Q3 2023 Suncor Energy Inc Earnings Call

One.

Good day and welcome to the Suncor Energy third quarter 2023 results conference call. At this time, all participants are in a listen only mode.

After the speaker presentation, there will be a question and answer session.

I 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 rain to withdraw your question Press Star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your host Mr. Choi Little Vice President of Investor Relations. Please.

Go ahead.

Thank you operator, and good morning, welcome to Suncor Energy's third quarter earnings call. Please.

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 third quarter earnings release as well as in our current annual information form both 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 third quarter earnings release, we.

We will start with comments from rich Kruger, President and Chief Executive Officer, followed by Chris Smith, Suncorp Chief Financial Officer.

Also on the call are three of our senior operating leaders, Peter Zebedee Executive Vice President oil Sands <unk>.

<unk> Executive Vice President downstream, and Shelly Powell Senior Vice President operational improvement and support services.

Following the formal remarks, we'll open up the call to questions now I'll hand, it over to rich to share. His comments, thanks, Mike third quarter characterize it as strong results across our business safety upstream downstream turnarounds in particular Fort Hills acquisition, and some organizational improvements I'll comment I'll, let me start.

With safety core value number one priority.

Thank you our people employees and contractors alike.

Recognizing that safety is a never ending journey.

With and proud of our team year on year recordable injuries are down 10% lost time incidents are down 33% and most importantly, we've had zero life threatening or life altering injuries in 2023, we've had improvement in each and every business segment.

And that said I'd like to call out our downstream our downstream had zero recordable injuries in the third quarter zero, the first quarter injury free in our company's history.

It is a very focused effort involving leadership training procedures workforce engagement and technology, a few highlights on the leadership and training front implementing human and organizational.

Leadership training, which is fundamentally about a culture change we're on target for all suncor leaders to be trained on harp buy.

<unk> year end 2023 comment on procedures in the in mining in the third quarter. We completed 4000 critical control Verifications. So big number the important number is 20% higher than the second quarter and so the significance of that is that we are engaging our workforce.

Focus and safely execute our higher risk activities in technology I will just comment once again and mining, where we are installing and employing collision awareness and fatigue management systems. We now have collision awareness equipment installed on over 1000 pieces of mobile equipment.

I'll continue with Fort Hills in.

On October three we announced a revised deal to acquire total Canada or one 406 8 billion. This is an improved deal versus the original deal specifically, we no longer have a contingent payment provision in the acquisition similar headline valuation to the earlier tech deal.

But we've got additional benefits commercial commercial patience and persistence for key here and we're pleased with the deal. We are on track to close the transaction later this month it addresses long term <unk> supply uncertainty associated with our upgrader.

Those are upgrader is for the long term.

But also enables additional value creation value creation through regional synergies with mobile equipment deployment value creation through directing higher yield PFT from Fort Hills to our upgrader.

A number of incentives and as I said, we are quite pleased with the deal.

<unk> with Fort Hills from an operational perspective, we executed our first five year full plant turnaround during the third quarter safely on budget and on schedule production, we're bang on expectations as part of our three year improvement plan.

We're continuing to progress mining through the centre pit, we're starting north pit opening cuts.

Of note is the success on past lessons learned zero water or zero issues with water seats, our slope instability and now with 100% ownership and full control.

We will be striving driving for further and faster improvements.

On the second quarter call I highlighted several areas that were considered high priority or improvement specifically turnaround performance signing fleet management and above field cost, let me start with turnaround performance. As a reminder, we complete large annual turnarounds at most all of our upstream and downstream.

Sites and spend on the order of $1 $3 billion per year or about 20% of our capex on turnarounds I've shared before that we benchmark using Solomon and other sources as a low average in performance cost schedule volumetric volumetric impact so to.

<unk> our efforts as an intensified focus I can assure you that would be an understatement. So how do we do in the third quarter, we will base plant.

Youtube Youtube greater our Youtube massive turnaround nearly 1 million hours 500, plus million 55 days, we completed it last week as per plan I mentioned Fort Hills, our first full plant turnaround $60 million 25 days completed in the third.

Quarter again as per plan.

Syncrude, we had a large turnaround in the second quarter that was completed per plan and we had a smaller third quarter turnaround completed early and under budget.

Montreal, and Edmonton refineries, we had events that overlaps between the third and the start of the quarter smaller in scope also completed successfully my message in all of this is we have more work to do certainly to become best in class, but first we need to improve our performance relative to our internal.

Cost and schedule commitments.

As we drive further and we look at our second third quarter performance I would say we're on track here ultimately our vision is that turnaround performance should be a differentiating core competency for the company.

Let me move on to mining fleet performance for context, the cost of physically moving or from the face of the mine to a crusher for the start of extraction. That's our single highest cost component in the production of bitumen today, we move about one 3 billion tonnes of Earth per year.

To support production and we've got a competitive cost gap versus best in class.

Comprehensive efforts to lower our cost per ton.

Winning formula.

You were trucks bigger trucks more efficient trucks and of course companion or compatible shovels, that's our mining improvement strategy in a nutshell. So this year and throughout 2024, we will add via a combination of perch purchase and lease 55 Ultra class.

<unk> 400 tonne trucks to our total fleet displacing nearly twice as many smaller third party less efficient higher cost vehicles. Each truck will be pre equipped for ultimate driverless autonomous operation the cost for for these acquisitions and leases are in our.

Guidance for this year and as well as our guidance that we'll issue shortly for 2020 for once in place. This action alone is expected to lower our overall corporate breakeven by $1 a barrel U S.

In addition in the third quarter, we executed a new long term strategic agreement with hitting our caterpillar equipment provider to deliver value to a win win framework associated with equipment and parts acquisition maintenance practices and fleet reliability.

We're also working with our equally important strategic partner SMS equipment, Komatsu unimproved lots, including finalizing the purchase of the world's largest hydraulic shovel and production today. The PC 9000 series for mid 2020 for delivery at Fort Hills Lastly in mining.

I'll comment on autonomous operations today, we have 31 trucks operating at base plant autonomously by second quarter 2024, it will be 45% and by year end 'twenty four it will be 91, if our data is correct. This will be the largest single mine fleet of autonomous ultra.

Class a trucks globally stay tuned for more our plans for materially improving mining costs and competitiveness is tangible focused on safety lead efficiency.

We composition and overall reliability let.

Let me continue with above field cost and organizational effectiveness during our second quarter call. We discussed plans to reduce above field costs by $400 million per year via a workforce reduction of 500 people to be completed by year end 2023, and you'll recall in the second quarter we.

A onetime charge of $275 million, our approach was 100% internal no consultants advisors focused on eliminating low value are unaffordable work today I can share that this effort has been completed two months ahead of schedule.

<unk> cost reductions starting in 2024 of $450 million will be achieved 12% or $50 million above target in part due to additional reductions of contingent workers or above field contractors. The impact of this action equates to $1 20 per barrel.

<unk> U S reduction in our corporate breakeven.

As the process unfolded it certainly hasnt been easy on our organization needed to those that left the company nor those that stayed however difficult we recognize it was necessary for our competitiveness competitiveness now we look ahead, coupled with executive leadership team changes other structural changes we are a <unk>.

<unk> more focused organization positioned to compete and win and Thats exactly what we intended to do.

Guidance during our second quarter call I mentioned that although tracking at or near the bottom end of guidance. We were focused on meeting our targets and delivering on commitments. I also said that given the material fall turnaround impact fall turnarounds have it made sense to update if necessary each year after.

The majority of our major maintenance work was complete.

That work now behind us and executed well, we're maintaining our guidance unchanged with full year upfront upstream production tracking at or near the 740000 barrel a day level.

Final comments before I turn it over to Chris I suspect you've noticed a few references today to turn in.

In terms of.

Beryl this reflects a new and evolving vocabulary within the company thinking about and communicating the impact of our actions plans and improvements in unit per barrel terms. In addition to a subset of assembly talk about the impact in per share terms, our vocabulary is part of creating clarity and focus.

Developing a results oriented high performance culture with that I'll turn it over to Chris great. Thanks, Rich and good morning, everyone.

