Q4 2023 Suncor Energy Inc Earnings Call

Operator: or you may see that we are Good day and welcome to the Suncor Energy fourth quarter 2023 results conference. At this time, all participants are on a listen-only basis. 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 1 1 on your telephone. You will then hear an automated message advising you to hold... To withdraw your question, press star 11 again.

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Speaker Change: Good day and welcome to the Suncor Energy fourth quarter 2023 results conference call.

Speaker Change: 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.

Speaker Change: Then here an automated message advising your hand is right.

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Operator: Please be advised that today's conference is being held. I would now like to hand the conference over to your speaker, Mr. Troy Little, Vice President of Investor Relations. Mr. Little, the floor is yours.

Speaker Change: Be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker, Mr. Choi Lyttle, Vice President of Investor Relations Mr.

Troy Little: Thank you, operator, and good morning. This is Suncor Energy's fourth 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 fourth-quarter earnings release as well as in our annual information form, both of which are available on CDAR, EDGAR, and our website, suncor.com. Certain financial measures referred to in these comments are not prescribed by Canadian Generally Accepted Accounting Procedures.

Choi Lyttle: Mr. Little the floor is yours.

Choi Lyttle: Thank you operator, and good morning, welcome to Suncor Energy's fourth quarter earnings call. Please.

Speaker Change: Please note that today's comments contain forward looking information.

Choi Lyttle: Actual results may differ materially from the expected results because of various risk factors and assumptions that are described in our fourth quarter earnings release as well as in our annual information form both of which are available on SEDAR, Edgar and our website Suncor Dot com.

Choi Lyttle: Certain financial measures referred to in these comments are not prescribed by Canadian generally accepted accounting principles.

Troy Little: For a description of these financial measures, please see our 4th Quarter Earnings Room. We will start with comments from Rich Kruger, President and Chief Executive Officer, followed by Kris Smith, Suncor's Chief Financial Officer. Also on the call are three of our senior operating leaders: Peter Zebedee, Executive Vice President, Oil Sands; Dave Oldreive, Executive Vice President, Downstream; and Shelley 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, Troy. Good morning.

Choi Lyttle: A description of these financial measures. Please see our fourth quarter earnings release.

Choi Lyttle: We will start with comments from rich Kruger, President and Chief Executive Officer, followed by Chris Smith, <unk> Chief Financial Officer also on the call are three of our senior operating leaders, Peter Zebedee Executive Vice President oil Sands, Dave <unk> Executive Vice President downstream and Shelley powers Senior Vice President operational.

Choi Lyttle: Improvements in support services.

Rich Kruger: 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, Greg good.

Richard M. Kruger: The fourth quarter, I would characterize it as strong results across the board, safety, upstream production, downstream reliability, cost management. We finalized the Fort Hills purchase. It was about delivering on commitments for our company. Kris will detail the fourth quarter.

Rich Kruger: Good morning, the fourth quarter I would characterize it as strong results across the board safety upstream production downstream reliability cost management, we finalize the Fort Hills purchase it was about delivering on commitments for our company, Chris will detail the fourth quarter, but first I'd like to provide a little bit of a lift.

Richard M. Kruger: But first, I'd like to provide a little bit of a look back on 2023 overall. For context, on my first earnings call 10 months ago, I outlined four things you could expect to see from Suncor. One, an intense focus on the fundamentals.

Rich Kruger: Back at 2023 overall for context on my first earnings call at 10 months ago I outlined four things you could expect to see from Suncor.

Rich Kruger: One an intense focus on the fundamentals to a simpler more focused organization three a shareholder oriented executive leadership team and for an overall urgency to improve performance. So how are we doing let me start with a focus on the fundamentals and first and most importantly, the fundamental of safety.

Richard M. Kruger: Two, a simpler, more focused organization. Three, a shareholder-oriented executive leadership team. And four, an overall urgency to improve performance. So how are we doing? Let me start with a focus on the fundamentals.

Richard M. Kruger: And first and most importantly, the fundamental of safety. The fourth quarter of the year was our safest quarter in 2023, and 2023 was the safest year in the company's history. We had no life-altering or life-threatening injuries for the first time since 2015. Additionally, we had a nearly 50% reduction in lost time incidents year on year. We had our best ever recordable incident rate in the downstream and our second best ever in the upstream. How?

Rich Kruger: The fourth quarter of the year was our safest quarter in 2023, and 2023 was the safest year in the company's history, we had no life altering or life threatening injuries for the first time since 2015, we added nearly 50% reduction in lost time incidents year on year.

