 payout more quickly? I mean, that's just that seems like a natural progression if that happens, and I'm just trying to, you know, kind of anticipate what the changes might be if that piece of the Total transaction does not occur.

Roger Read: Yeah, I appreciate that. Yeah, just as a quick follow-up, it's been kind of hammered already, but the ROFR that Conoco has, if they exercise that, it obviously alters the transaction. Would we anticipate, you know, then you would, obviously with a lot less debt, would be likely to move back to a 75/25 payout more quickly? I mean, that's just that seems like a natural progression if that happens, and I'm just trying to, you know, kind of anticipate what the changes might be if that piece of the Total transaction does not occur.

Yeah I appreciate that.

Yes, just.

As a quick follow up.

It's been kind of hammered already but the ROE for the conoco as if.

They exercise added obviously alters the transaction what we anticipate.

Then you would obviously with a lot less debt.

Would be likely to move back to $75 25 pay out more quickly I mean, thats just that seems like a natural progression if that happens and I am just trying to.

Kind of anticipate what the changes might be if that that.

That piece of the total transaction does not occur.

Rich Kruger: Well, you know, what ConocoPhillips may or may not do, you know, we'll all learn that here in the relatively near future. If I step back from it, more broadly, you know, go back to what I described on capital allocation. If we have surplus cash, we'll look at what's the best way to return that to the shareholder. That will, you know, that'll be, you know, combinations of continuing to look at our dividend, and/or share buybacks, and/or debt reduction. Undoubtedly, if we didn't have this big acquisition, our debt would be back closer to where we've talked about targeting it.

Again, it what conoco may or May not do we'll all learn that here in the relatively near future, but if I think about if I step back from it.

More broadly if we have go back to what I described on capital allocation if we have.

We have surplus cash we will look at what's the best way to return that to the shareholder and that that'll be combinations have continued to look at our dividend.

Share buybacks <unk> debt reduction so undoubtedly if we didn't have this.

Big acquisition, our debt would be back closer to where we've talked about targeting it and but it would be that combination of events that we would just look at what do we believe is the highest value of the shareholder and I can assure you Roger everything everything we have done and will continue to do we will always have the shareholder.

Rich Kruger: It'd be that combination of events that we would just look at what do we believe is the highest value of the shareholder. I can assure you know, Roger, everything we have done and will continue to do will always have the shareholder, you know, at the front of the windshield, not looking in back, but looking forward. What's in the best interest of the shareholder? That's our mantra.

At the front of the windshield not not looking at bat, but looking forward what's in the best interest of the shareholders that is our that's our mantra.

Speaker 20: Appreciate it. Thank you.

Roger Read: Appreciate it. Thank you.

I appreciate it thank you.

Rich Kruger: You're welcome.

Operator 1: Thank you. I would now like to turn the call back over to Mr. Troy Little for any closing remarks.

Operator: Thank you. I would now like to turn the call back over to Mr. Troy Little for any closing remarks.

Youre welcome.

Thank you I would now like to turn the call back over to Mr. Troy Little for any closing remarks.

Troy Little: Thank you, operator. Thank you for joining us, everyone. Please don't hesitate to call us with any follow-up questions. Operator, you can now end the call.

Thank you operator, thank you for joining US everyone. Please don't hesitate to call us with any follow up questions.

Operator, you can now end the call.

Rich Kruger: Thanks, folks.

Operator 1: Thank you all for participating. This concludes today's program. You may now disconnect.

Thanks, Paul.

Operator: Thank you all for participating. This concludes today's program. You may now disconnect.

Thank you all for participating. This concludes today's program you may now disconnect.

Okay.

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Okay.

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Okay.

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So.

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Yeah.

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Suncor Energy Inc. Q1 2023 Earnings Call

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