To start with I'd like to make a few comments on the business environment that we saw in the third quarter was a very constructive on with both crude prices and refining crack strengthening versus Q2 on the back of healthy supply demand fundamentals we.

We saw <unk> averaged at about <unk> $82, a barrel in the quarter and the light heavy differential narrowed versus Q2, averaging about $13 a barrel as.

As well, we continue to see synthetic crude oil trade at a premium of about $3 a barrel to WTO.

On the refining side, while we saw weakening gasoline cracks in the back half of the quarter. It was a good quarter for refining margins and particularly for distillate cracks and our 5221 refining index was $2 a barrel stronger than Q2.

Finally, natural gas, which is a key input cost of our operations remained low with echo averaging $2 50 at G J in the quarter.

While Alberta power prices have remained robust.

Now with respect to our financial performance with this constructive business environment and so on.

And Suncor delivered a strong financial quarter.

$3 6 billion and adjusted funds from operations or $2 80 per share and adjusted operating earnings of $2 billion.

Our $1 52 a share.

During the quarter. We also returned nearly $1 billion to shareholders in dividends and share repurchases.

And since the beginning of the year, we bought back over 3% of our common shares outstanding.

At December 31, 2022.

Also during the quarter, we reduced our net debt by $1 4 billion with net debt at $13 billion at the end of the quarter.

Turning now to operations, we saw solid operations in both our upstream and downstream segments.

Our upstream delivered 691000 barrels per day of total production in the quarter.

Oil Sands had strong operations with 646000 barrels a day of production and delivering $2 9 billion of adjusted funds from operations with average price realizations of $106, a barrel Canadian or 97% of <unk>.

That rich has already talked about the very good turnaround performance in the quarter, So I'm not going to repeat that but I would like to highlight a few things.

Outside of planned maintenance activities in the quarter, our upgrader has operated at over 100% utilization.

And we continued to see strong institute production, including 99% utilization at fire bag.

As rich mentioned, the Fort Hills asset came out of its five year full plant turnaround with strong operations and delivered as expected with high asset utilization.

Our E&P business segment generated $372 million in <unk> in the quarter with production of 44000 barrels per day, and average price realizations of $121, a barrel Canadian or 104% of Brent.

The Terra Nova <unk> completed its life extension work in the quarter and has now returned to station, whereas commissioning and startup activities well underway and we expect it to begin production later in Q4 ramping up for the remainder of the year and into 2024.

As for our downstream segment it had its strongest financial quarter of the year, so far generating $1 5 billion in.

And adjusted funds from operations on a FIFO basis.

We saw very strong performance across the entire refining network with average refinery utilization rates of 99% post the Q2 turnaround season.

And while retail and branded wholesale sales were impacted by the cyber incident earlier in the quarter overall refined product sales were solid at 574000 barrels per day, and we saw a margin capture averaging 88%.

Similar to the same quarter last year.

With respect to overall costs. Despite inflationary pressures this year, we continue to see progress on reducing costs.

And along with the benefit of low natural gas prices are trending toward the bottom end of our oil sands cash cost per barrel guidance ranges for the year.

As for Capex. It was $1 5 billion in the quarter whats been primarily focused on plant turnaround and maintenance activities and mining tailings development, including the Red Lake West Mine extension project at Syncrude.

As well we are completing the Terra Nova asset life extension project that I mentioned earlier, while also beginning investment on West White Rose.

And despite inflationary pressures this year and the extension of the turnover work and the unplanned repairs, which we had a commerce city earlier. This year, we expect to remain within our capital guidance range.

And though we will be towards the top end.

As mentioned, our net debt was $13 billion at the end of the quarter.

With the anticipated close of the total energy, Canada acquisition, which rich spoke about earlier in his comments, we expect our net debt to end the year between $13 five in 2000 14 billion depending on commodity prices.

As mentioned, we've delivered nearly $1 billion in shareholder returns in this quarter.

We remain committed to our capital allocation framework delivering value to our shareholders through competitive dividends and share buybacks, while maintaining a strong balance sheet.

Now before I hand, it back to Troy just want to make a few comments on suncor as progress on our de Carbonization plans in the Oilsands pathways Alliance to net zero.

We remain focused on delivering against our 2030 emission reduction goals and our longer term objective of net zero by 2050.

A prime example of that is the progress we're making on our base plant Cogeneration project, which is on track to be complete in late 2024.

When operational project will reduce our direct <unk> emissions by about one mega ton a year, while also providing lower emissions intensity power to the Alberta grid.

A key part of our Decarbonization plan is our work with our industry partners and the pathways aligns to net zero, which is advancing an industry, leading carbon capture and sequestration project.

As we continue to advance early engineering work on the project. We are working closely with both the Canadian Federal and Alberta provincial governments to get the necessary fiscal and regulatory frameworks in place to support it and.

And we look forward to being in a position to advance. The next phase of the project in 2024, which would include ordering materials for the carbon pipeline.

And with that I will now turn it back over to you Troy.

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

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star one again.

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 thanks.

Good morning, Thanks for the rundown rich what inning.

The turnaround do you think suncor is in at this juncture and then what are some of the next steps are going to be taking in the next I don't know 612 18 months.

Uh huh.

We.

Greg I think we've got the right team we've got the right leadership, we know this game.

Yes.

I think we're.

I agree about hershey's.

Quickly on the <unk> sorry.

Yes.

We got a lot of we've got a lot more work to do Greg but.

But I feel really good when you talk about the things I've reiterated in terms of.

Safety integrity reliability and profitability I feel very very good on that we've got more to do but I think we have a business plan that we'll be talking about in the not too distant future that has continuous improvement about it.

As I sit here seven months in I feel better than I did in the first month.

Okay, no thanks for that and I'm going to completely shift gears, maybe and ask.

Peter another questions, but as it relates to Fort Hills, then could you give us an update on just how that mine remediation plan is unfolding or are you seeing the things you want to see right now and so on and what can we expect.

I will turn it over to Peter we were talking about this yesterday go ahead, Peter Thanks, Rich and thanks, Greg Yes, actually we're really pleased with the performance at Fort Hills year to date.

Rick stated in his comments some of the risks that are manifesting themselves in earlier years around water seeps pit wall instability or risk mitigation activities have been entirely successful we haven't seen any of that show up in our operations. So far year to date. So I'm really pleased about that we've been able to reestablish a healthy mind inventories.

Yes.

So far year to date, we are bang on our production plan and expectations. In addition to executing the first five year turnaround on time and on budget, So really happy with that.

Just a reminder, that we are in the first year of our three year.

Planned two to reset the Fort Hills operation.

The first couple of years do entail higher costs on lower production, but we're ultimately driving to those higher run rates run rates down the road. So I think to sum it all up I'm really happy with Fort Hills, but we've still got some work ahead of us to get to where we wanted to be.

Understood Thanks very much.

Thank you one moment our next question.

Yes.

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

Good morning, and thanks for taking my question.

My first one going forward long on that second question for Greg. So as you are about to close the Port Hills consolidation. Later. This month can you maybe highlight or you can provide some examples of how owning the entire asset both improved logistics within the facility and the asset base as well as more broadly with respect to your oil.

<unk> operations.

Sure.

I'll make a couple of comments and then Peter wants to add onto it I think one of the things. We now have such a concentration of assets in the mining world things that sounds fairly simple, but like fleet deployment, we have a higher percentage of smaller leased trucks at Fort Hills and I described.

In my comments kind of the strategy of fewer bigger so our ability to optimize things as simple as where heavy equipment goes is an opportunity for improvement the ability to make decisions faster and more effectively diverting Fort hills to the upgrader is to get the uplift that comes with a PFS.

On the processing. So I think it allows us to do things faster and think of it in more of a holistic oil sands front, Peter would you add anything you'd add to that I think I'd just reinforce rich I mean, the production optimization opportunities are significant I think you've seen us do that over certainly over the last year.

<unk> and our ability to keep those upgrades fall and have really high utilized ratios upgrader is really enabled by the interconnectivity.

Of our Richmond, producing assets and I think with a 100% ownership of Fort Hills at only enables that further and we see.

A beneficial yield uplift through the upgrader, so as a result of running that PFS.

PFT through them.