Rich Kruger: We had our best ever recordable incident rate in the downstream and our second best ever in the upstream how leadership workforce engagement risk management procedures and technology.

Richard M. Kruger: Leadership, workforce engagement, risk management, procedures, and technology. I'll continue with a second fundamental, asset reliability, starting with the upstream. Our bitumen upgraders, or our moneymakers, had four-year utilization of 92 percent, our best ever. We had 91 percent at the base plant, and 93 percent at Syncrude. This was the first time in our history that both assets were at or above 90 percent, and combined they were 3 percent higher than our previous best ever. How?

Rich Kruger: Continue with a second fundamental asset reliability, starting with the upstream our bitumen upgrade or is there are moneymakers full year utilization of 92% our best ever we had 91% at the base plant 93% at Syncrude. This is the first time in our history that both assets were at or above 90%.

Rich Kruger: And combined they were 3% higher than our previous best ever how operational excellence by our site teams and our unique interscience physical integration.

Richard M. Kruger: Operational excellence by our site teams and our unique inter-site physical integration. I'll continue with the downstream liability. Crude unit utilization, 90% for the full year, nothing to brag about. But it's a tale of two halves, 82% utilization in the first half and 99% utilization in the second half. For the full year, Sarnia Refinery had its best ever utilization, Edmonton had its second best ever, and Montreal its third best

Rich Kruger: The downstream liability crude unit utilization, 90% for the full year nothing to brag about but it's a tale of two past, 82% utilization in the first half and 99% utilization in the second half for the full year Sarnia refinery had its best ever.

Rich Kruger: Asian, Edmonton had its second best ever in Montreal, its third best ever.

Richard M. Kruger: How, again, leadership, workforce, and commitment to performance. I'll continue with delivering on commitments, and I'll highlight upstream production. We finished the year at 746,000 barrels a day, the second highest in our company history, including 808 KBD in the fourth quarter. We achieved external guidance for the first time in six years. Highest ever annual production at Syncrude in its 45-year history and at Firebag in its 20-year history. Fort Hills delivered on year one of a three-year plan The full year was at 147,000 barrels a day, and in the fourth quarter at a very strong 186,000 barrels a day. How? I'll begin to sound like a broken record.

Rich Kruger: How again leadership workforce commitment to perform.

Rich Kruger: I'll continue with delivering on commitments and I'll highlight upstream production. We finished the year at 746000 barrels a day second highest in our company history, including eight O 8-K, B D. In the fourth quarter, we achieved external guidance for the first time in six years.

Rich Kruger: Highest ever annual production at Syncrude, and it's 45 year history and at fire Bagging hits 20 year history.

Rich Kruger: Fort Hills delivered on year, one of a three year plan full year was at 147000 barrels a day in the fourth quarter had a very strong 186000 barrels a day how are you.

Richard M. Kruger: Leadership, clear priorities, workforce focus. We understand that trust and credibility are based on delivering on commitments. The second area I highlighted that you could expect from Suncor was a simpler, more focused organization. But we're even better collectively or in terms of team competencies.

Rich Kruger: I'll begin to sound like a broken record leadership clear priorities workforce focus we understand that trust and credibility are based on delivering on commitments.

Rich Kruger: The second area I highlighted you could expect Suncor was a simpler more focused organization.

Rich Kruger: Well, we have a new executive leadership team has smaller at eight versus previous nine four of US were new in 2023, a fifth in 2022.

Rich Kruger: Individually the.

Rich Kruger: Punctual expertise on this team is outstanding.

Rich Kruger: But we're even better collectively or in terms of the team competency our newest member of the team kept Ferguson joined US here, a month or so ago as our senior VP of strategy sustainability commercial and development and cats in the room with US this morning as well.

Richard M. Kruger: Our newest member of the team, Kent Ferguson, joined us here a month or so ago as our Senior VP of Strategy, Sustainability, Commercial, and Development, and Kent's in the room with us this morning as well. We reorganized and refocused our above-field or our non-operating workforce, a 20% reduction in headcount completed in five months last year between June and November. And we did this through the elimination of work that was judged to be low priority or simply unaffordable.

Rich Kruger: <unk> reorganized and refocused our field or our non operating workforce, a 20% reduction in head count completed in five months last year between June and November.

Rich Kruger: We did this through the elimination of work work that was judged to be low priority or simply unaffordable.