Great I appreciate that color and context my second question.

Maybe shifting gears towards the downstream assets.

With respect to Q3 results you guys quite a strong downstream.

Operating margin there as we look forward through to the end of the year can you remind us about a.

The flexibility that you have in terms of.

Dennis.

On our end it cut out I don't know if you can hear us, but will your ending with the flexibility we have and it went silent.

Yes, Dennis disconnected his line.

Okay. Operator, once you move to the next question. Please.

Our next question will come from Neil Mehta.

With Goldman Sachs. Your line is open.

Yes, maybe outside of buildup with Dennis.

Refining just curious on the team's view of the setup here in the near term grid downstream operations will get this big bifurcation between distillate and gasoline are you guys able to run and capture the stronger diesel margins and then as it relates to WCS.

What do you think is going on there and what are you hearing on Pms.

In the meantime.

Are you able to keep the business relatively neutral from a sensitivity standpoint. Thank you.

Dave why don't you take the kind of the downstream marketing standpoint, and then when we get to the.

WCS I'll ask Chris to comment on that it sounds good yeah. Thanks for the question the.

In the downstream for Suncor, we're a little less exposed to <unk> or to lower gasoline cracks than maybe our competition is.

Pretty low <unk> across our refining network with hydrocracking technology at all of our refineries really helps us with our gasoline to distillate around we've got about a one to one <unk>, which is much lower than the competition.

The.

The production of diesel from the Upgrader and it takes it to about one <unk> eight which is much lower than the competition. So we are significantly less exposed.

To lower gasoline cracks than many others that being said, we certainly have seen the gasoline market drop we expect to continue to be able to run full through the through the fourth quarter.

Running crude to make high value diesel and making sure the gasoline gets cleared but we see a good strong fourth quarter ahead of us.

Great and.

Hey, Neil on your question about WCS and <unk> X I mean, obviously, we've seen the WCS heavy start to widen out quite a bit here as we head into Q4 and a lot of drivers behind that obviously refinery turnarounds production out of the basin as well as we go and as you probably know as you go into the winter season, just that diluent race.

<unk> had an impact on that light heavy desk. So it's got some seasonality in it but we do see when <unk> comes on it will obviously be constructive to narrow in that light heavy deaf and right. Now every indication is that line that's going to be in operation towards the end of Q2 or early Q cute or sorry at the end of Q1 or early <unk>.

Q2 of next year, they are really literally down to the last few kilometers of pipe.

And they've got the latest approval just reroute I think it was about one five kilometers that they needed to deal with so they've made great progress on the project its 97% complete.

So the finish lines in sight for us wed expect the call for line fill to be coming here in Q4 that that line go will start in Q1 of next year and as I said I think it's going to be quite constructive we would expect light heavy deaths theres always going to be some seasonality and some things which affected but <unk> is going to I think.

But put that light heavy dip more towards the mid teens as an average and really it's going to be both less volatility in it.

Okay. That's great color and then follow up is on 'twenty four Capex I think you gave us a lot of it now gets around it.

But as we think about building to the 'twenty four capex number any early thoughts.

That you can provide.

How should trucks be a consideration in that in that estimate.

Yes.

We will be coming out here shortly in the next few weeks I guess it is something like this with our guidance and Troy has been sharing with me kind of what folks consensus isn't I would say that I don't think there'll be any surprise it will be a bit bigger than this year as we bring about some of these structural improvements driven by particularly mining and then.

Of course, the other component part of it is the incremental ownership that goes with Fort Hills, but I think if you. If you kind of think about in terms of where we are this year and add incremental for those two things. It gets you right in the range of what you can expect and the other thing I'd just comment on the trucks itself, we're really looking at.

Any incremental spend in terms of its payout period and these trucks the displacing two for one and all the efficiency go with it they are a very rapid pay out there independent of oil price and there are things that we're quite confident that we get back quite quickly so any incremental.

Quite frankly any money, we're looking at it very very closely in terms of Bang for the Bakken how quickly it provides accretive or value added, but I think in a nutshell thats kind of what you can expect when you when you see 2020 for guidance.

Thanks, Rich I appreciate it.

Okay.

Thank you.

One moment our next question.

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

Hello, Good morning, everyone. Thanks, Thanks, very much indeed, rich congratulations on the changes youre missing clearly having an impact.

But obviously you are not done yet. So my question is related to the $5 improvement and I guess you talked about about 20. This morning.

For the balance.

How much do you put down to efficiency gains what are the gating items that we should be.

Be watching to have line of sight on the timeline to achieve them.

Thanks, Doug you mentioned, the I mentioned the Buck in the above field costs that has been captured as we go into it I commented on another bump that Peter as he gets.

Bigger and fewer more efficient trucks is another bug and literally the way we are our.

Talking here and looking at it as Peter has a display or a spectrum of opportunities and we look at timing oil cost will deliver Dave is developing the same thing in the downstream and then beyond that we're looking at corporate and other.

Whether thats further efficiencies and we know to get you referenced five bucks is that kind of initial target we know to get that our inventory list has to be much bigger than that because some things won't happen they won't happen on the timeline, but.

But I think this the how youre hearing us talk about the improvements in the dollar per barrel terms kind of get used to that because that's the way we're going to be gone for a while and of course that comes from cutting cost spending less sustaining capital increasing volumes increasing margins, there's a lot of levers to achieve that.

But.

But it's really it's the way we're looking at almost all aspects of our business now.

I appreciate that and I don't want Mr. Ken as a second question, but.

<unk> you could give us some idea on your latest thoughts on when you will come to market with your strategy plan that would be helpful to put our diaries.

My My second question is actually on your guidance.

Obviously Fort Hills has not closed yet, but you left the full year unchanged and.

Leaves you with quite a big ask for the fourth quarter to achieve the 740 770 range for oil sands, but for upstream other can you.

Can you give us an idea of what the stair steps are to get there as you did not change the guidance for the year.

Sure.

And I've said, we're going to be at.

At or around the low end of that range. So the 770 767 to 70 of those numbers aren't going to happen, but as we look at completing the third quarter.

All the big work's behind US all of the operations are up and running.

No maintenance work planned you've commented on total of course, we had total in our original guidance.

With the Tech deal, we didn't get as much of it now.

Later this year as we completed kind of come back. So there is a part of it with closing the deal that that will be additive for the last quarter and the rest of it is just it's running full out and running efficient efficiently through the rest of the quarter I do all the math I know exactly what it takes literally from.

Not only the quarter, but from here on.

And we continue to believe it's achievable.

That's exactly what we have everyone in the organization focused on.

Great stuff I appreciate the answer rich.

Your strategy David I appreciate any update on that thank you.

Thanks, just maybe comment on that quickly Doug we're looking at we're looking at right now kind of went in that went in the new year, we come out with.

Investor day, or whatever you want to call it.

Getting a lot more granularity on the strategy.

Sharon as we go along kind of attendance of it and the actions, but we'll add as we get into the new year, we'll put it all out there in terms of exactly what we're trying to achieve and when.

Thank you one moment our next question.

And that will come from the line of mono wholesale with TD. Your line is open.

Thanks, and good morning, everyone I'll start with a question on shareholder capital returns it looks like Youre tracking.

Well ahead of your 50% target for the year. So is it fair to assume Q4, it could be more of a focused on debt reduction or with the the pullback in oil and crack spreads and even your share price is it possible that you get after the need to buyback more aggressively here.

And land above your target for the year.

Yes, Chris won't comment on that thanks, Rich Hey, Menno. Thanks for that question Youre right in that when you look at any shareholder returns and particularly the buyback.

Large numbers in the early part of the year.

We are we're managing towards that allocation target that we have out there of 50 50.

That doesn't mean that we're going to dial back further on the buyback that you've seen in the third quarter, but certainly we want to make sure that we're balancing against that capital allocation in the fourth quarter. We are probably going to end the year, probably a little a little more balanced towards share buybacks versus debt reduction quite frankly, it will probably be closer to <unk>.

<unk> 40 on an annual basis, but with the transaction in the quarter and the other drivers we're looking to make sure that we're in the zone of that capital allocation is we are managing the balance sheet to the exited the year and then we're going to continue with that calculated allocation framework into 2024.

Perfect. Thanks, Chris and then my my follow up is on the 20% contractor.

<unk> reduction can you just confirm that 20% is still the right number longer term or should we ultimately see something in excess of that.

With the understanding that this was only completed recently I believe what are the sort of positives and negatives that have come out of this in terms of impact to day to day execution.

Peter you want to comment on that yes. So thanks Menno, we did achieve that earlier this year I continue to believe that there are more efficiencies.

And our contractor base across the breadth of our operations.

We've taken kind of a first step we've taken a lot of the waste out of the system. So far and now we're looking at more sophisticated examples of.

Integrated planning and scheduling.

And kind of maintenance scheduling activities to drive further efficiencies. So do I think theres more yes, absolutely, but this stuff is a bit more difficult to go after than the kind of the first tranche, but that is something that we keep top of mind in our operations each and every day.

It's easily measurable and it's something that my team is focused on quite heavily to drive further cost efficiencies over and above what we've already done so far and if I can.

This rich if I could add to Peter's comment it kind of gets into the Fort Hills again.

Operator ship and a 100% ownership or are more immediate control are things as it looks as we look at contractors, whether it's the contract or a staged deployment just like equipment, I mentioned thinning and SMS strategic contractors for us we're able to look at things.

Scale.

The efficiency improvements can come in some pretty material numbers, and we're able to do that because of the full scale and scope of our operation and that we indeed operate them and I think when you start putting all that together, that's where you start to get kind of a snowball effect on whats possible.

I appreciate the thoughts I'll turn it back.

Thank you one moment for our next question.

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

Yes, thanks, good morning.

Maybe just to follow back up to make sure I understand the guidance items for the full year production and what's <unk>.

Included in that so at the time you came out early May Fort Hills consolidation was anticipated, but now it's a 100%. So maybe how does that compare and is any of this has to do with the accounting convention meeting that the close will be back dated April one or.

Does it matter when the transaction closes this quarter.

Hey, Roger It's Chris Let me, let me just it's not about the April one.

Effective close date, so when we set the guidance at the beginning of the year, we had an assumption on the tech the tech transaction, which we completed and we've built that into guidance.

You May you may recall that total actually exercise, it's rover and so we ended up actually having less production than what we had anticipated in our guidance, but we didn't reset our guidance and so what rich was referring to is obviously now we're completing the transaction for <unk>.

<unk>, which includes the.

The volumes are the interest that they took from tech and so we'll be we'll be including that.

The newly acquired working interest in total with the balance of the quarter, which we expect that to close here later in November.

And so when you look at it it's a wash at the end of the day and so that was just that point.

And so when we stack that up and then look at our operations just to underline what rich was saying.

It's all hands on deck, we got a big quarter in front of us, but we've got the assets available.

Peter and the team are.

And hard we like what we see from the asset so.

We're standing at the bar.

The bottom end of the guidance, but we believe we'll be at or near it.

I'll just add to that it's we've talked about Fort Hills now being a wash the profile is different from the time of the year to the end, but the really if you dig into it there's some puts and takes.

Strong in situ performance others, the real big difference and all of that is the absence of turnover for the year.

There are some other things that are generally kind of losing a small ups and downs, but terra Nova is that difference between being caught up.

Middle of guidance and at the lower end of guidance.

Okay no that helps.

And then back to your comments about the performance on the turnarounds this quarter coming in on budget.

But wondering getting better.

Mike kind of broader question is does the budget get tougher going forward I mean is that part of the process here of becoming a call. It an upper quartile or upper quintile performer on turnarounds that it is.

Not simply hit your budget, but you actually need to refine the budget down in terms of how turnarounds are executed.

Yes, absolutely and what what I'm looking at Dave and Shelly here, who are two executive leaves on this across upstream and downstream and kind of the first point I made it and I said it kind of quickly is get a level of predictability and stability relative to our own targets the cost the sketch.

<unk> the work we have to get executed that establishes just confidence.

Improving the performance and moving from a a third quartile third or fourth quartile, depending on whether youre looking at cost schedule, and then moving that up higher into a second quartile or above it. It does deal with the processes, our risk based work selection and the execution.

So stability with where we are now our own expectations and then concerted improvement in areas, where we know we have a gap and I think certainly won't declare a victory, but what the second and third quarter have shown is we're getting better at predictability and actually.

Delivering on the commitments we've established for ourselves now it's time to get better Shelley, Dave anything you'd add to that.

I think you said it well rich and maybe the only thing I would add is just an example of how we're going to get better using benchmark.

We do benchmark, our turnarounds, but often it's later in the process. When the scope is already defined we wanted to do is go early as we are planning the turnarounds at the very early stages.

Put our benchmarks in place challenge the organization to deliver and John has just have more challenging targets.

Put that in early and then plan the turnaround on that basis, and I think with that change alone we're going to see some significant improvement in our turnaround and so I don't have numbers to share on it but how does it look like when we get there.

We're safer we have a shorter duration because of the selection of the work and we have lower cost and then when you do that then you have more days.

Back up and running in production. So this is a this is a huge opportunity for us and as I said in my comments that to say.

<unk> focus on this that would be a big understatement.

No I appreciate that clarity and look forward to seeing the execution on that front. Thank you.

Thank you Thomas our next question.

Okay.

Our next question will come from the line of John <unk> with Jpmorgan. Your line is open.

Hi, good morning, Thanks for taking my question.

So my first question I think I'm Gonna borrow Neil's question on 'twenty, four Capex and just make it a production question. So.

Maybe you can go through some of the moving pieces on the upstream production side thinking about bridging into next year. There is there is obviously the increased working interest in Fort Hills, they've got the loss of U K. The turnover restart just a lot of moving pieces and they're not really sure how to think about the maintenance side. So maybe you could help us frame how to think about production for next year.

Sure it.

And its comment on Trulia is looking at me like.

Let the horse out of the barn earliest comment, but but take where we were we project we're going to end up this year in the 740 range and the same asset base turnover wasn't part of it flash forward to next year, we have an incremental ownership at Fort Hills.

And a.

Modest growth overall of that Fort Hills, and then we've got Terra Nova back on four we expect to be essentially the full year, we will ramp up as we bring on well centers a little bit in the year, but we have that on so if you take if you take it add those three numbers together, you're not far off from what we.

Be expecting.

2024 to look at look like.

Great. Thank you and then just maybe if we could have an update on when.

When do you expect to get to the 75% level on capital allocation.

The visibility now for what Youre paying for Fort Hills, and you've given some guidance on year end net debt. So.

Any view on the timing there.

Yes, Thanks, John It's Chris here, So as I mentioned in my comments, we expect to exit the year somewhere between $13 five in 2014 because of the transaction.

And depending on commodity price.

Expect $12 billion to $12 billion net debt to be somewhere in the back end of 2024, I mean, it depends obviously on your your view of the price deck going into 2024, we do expect a.

Our strong year on production next year and higher volumes as rich just said as well as we're driving the lower cost structure. So that's certainly going to help accelerate that but that's kind of the notional time and you should think about.

Great. Thanks, Chris.

Yep.

Thank you that concludes our Q&A session for today I would now like to hand, the call over to Mr. Rich <unk> for any closing remarks.

Okay. Thank you Okay first of all folks you've got a blame what I say here on Greg Pardy.

He started it out with a baseball question.

The two questions I get asked the most are can suncor turn it around.

So how fast.

We all know by now on our sports fans love teamwork strategy competition, and winning eight days ago, a team called the Texas Rangers won the World series Best team in baseball two years ago. They were last in their division. They were one of the worst teams in baseball now they are the world Champs how did they do it same game big turn.

Around well, we got a new coach.

A little bit of gray hair, there are lots of experienced kind of a no nonsense kind of guy. They got a few new players. They took some of the current players and put them on the field, where they could succeed the most what else. They created intense focus on the goal of winning a culture of winning and endless focus on the fundamentals what is it.

Any of this has to do with Suncor.

Maybe nothing but to our investors who have stayed spans a tiered us on held onto their season tickets. Thank you for your confidence and your patients. Our goal is to reward you with the trophy.

That's all we've got for today. This team is to get back on the field.