Richard M. Kruger: We spent $275 million in severance costs to achieve a $450 million annual savings starting this year, $50 million above our target. If you do the math on that, that's about an eight-month payout.

Rich Kruger: We spent $275 million in severance cost to achieve a $450 million annual savings starting this year $50 million above our target.

Rich Kruger: You do the math on that that's about an eight month payout.

Richard M. Kruger: Our central above field teams have clear priorities, and they are very intensely focused on operational support and improvement. Another change we made above field is that we consolidated corporate strategy, commercial sustainability, and development work, not only to increase efficiency, but even more importantly, to ensure we focus on the highest value work. Simultaneously, in the second half, an area we haven't talked about, we restructured and reorganized our upstream and downstream operational site teams. So we now have a common site design across the company, operations, maintenance, engineering, et cetera, with crystal clear site accountabilities.

Rich Kruger: Our central above field teams have clear priorities and they are very intensely focused on operational support and improvement.

Rich Kruger: Another change we made above field as we consolidated corporate wide strategy commercial sustainability and development work not only to increase efficiency, but even more importantly to ensure we focus on the highest value work.

Rich Kruger: Simultaneously in the second half an area, we haven't talked about we restructured and reorganized our upstream and downstream operational site teams. So we now have a common site design across the company operations maintenance engineering et cetera, with Crystal clear.

Richard M. Kruger: The benefits of this are our common operating standards, applications of best practices, and natural improvement networks across the company. I would say the early results of this are positive, greater clarity, and accountability. We're seeing it in the improvements in the execution of our work. For example, although in early 2023, our cost per barrel was at or below guidance across all upstream oil sands sites. And for the first time in company history, we executed our turnaround scope, upstream, and downstream, $1.3 billion in aggregate on budget and on schedule. A third area I promised you could see was a shareholder-oriented executive leadership team. Well, during the year, we high-graded our asset portfolio to strengthen our competitive advantage and add shareholder value. We did that, in part, by acquiring the remaining 46 percent interest in Fort Hills in two separate transactions that totaled $2.2 billion. Both transactions were considered to be at attractive prices. The second one, Total Canada, also provides large and immediate tax benefits as articulated in our release.

Rich Kruger: Accountabilities the benefits of this week is our common operating standards applications of best practices and natural improvement networks across the company.

Rich Kruger: I would say the early results in this are positive greater clarity accountability, we're seeing it in the improvements in the execution of our work in.

Rich Kruger: An example, although early 2023, our cost per barrel was at or below guidance across all upstream oil sands sites and for the first time in our company.

History, we executed our turnaround scope upstream downstream $1 $3 billion in aggregate on budget and on schedule.

The third area I promised you could see was a shareholder oriented executive leadership team well in the in the year, we high graded our asset portfolio to strengthen our competitive advantage and add shareholder value. We did that in part by acquiring the remaining 40% 46% interest in Fort Hills in two separate.

Transactions that totaled $2 $2 billion, both transactions, we consider to be at attractive prices. The second one touch al Canada also provides large and immediate tax benefits as articulated in our release.

Richard M. Kruger: These acquisitions address our long-term bitumen supply uncertainty, but in addition, they enable material regional synergies with the large footprint of our operation. In the year, we also sold non-core UK North Sea upstream assets for 1.1 billion and the solar and wind business for about 700 million, or a combined 1.8. In the year, profitability, and shareholder returns, we had AFFO of $13.3 billion, the second highest in our history, despite oil prices being the seventh highest over the same period of time. We generated free funds flow of $7.5 billion, the second highest, and we executed a $5.7 billion capital program, again within our guidance. We distributed $5 billion to shareholders, 2.8 in dividends, and 2.2 in buybacks, and when combined, this is a 9.1% cash return on the year.

These acquisitions address our long term Benjamin supply uncertainty, but in addition, they enabled material regional synergies with the large footprint of our operations.

In the year, we also sold non core UK North sea upstream assets for $1 1 billion and the solar and wind business were about $700 million are a combined one eight.

Rich Kruger: In the year profitability and shareholder returns, we had <unk> of $13 3 billion. The second highest in our history. Despite oil prices being the seventh highest over the same period of time, we generated free funds flow of $7 5 billion second highest and.

We executed a $5 $7 billion capital program again within our guidance, we distributed $5 billion to shareholders to 0.8 in dividends 2.2 in buybacks.

Rich Kruger: When combined this is a nine 1% cash return in the year.