Thank you. Thank you everyone for joining our call. This morning, if you have any follow up questions. Please don't hesitate to reach out to our team.

Thank you. This concludes today's program.

You all for participating you may now disconnect.

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

Messages advising your hand is rain to withdraw your question Press Star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your host Mr. Choi Little Vice President of Investor Relations. Please go ahead.

Thank you operator and good morning.

Welcome to Suncor Energy's third 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 third quarter earnings release as well as in our current annual information form both 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 third quarter earnings release.

We will start with comments from rich Kruger, President and Chief Executive Officer, followed by Chris Smith, Suncorp Chief Financial Officer.

Also on the call are three of our senior operating leaders theatres that body executive Vice President oil Sands <unk>.

<unk> Executive Vice President downstream and Shelly Powell Senior Vice President operational improvement and support services. Following the formal remarks, we will open up the call to questions now I'll hand, it over to rich to share his comments, thanks, Mike third quarter characterize it as strong results across our business.

Safety upstream downstream turnarounds in particular Fort Hills acquisition, and some organizational improvements I'll comment I'll, let me start with safety core value number one priority.

Thank you our people employees and contractors alike.

Recognizing that safety is a never ending journey.

He used with and proud of our team year on year recordable injuries are down 10% lost time incidents are down 33% and most importantly, we've had zero life threatening or life altering injuries in 2023.

We've had improvement in each and every business segment and that said I would like to call out our downstream our downstream had zero recordable injuries in the third quarter zero, the first quarter injury free in our company's history.

It is a very focused effort involving leadership training procedures workforce engagement and technology, a few highlights on the leadership and training front implementing human and organizational performance leader.

Leadership training, which is fundamentally about a cultural change we're on target for all suncor leaders to be trained on hop by year end 2023 comment on procedures in the in mining in the third quarter. We completed 4000 critical control Verifications So big.

Number the important number is 20% higher than the second quarter and so the significance of that is that we are engaging our workforce to focus and safely execute our higher risk activities in technology I will just comment once again and mining where we are installing an employee.

Collision awareness and fatigue management systems, we now have collision awareness equipment installed on over 1000 pieces of mobile equipment.

With Fort Hills.

On October three we announced a revised deal to acquire total Canada or one 406 8 billion. This is an improved deal versus the original deal specifically, we no longer have a contingent payment provision in the acquisition similar headline valuation to the earlier tech deal.

But we've got additional benefits commercial commercial patience and persistence for key here and we're pleased with the deal we're on track to close the transaction later this month.

Addresses long term bitumen supply uncertainty associated with our upgraded sales our upgrader is for the long term.

But also enables additional value creation value creation through regional synergies with mobile equipment deployment value creation through directing higher yield PFT from Fort Hills to our upgrader.

A number of incentives and as I said, we're quite pleased with the deal.

<unk> with Fort Hills from an operational perspective, we executed our first five year plus full plant turnaround during the third quarter safely on budget and on schedule production, we're bang on expectations as per our three year improvement plan.

We're continuing to progress mining through the centre pit, we're starting north pit opening cuts.

Of note. It is success on past lessons learned zero water or zero issues with water seeps, our slope instability and now with 100% ownership and full control.

We will be striving driving for further and faster improvements.

On the second quarter call I highlighted several areas that were considered high priority or improvement specifically turnaround performance signing fleet management and above field cost, let me start with turnaround performance. As a reminder, we complete large annual turnarounds at most all of our upstream and downstream.

Sites and spend on the order of $1 $3 billion per year or about 20% of our capex on turnarounds I've shared before that we benchmark using Solomon and other sources as below average in performance cost schedule volumetric volumetric impact so to.

Five our efforts as an intensified focus I can assure you that would be an understatement. So how do we do in the third quarter will base plant.

Youtube Youtube greater our Youtube massive turnaround nearly 1 million hours 500, plus million 55 days, we completed last week as per plan.

<unk> Fort Hills, our first full plant turnaround $60 million 25 days completed in the third quarter again as per plan Syncrude, we had a large turnaround in the second quarter that was completed per plan and we had a smaller third quarter turnaround completed early and under budget.

Montreal, and Edmonton refineries, we had events that overlaps between the third and the startup of the first quarter smaller in scope also completed successfully my message in all of this is we have more work to do certainly to become best in class, but first we need to improve our performance relative to our <unk>.

Internal cost and schedule commitments.

As we drive further and we look at our second third quarter performance I would say we're on track here ultimately our vision is that turnaround performance should be a differentiating core competency for the company.

Let me move on to mining fleet performance for context, the cost of physically moving or from the face of the mine to a crusher for the startup extraction.

Our single highest cost component in the production of bitumen today, we move about one 3 billion tons of Earth per year to support production and we've got a competitive cost gap versus best in class.

Comprehensive efforts to lower our cost per ton.

Winning formula you.

Fewer trucks bigger trucks more efficient trucks and of course companion or compatible shovels, that's our mining improvement strategy in a nutshell sell this year and throughout 2024, we will add via combination of perch purchase and lease 55 Ultra class.

400 tonne trucks to our total fleet displacing nearly twice as many smaller third party less efficient higher cost vehicles.

Each truck will be pre equipped for ultimate driverless autonomous operation.

Cost for for these acquisitions and leases are in our guidance for this year and as well as our guidance that we'll issue shortly for 2020 for once in place. This action alone is expected to lower our overall corporate breakeven by $1 a barrel U S.

In addition in the third quarter, we executed a new long term strategic agreement with fitting our caterpillar equipment provider to deliver value to a win win framework associated with equipment and parts acquisition maintenance practices and fleet reliability.

We're also working with our equally important strategic partner SMS equipment Komatsu on improvements, including finalizing the purchase of the world's largest hydraulic shovel in production today. The PC 9000 series for mid 2020 for delivery at Fort Hills Lastly in mining.

I'll comment on autonomous operations today, we have 31 trucks operating at base plant autonomously by second quarter 2024, it will be 45% and by year end 'twenty four it will be 91, if our data is correct. This will be the largest single mine fleet of autonomous ultra.

Class trucks globally stay tuned for more our plans for materially improving mining cost competitiveness is tangible focused on safety lean efficiency.

We composition and overall reliability.

Let me continue with above field cost organizational effectiveness during our second quarter call. We discussed plans to reduce above field costs by $400 million a year via a workforce reduction of 500 people to be completed by year end 2023, and you'll recall in the second quarter.

We took a onetime charge of $275 million our approach was 100% internal.

Consultants advisors focused on eliminating low value are unaffordable work today I can share that this effort has been completed two months ahead of schedule annual cost reductions starting in 2024, a $450 million will be achieved 12% or 50 million.

Above target in part due to additional reductions of contingent workers or above field contractors. The impact of this action equates to $1 20 per barrel.

Reduction in our corporate breakeven as the process unfolded. It certainly hasnt been easy on our organization needed to those that left the company nor those that stayed however difficult we recognize it was necessary for our competitiveness competitiveness now we look ahead, coupled with executive leadership.

Team changes other structural changes we are a simpler more focused organization.

<unk> to compete and win and Thats exactly what we intended to do.

<unk> during our second quarter call I mentioned that although tracking at or near the bottom end of guidance. We were focused on meeting our targets and delivering on commitments. I also said that given the material fall turnaround impact fall turnarounds have it made sense to update if necessary each year after the.

40 of our major maintenance work was complete with that work now behind us and executed well, we're maintaining our guidance unchanged with full year upfront upstream production tracking at or near the 740000 barrel a day level.

Final comments before I turn it over to Chris I suspect you've noticed a few references today to turn.

In terms of <unk>.

For barrel this reflects a new and evolving vocabulary within the company thinking about and communicating the impact of our actions plans and improvements in unit per barrel terms. In addition, a subset of a similarly talk about the impact in per share terms, our vocabulary is part of creating clarity and focus.

Developing a results oriented high performance culture with that I'll turn it over to Chris great. Thanks, Rich and good morning, everyone.

To start with I'd like to make a few comments on the business environment that we saw in the third quarter was a very constructive on with both crude prices and refining crack strengthening versus Q2 on the back of healthy supply demand fundamentals we.

We saw <unk> averaged at about USD $82, a barrel in the quarter and the light heavy differential narrowed versus Q2, averaging about $13 a barrel as.

As well, we continue to see synthetic crude oil trade at a premium of about $3 a barrel to WTO.

On the refining side, while we saw weakening gasoline cracks in the back half of the quarter. It was a good quarter for refining margins and particularly for distillate cracks and our 5221 refining index was $2 a barrel stronger than Q2.

Finally, natural gas, which is a key input cost of our operations remained low with echo averaging $2 50 at G J in the quarter.

While Alberta power prices have remained robust.

Now with respect to our financial performance with this constructive business environment.

And Suncor delivered a strong financial quarter.

$3 6 billion and adjusted funds from operations or $2 80 per share and adjusted operating earnings of $2 billion.

Or $1 52, a share.

During the quarter. We also returned nearly $1 billion to shareholders in dividends and share repurchases.

And since the beginning of the year, we bought back over 3% of our common shares outstanding.

At December 31, 2022.

Also during the quarter, we reduced our net debt by $1 4 billion with net debt at 13 billion as at the end of the quarter.

Turning now to operations, we saw solid operations in both our upstream and downstream segments.

Our upstream delivered 691000 barrels per day of total production in the quarter oil Sands had strong operations with 646000 barrels a day of production and delivering $2 9 billion of adjusted funds from operations with average price realizations of $106, a barrel Canadian or 97% of <unk>.

UTI.

Now rich has already talked about the very good turnaround performance in the quarter. So I am not going to repeat that but I would like to highlight a few things.

Outside of planned maintenance activities in the quarter, our upgrader has operated at over 100% utilization.

And we continued to see strong institute production, including 99% utilization at fire bag.

As rich mentioned, the Fort Hills asset came out of its five year full plant turnaround with strong operations and delivered as expected with high asset utilization.

Our E&P business segment generated $372 million in <unk> in the quarter with production of 44000 barrels per day, and average price realizations of $121, a barrel Canadian or 104% of Brent.

The Terra Nova <unk> completed its life extension work in the quarter and has now returned to station, where it has commissioning and startup activities well underway and we expect it to begin production later in Q4 ramping up for the remainder of the year and into 2024.

As for our downstream segment it had its strongest financial quarter of the year, so far generating $1 5 billion.

And adjusted funds from operations on a FIFO basis.

We saw very strong performance across the entire refining network with average refinery utilization rates of 99% post the Q2 turnaround season.

And while retail and branded wholesale sales were impacted by the cyber incident earlier in the quarter overall refined product sales were solid at 574000 barrels per day, and we saw a margin capture averaging 88% similar to the same quarter last year.

With respect to overall costs. Despite inflationary pressures this year, we continue to see progress on reducing costs.

And along with the benefit of low natural gas prices are trending toward the bottom end of our oil sands cash cost per barrel guidance ranges for the year.

As for Capex. It was $1 5 billion in the quarter whats been primarily focused on plant turnaround and maintenance activities and mining tailings development, including them.

Lake West Mine extension project at Syncrude.

As well we are completing the Terra Nova asset life extension project that I mentioned earlier, while also beginning of investment on West White Rose.

And despite inflationary pressures this year and the extension of the turnover work and the unplanned repairs, which we had a commerce city earlier. This year, we expect to remain within our capital guidance range.

And though we will be towards the top end.

As mentioned, our net debt was $13 billion at the end of the quarter.

With the anticipated close of the total energy, Canada acquisition, which rich spoke about earlier in his comments, we expect our net debt to end the year between $13 five in 2000 14 billion depending on commodity prices.

As mentioned, we've delivered nearly $1 billion in shareholder returns in this quarter.

We remain committed to our capital allocation framework delivering value to our shareholders through competitive dividends and share buybacks, while maintaining a strong balance sheet.

Now before I hand, it back to Troy just want to make a few comments on some course progress on our de carbonization plans in the Oilsands pathways Alliance to net zero.

We remain focused on delivering against our 2030 emission reduction goals and our longer term objective of net zero by 2050.

A prime example of that is the progress we're making on our base plant Cogeneration project, which is on track to be complete in late 2024.

When operational that project will reduce our direct <unk> emissions by about one mega ton a year, while also providing lower emissions intensity power to the Alberta grid.

A key part of our Decarbonization plan is our work with our industry partners and the pathways Alliance to net zero, which is advancing an industry, leading carbon capture and sequestration project.

As we continue to advance early engineering work on the project. We are working closely with both the Canadian Federal and Alberta provincial governments to get the necessary fiscal and regulatory frameworks in place to support it and.

And we look forward to being in a position to advance. The next phase of the project in 2024, which would include ordering materials for the carbon pipeline.

And with that I will now turn it back over to you Troy.

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

Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question Press Star 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. Thanks. Good morning, Thanks for the rundown rich what inning.

But the turnaround do you think suncor is in at this juncture and then what are some of the next steps youre going to be taking in the next I don't know 612 to 18 months.

Uh huh.

We.

Greg I think we've got the right team we've got the right leadership, we know this game.

Yes.

I think we're.

I think we're about <unk>.

We're in the kitchen on the <unk> sorry about that.

Yes.

We got a lot of we've got a lot more work to do Greg but.

But I feel really good when you talk about the things I've reiterated in terms of.

Safety integrity reliability and profitability I feel very very good on that we've got more to do but I think we have a business plan that we'll be talking about in the not too distant future that has continuous improvement about it.

As I sit here seven months in I feel better than I did in the first month.

Okay, no thanks for that and I'm going to completely shift gears, maybe and ask.

Peter another questions, but as it relates to Fort Hills, then could you give us an update on just how that mine remediation plan is unfolding or are you seeing the things you want to see right now and so on and what can we expect.

Now I will turn it over to Peter we were talking about this yesterday go ahead, Peter Thanks, Rich and thanks, Greg Yes, actually we're really pleased with the performance at Fort Hills year to date.

Rich stated in his comments some of the risks that are manifesting themselves in earlier years around water seeps pit wall stability, our risk mitigation activities have been entirely successful we haven't seen any of that show up in our operations. So far year to date. So I'm really pleased about that we've been able to reestablish a healthy mind inventories.

Yes.

So far year to date, we are bang on our production plan and expectations. In addition to executing the first five year turnaround on time and on budget, So really happy with that.

Just a reminder, that we are in the first year of our three year.

Plan to reset the Fort Hills operation.

The first couple of years do entail higher costs on lower production, but we're ultimately driving to those higher run rates run rates down the road. So I think to sum it all up I'm really happy with Fort Hills, but we've still got some work ahead of us to get to where we wanted to be.

Understood Thanks very much.

Thank you one moment our next question.

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

Good morning, and thanks for taking my questions.

My first one going forward long on that second question for Greg.

You're about to close the Port Hills consolidation later this month can you maybe highlight or you can provide some examples of how owning the entire asset both improved logistics within the facility and the asset base as well as more broadly with respect to your oil sands operations.

Sure.

I'll make a couple of comments and then Peter wants to add on to it I think one of the things. We now have such a concentration of assets in the mining world things that sound fairly simple, but like fleet deployment, we have a higher percentage of smaller leased trucks at Fort Hills and I described.

In my comments kind of the strategy of fewer bigger so our ability to optimize things as simple as where heavy equipment goes is an opportunity for improvement the ability to make decisions faster and more effectively diverting Fort hills to the upgrader is to get the uplift that comes with a PFS.

On the processing. So I think it allows us to do things faster and think of it in more of a holistic oil sands front, Peter would you add anything you'd add to that I think I'd just reinforce rich I mean, the production optimization opportunities are significant I think you've seen us do that over certainly over the last year.

<unk> and our ability to keep those upgrades fall and have really high Utilizations upgrader is really enabled by the interconnectivity.

It's been producing assets and I think with 100% ownership of Fort Hills at only enables that further and we see.

Quite a beneficial yield uplift through the upgrader, so as a result of running that.

<unk>.

Great I appreciate that color and context my second question is.

Maybe shifting gears toward.

The downstream assets.

With respect to Q3 results you guys quite a strong downstream.

Operating margin there as we look forward through to the end of the year can you remind us about a.