Richard M. Kruger: Where we are today and going forward, continued priorities are to lower our overall corporate WTI breakeven and increase free cash flow, and free funds flow per share. In terms of continuing to improve and the urgency to do that, I'll talk a bit more about that when Kris is done, but I would say that, despite overall strong financial and operating performance in 2023, I look at it as if we have left some on the table. We missed our refining utilization guidance by a couple percent, really attributed to a slow recovery in the first half of the year at Commerce City, and we had disappointing project execution at Terra Nova and the subsequent delayed startup with the ramp-up of that asset now going on.

Where we are today and going forward continued priorities are to lower our overall corporate WT I breakeven and increased free cash flow free funds flow per share in terms of continuing to improve and the urgency to do that I'll I'll talk a bit more about that when Chris has done, but I would say that despite.

Overall strong financial and operating performance in 2023 I look at it is we also left some on the table.

Missed our refining utilization guidance by a couple percent.

Really attributed to a slow recovery in the first half of the year at Commerce City, and we had disappointing project execution at Terra Nova and the subsequent delayed startup with the ramp up of that asset now going on so in summary, 2023, I would say it was a good year in many areas.

Richard M. Kruger: So in summary, 2023, I would say was a good year in many areas, very good in other areas, but I believe we can do better, and that's exactly our plan. So I'll come back to 2024 in a few minutes, but first I'll turn it over to Kris, who will talk about our fourth quarter summary. Great, thanks, Rich, and good morning, everyone.

Very good and other areas, but I believe we can do better and that's exactly our plan. So I'll come back to 2024 in a few minutes, but first I will turn it over to Chris who will talk about our fourth quarter summary.

Great. Thanks, Rich and good morning, everyone.

Kris Smith: Well, while we saw crude prices and refining margins weaken versus the prior quarter, the fourth quarter still saw a robust price and margin environment. WTI averaged US $78 a barrel in the quarter, while the light heavy differential widened versus Q3, averaging about $22 a barrel. We also saw synthetic crude oil premiums retreat in Q4 on the back of strong regional upgrading production and egress constraints across the basin, averaging about $0.30 a barrel US above TI. On the refining side, while we saw weakening gasoline cracks in the quarter, distillate cracks continued to be strong, and our 5-2-2-1 refining index was US $33.45 a barrel, which was about $2.55 a barrel Finally, natural gas, which is a key input cost to our operations, remained low, with ACO averaging $2.15 Canadian at GJ in the quarter.

Well, we saw crude prices and refining margins weakened versus the prior quarter, the fourth quarter still saw robust price and margin environment.

<unk> averaged <unk> $78, a barrel in the quarter, while the light heavy differential widened versus Q3, averaging about $22 a barrel U S.

We also saw synthetic crude oil premiums retreat in Q4 on the back of strong regional upgrading production and egress constraints across the basin, averaging about 30 per barrel U S about ti.

On the refining side, while we saw weakening gasoline cracks in the quarter distillate cracks continued to be strong and our 5221 refinery index was U S $33 45 per barrel, which was about $2 55, a barrel below Q3.

Finally, natural gas, which is a key input costs of our operations remained low with echo averaging $2.15 Canadian at GJ in the quarter.

Kris Smith: With this business environment and very strong operations, Suncor delivered strong financial results in the fourth quarter, generating $4 billion in adjusted funds from operations, or $3.12 a share, and Adjusted Operating Earnings of $1.6 billion, or $1.26 a share. During the quarter, we also returned nearly $1.1 billion to shareholders. This was comprised of $704 million in dividends, which represented a 5% increase over the previous quarterly dividend, as well as $375 million in share repurchase. In 2023, we bought back $2.2 billion of shares, which was almost 4% of our float. Our net debt ended at $13.7 billion, reflecting the closing of the acquisition of Total Energies Canada in the quarter for $1.5 billion Canadian, plus closing adjustments and closing costs.

With this business environment, and very strong operations Suncor delivered strong financial results in the fourth quarter generating 4 billion and adjusted funds from operations were $3 12 per share and.

And adjusted operating earnings of $1 6 billion or $1 26 per share.

During the quarter. We also returned nearly $1 1 billion to shareholders.

This was comprised of $704 million in dividends, which represented a 5% increase over the previous quarterly dividend as well as $375 million in share repurchases.

In 2023, we bought back $2 2 billion of shares which is almost 4% of our float.

Our net debt ended at $13 7 billion, reflecting the closing of the acquisition of the hotel <unk>, Canada in the quarter for $1 5 billion Canadian plus closing adjustments and closing costs.