The flexibility that you have in terms of.

Dennis.

On our end it cut out I don't know if you can hear us, but will your ending with the flexibility we have but then it went silent.

Yes, Dennis disconnected his line.

Okay, operator wanting to move to the next question. Please.

Our next question will come from Neil Mehta.

With Goldman Sachs. Your line is open.

Yes, maybe I'll try to buildup as Dennis.

Refining just.

Just curious on the team's view of the setup here in the near term grid downstream operations, who get this big bifurcation between distillate and gasoline are you guys able to run and capture the stronger diesel margins and then as it relates to WCS.

Things going on there and what are you hearing on Pms.

In the meantime.

Are you able to keep the business relatively neutral from a sensitivity standpoint. Thank you.

Dave why don't you take the kind of a downstream marketing standpoint, and then when we get to the WCS.

WCS I'll ask Chris to comment on that it sounds good yeah. Thanks for the question.

In the downstream for Suncor, we're a little less exposed to <unk> or to <unk>.

Lower gasoline cracks than maybe our competition is.

Pretty low <unk> across our refining network with hydrocracking technology at all of our refineries really helps us with our gasoline to distillate around we've got about a one to one <unk>, which is much lower than the competition.

The.

The production of diesel from the Upgrader and it takes it to about <unk>, eight which is much lower than the competition. So we're significantly less exposed to.

To lower gasoline cracks than many others that being said, we certainly have seen the gasoline market drop we expect to continue to be able to run full through the through the fourth quarter.

Brian crude to make high value diesel and making sure the gasoline gets cleared but we see a good strong fourth quarter ahead of us.

And.

Hey, Neil on your question about WCS and <unk> I mean, obviously, we've seen the WCS that light heavy start to widen out quite a bit here as we're into Q4 and a lot of drivers behind that.

Obviously refinery turnarounds production out of the basin as well as we go and as you probably know as you go into the winter season, just that diluent ratio.

<unk> had an impact on that light heavy desk. So it's got some seasonality in it but we do see when <unk> comes on it will obviously be constructive to narrow in that light heavy deaf and right. Now every indication is that line is going to be in operation towards the end of Q2 or early Q acute or sorry at the end of Q1 or early Q2 of next year.

<unk> they are really literally down to the last few kilometers of pipe.

And they've got the latest approval just rewrote I think it was about one five kilometers that they needed to deal with so they've made great progress on the project its 97% complete.

So the finish lines in sight for us we didn't get back the call for line fill to be coming here in Q4 that that line fill will start in Q1 of next year and as I said I think it's going to be quite constructive we would expect light heavy deaths theres always going to be some seasonality and some things which affected but <unk> is going to I think put.

Put that light heavy dip more toward the mid teens as an average and really it's going to be both less volatility.

Okay. That's great color and then follow up is on 'twenty four Capex I think you gave us a lot of it now gets around it.

But as we think about building to the 'twenty four capex number any early thoughts.

That you can provide.

How should trucks be a consideration in that in that.

Estimate.

Yes.

<unk> will be coming out here shortly in the next few weeks I guess it is something like this with our guidance and Troy has been sharing with me kind of what folks consensus isn't I would say that I don't think there'll be any surprise it will be a bit bigger than this year as we bring about some of these structural improvements driven by particularly mining.

And then of course, the other component part of it is the incremental ownership that goes with Fort Hills, but I think if you. If you kind of think about in terms of where we are this year and add incremental for those two things.

Gets you right in the range of what you can expect and the other thing I'd just comment on the trucks itself, we're really looking at.

Any incremental spend in terms of its payout period and these trucks the displacing two for one and all the efficiency go with it they are a very rapid pay out there independent of oil price and there are things that we're quite confident that we get back quite quickly so any incremental.

Quite frankly any money, we're looking at it very very closely in terms of Bang for the Bakken how quick it provides accretive or value added, but I think in a nutshell thats kind of what you can expect when you when you see 2020 for guidance.

Thanks, Rich I appreciate it.

Okay.

Thank you.

Our next question.

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

Hello, Good morning, everyone. Thanks, Thanks, very much indeed, rich congratulations on the changes youre missing clearly having an impact.

But obviously you are not done yet. So my question is related to the $5 improvement and I guess you talked about about 20. This morning.

For the balance.

How much do you put down to efficiency gains what are the gating items that we should be.

Be watching to have line of sight on the timeline to achieve them.

Thanks, Doug you mentioned, the I mentioned, the Bakken the above field costs that has been captured as we go into it I commented on another bump that Peter as he gets.

Bigger and fewer more efficient trucks is another bug and literally the way we are our.

Talking here and looking at it as Peter has a display or a spectrum of opportunities and we look at timing what it'll cost will deliver Dave is developing the same thing in the downstream and then beyond that we're looking at corporate.

Whether thats further efficiencies and we know to get you referenced five bucks is that kind of initial target we know to get that our inventory list has to be much bigger than that because some things won't happen they won't happen on the timeline, but.

But I think this the how youre hearing us talk about the improvements in the dollar per barrel terms kind of get used to that because that's the way we're going to be gone for a while and of course that comes from cutting cost spending less sustaining capital increasing volumes increasing margins, there's a lot of levers to achieve that.

But.

But it's really it's the way we're looking at almost all aspects of our business now.

I appreciate that and I don't want Mr. Ken as a second question, but.

Perhaps you could give us some idea on your latest thoughts on when you will come to market with your strategy plan that would be helpful to put our diaries.

My My second question is actually on your guidance.

Obviously Fort Hills has not closed yet, but you left the full year unchanged.

Leaves you with quite a big ask for the fourth quarter to achieve the 740 770 range for oil sands, but for upstream other can you.

It gave us an idea of what the stair steps are to get there as you did not change the guidance for the year.

Sure.

And I've said, we're going to be at.

At or around the low end of that range. So the 770 767 to 70 of those numbers aren't going to happen, but as we look at completing the third quarter all of the big work's behind US all of the operations are up and running.

No maintenance work planned you've commented on total of course, we had total in our original guidance and with the Tech deal we didn't get as much of it now.

Later this year as we completed kind of come back. So there is a part of it with closing the deal that that will be additive for the last quarter and the rest of it is just it's running full out and running efficient efficiently through the rest of the quarter I do all the math I know exactly what it takes literally from <unk>.

Not only the quarter, but from here on and we continue to believe it's achievable and.

That's exactly what we have everyone in the organization focused on.

Great stuff I appreciate the answer rich.

Of your strategy, David I appreciate any update on that thank you.

Thanks.

Just maybe comment on that quickly Doug we're looking at we're looking at right now kind of went in that went in the new year, we come out with a <unk>.

Yesterday, or whatever you want to call it.

A lot more granularity on the strategy.

Sharon as we go along kind of attendance of it and the actions, but will as we get into the new year, we'll put it all out there in terms of exactly what we're trying to achieve and when.

Thank you one moment our next question.

And that will come from the line of mono wholesale with TD. Your line is open.

Thanks, and good morning, everyone I'll start with a question on shareholder capital returns it looks like Youre tracking well.

Well ahead of your 50% target for the year. So is it fair to assume Q4, it could be more focused on debt reduction or with the pullback in oil and crack spreads and given your share price is it possible that you get after the need to buyback more aggressively here.

And land above your target for the year.

Yes, Chris won't comment on that thanks, Rich Hemant Oh, thanks for that question Youre right in that when you look at any shareholder returns and particularly the buyback.

Large numbers in the early part of the year.

We are we're managing towards that allocation target that we have out there of 50 50.

That doesn't mean that we're going to dial back further on the buyback that you've seen in the third quarter, but certainly we want to make sure that we're balancing against that capital allocation in the fourth quarter. We are probably going to end the year, probably a little a little more balanced towards share buybacks versus debt reduction quite frankly, it will probably be closer to <unk>.

60, 40 on an annual basis.

With the transaction in the quarter and the other drivers we're looking to make sure that we're in the zone of that capital allocation is we're managing the balance sheet to the exit of the year and then we're going to continue with that calculated allocation framework into 2024.

Perfect. Thanks, Chris and then my follow up is on the 20% contractor.

Reduction can you just confirm that.

90% is still the right number longer term or could we ultimately see something in excess of that.

The understanding that this was only completed recently I believe what are the sort of positives and negatives that have come out of this in terms of impact to day to day execution.

Peter you want to comment on that yes. So thanks Menno, we did achieve that earlier this year I continue to believe that there are more efficiencies.

And our contractor base across the breadth of our operations I think we've taken kind of a first step we've taken a lot of the waste out of the system. So far and now we're looking at more sophisticated examples of integrated planning and scheduling.

And kind of maintenance scheduling activity to drive further efficiencies. So do I think theres more yes, absolutely, but this stuff is a bit more difficult to go after than the kind of the first tranche, but that is something that we keep top of mind in our operations each and every day.

It's easily measurable and it's something that my team is focused on quite heavily to drive further cost efficiencies over and above what we've already done so far and if I get this rich if I could add to Peter's comment it kind of gets into the Fort Hills again.

Operator ship and a 100% ownership or are more immediate control a lot of things as it looks as we look at contractors, whether it's the contract or a staged deployment just like equipment I mentioned opinion in SMS strategic contractors for us we're able to look at things.

Our scale.

The efficiency improvements can come in some pretty material numbers, and we're able to do that because of the full scale and scope of our operation and that we indeed operate them and I think when you start putting all that together, that's where you start to get kind of a snowball effect on what's possible.

I appreciate the thoughts I'll turn it back.

Thank you one moment for our next question.

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

Yes, thanks, good morning.

Maybe just to follow back up to make sure I understand the guidance items for the full year production and what's <unk>.

Included in that so at the time you came out early May Fort Hills consolidation was anticipated, but now it's 100%. So maybe how does that compare and is any of this have to do with the accounting convention.

Adding that the close will be back dated April one or.

Does it matter when the transaction closes this quarter.

Hey, Roger It's Chris Let me, let me just it's not about the April one.

Effective close date, so when we set the guidance at the beginning of the year, we hadn't assumption on the tech the tech transaction, which we completed and we've built that into guidance.

You May you may recall that total actually exercised its rover and so we ended up actually having less production than what we had anticipated in our guidance, but we didn't reset our guidance.

And so what rich was referring to is obviously now we're completing the transaction drove total which includes the.

The volumes or the interest that they took from tech and so we'll be we'll be including that.

The newly acquired working interest in total.

<unk> of the quarter, which we expect that to close here later in November.

And so when you look at it it's a wash at the end of the day and so that was just that point and so when we stack that up and then look at our operations just to underline what rich was saying.

It's all hands on deck, we got a big quarter in front of us, but we got the assets available.

Peter and the team are.

<unk> hard we like what we see from the asset so.

We're standing at the.

The bottom end of the guidance, but we believe we'll be at or near it.

I'll just add to that is we've talked about Fort Hills now being a wash the profile is different from the time of the year and but they're really if you dig into it there's some puts and takes.

Strong in situ performance others, the real big difference and all of that is the absence of turnover for the year.

There are some other things that are generally kind of losing a small ups and downs, but terra Nova is that difference between being caught up.

Middle of guidance and at the lower end of guidance.

Okay no that helps.

And then back to your comments about the performance on the turnaround this quarter coming in on budget.

But wanting to do better.

Mike kind of broader question is does the budget get tougher going forward I mean is that part of the process here of becoming a call it an upper quartile or upper quintile performer on turnarounds that.

Not simply hit your budget, but you actually need to refine the budget down in terms of how turnarounds are executed.

Yes, absolutely.

What I'm looking at Dave and Shelly here, who are two executive leads on this across upstream and downstream and kind of the first point I made it and I said it kind of quickly is get a level of predictability and stability relative to our own targets. The cost schedule. The work we have to get executed that is.

Stablish is just confidence.

Improving the performance and moving from a a.

A third quartile third or fourth quartile, depending on whether youre looking at cost schedule, and then moving that up higher into a second quartile or above it.

It does deal with the processes, our risk based work selection and the execution, so stability with where we are now our own expectations and then concerted improvement in areas, where we know we have a gap and I think certainly won't declare a victory but.

The second and third quarter have shown.

We are getting better at predictability in actually delivering on the commitments. We've established for ourselves now it's time to get better.

Shelley, Dave anything you'd add to that.

I think you said it well rich and maybe the only thing I would add is just an example of how we're going to get better using benchmark.

We do benchmark, our turnarounds, but often it's later in the process. When the scope is already defined we want to do is go early as we are.

We're planning the turnarounds in the very early stages.

Put our benchmarks in place challenged the organization to deliver and John as you just have more challenging targets.

That in early and then plan the turnaround on that basis, I think from that change alone we're going to see some significant improvement.

Turnaround.

So I don't have numbers to share on it but how does it look like when we get there.

Safer.

We have a shorter duration because of the selection of the work and we have lower cost and then when you do that then you have more days, we're back up and running in production. So this is a.

This is a huge opportunity for us and as I said in my comments that to say an acute focus on this that would be a big understatement.

No I appreciate that clarity and look forward to seeing the execution on that front. Thank you.

Thank you.

Our next question.

Okay.

Our next.

<unk> will come from the line of John <unk> with Jpmorgan. Your line is open.

Hi, good morning, Thanks for taking my question.

So my first question I think I'm going to borrow Neil's question on 'twenty, four Capex and just make it a production question. So maybe you can go through some of the moving pieces on the upstream production side thinking about bridging to next year.

There is obviously the increased working interest in Fort Hills, they've got the loss of U K. The turnover restart just a lot of moving pieces and so not really sure how to think about the maintenance side. So maybe you could help us frame how to think about production for next year.

Sure.

And its comment on Trulia is looking at me like don't let the horse out of the barn earliest comment, but but take where we were we project we're going to end up this year in the 740 range and the same asset base turnover wasn't part of it flash forward to next year, we have an incremental ownership at Fort Hills.

<unk>.

And a.

Modest growth overall at Fort Hills, and then we've got Terra Nova back on four we expect to be essentially the full year, we will ramp up as we bring on well centers a little bit in the year, but we have that on so if you take if you take and add those three numbers together, you're not far off from what we.

I'll be expecting.

2024 to look at.

Looked like.

Great. Thank you and then just maybe if we could have an update on when.

When do you expect to get to the 75% level on capital allocation.

The visibility now for what Youre paying for Fort Hills, and you've given some guidance on year end net debt. So.

Any of you on the timing there.

Yes, Thanks, John It's Chris here, So as I mentioned in my comments, we expect to exit the year somewhere between $13 five in 2014 because of the transaction.

And depending on commodity price, we expect $12 billion to $12 billion net debt to be somewhere in the back end of 2024, I mean, it depends obviously on your your view of the price deck going into 2024, we do expect a.

Our strong year on production next year and higher volumes as rich just said as well as we're driving the lower cost structure. So that's certainly going to help accelerate that but that's kind of the notional time and you should think about.

Great. Thanks, Chris.

Yep.

Thank you that concludes our Q&A session for today I would now like to hand, the call over to Mr. Rich <unk> for any closing remarks.

Okay. Thank you Okay first of all folks you've got to blame what I say here on Greg Pardy.

He started it out with the baseball question.

The two questions I get asked the most are suncor turn it around.

So how fast we.

We all know by now on our sports fans love teamwork strategy competition, and winning eight days ago, a team called the Texas Rangers won the World series Best team in baseball two years ago. They were last in their division. They were one of the worst teams in baseball now they are the world Champs how did they do it same game big turn.

And around well, we got a new coach.

A little bit of gray hair, there are lots of experience kind of a no nonsense kind of guy. They got a few new players. They took some of the current players and put them on the field, where they could succeed the most what else. They created intense focus on the goal of winning a culture of winning and endless focus on the fundamentals what is it.

Any of this has to do with Suncor.

Maybe nothing but to our investors who have stayed the same.

Geared us on held onto their season tickets. Thank you for your confidence and your patients. Our goal is to reward you with the trophy.

That's all we've got for today. This team is to get back on the field.

Thank you. Thank you everyone for joining our call. This morning, if you have any follow up questions. Please don't hesitate to reach out to our team.

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