Kris Smith: And we continue to remain focused on our capital allocation framework of allocating free cash flow to continue debt reduction and cash returns to shareholders through share buybacks. Turning now to operational performance in the quarter, we saw very strong operational performance in both the upstream and downstream, as outlined by Rhett. Our upstream delivered total production of 808,000 barrels per day in the quarter, the second highest in our history. This included 875,000 barrels per day in November and 904,000 in December, which were the highest months of production in company history.

And we continue to remain focused on our capital allocation framework of allocating free cash flow to continued debt reduction and cash returns to shareholders through share buybacks.

Turning now to operational performance in the quarter.

We saw very strong operational performance in both the upstream and downstream as outlined by reps.

Our upstream delivered total production of 808000 barrels per day.

In the quarter the second highest in our history. This included 875000 barrels per day in November and 904000 in December which were the highest months of production in company history.

Kris Smith: The fourth quarter also saw record quarterly production in our oil sands segment. The base plant upgrade or two turnaround was successfully completed on time and on budget early in the quarter, while we also completed our fire bag turnaround successfully. As well, Syncrude had a very strong upgrading course, achieving over 100% utilization. Another record.

Fourth quarter also saw a record quarterly production at our oil Sands segment.

The base plant upgrade or two turnaround was successfully completed on time and on budget early in the quarter. While we also completed our fire bag turnaround successfully.

As well Syncrude had a very strong upgrading quarters, achieving over 100% utilization.

Another record.

Kris Smith: With the successful completion of the Fort Hills full plant turnaround in Q3 and the mine plan being set up to maximize ore delivery in the quarter, we saw very strong production at Fort Hills, with total production averaging 186,000 barrels per day, or about 96% utilization, a quarterly record. In addition to high reliability across our oil sands assets, we also optimize inter-asset volume transfers to maximize value across those assets. This included internal bitumen transfers of about 45,000 barrels per day in Q4, demonstrating an increased level of integration within the oil sands.

With the successful completion of the Fort Hills full plant turnaround in Q3, and the mine plan being set up to maximize ore delivery in the quarter. We saw very strong production at Fort Hills with total production, averaging 100 to 186000 barrels per day or about 96% utilization a quarterly record.

In addition to high reliability across our oil sands assets.

So optimized inter asset volume transfers to maximize value across those assets.

This included internal bitumen transfers of about 45000 barrels per day in Q4, demonstrating an increased level of integration with an oil sands. This increase was primarily driven by Benjamin transferred from Fort Hills to the base plant upgrader.

Kris Smith: This increase was primarily driven by bitumen transferred from Fort Hills to the base plant upgrade, taking advantage of the SCO yield uplift from the paraffinic froth treated Fort Hills barrels. Also, in the quarter, we saw the return to operation of the Terranova asset in our East Coast E&P segment, and that asset continues its ramp-up of production into this quarter. With respect to the downstream, refining utilization was an impressive 98% in the quarter, which included two smaller turnarounds at Edmonton and Montreal that were successfully completed. Downstream margin capture was strong in the quarter at 103% on a LIFO basis when compared to Suncor's 5-2-2-1 refining index, primarily driven by higher realizations from seasonal diesel differentials over the previous quarter. And with diesel cracks continuing to outperform gasoline, Suncor is structurally advantaged as our network produces a higher distillate cut when compared to the average North American refinery. As mentioned, we closed the purchase of Total Energies Canada on November 20th for $1.5 billion Canadian before closing adjustments and other closing costs, making Suncor the sole owner of Fort Hill. In the quarter, we recognized an initial tax benefit of $880 million associated with the transaction, which supports the strong acquisition economics.

Taking advantage of the SCO yield uplift from the Paraffinic froth treated Fort Hills barrels.

Also in the quarter, we saw a return to operation of the Terra Nova asset in our East Coast E&P segment and that asset continues its ramp up of production into this quarter.

With respect to the downstream refining utilization was an impressive 98% in the quarter, which included two smaller turnarounds in Edmonton and Montreal that were successfully completed.

Downstream margin capture was strong in the quarter at 103% on a LIFO basis, when compared to Suncor is $5 two to one refine index.

Primarily driven by higher realizations from seasonal diesel differentials over the previous quarter.

And with diesel cracks continuing to outperform gasoline suncor is structurally advantaged as our network produces a higher distillate cut when compared to the average North American refining.

As mentioned, we closed the purchase of total energy Canada in November 20th for $1 5 billion Canadian dollars before closing adjustments and other closing costs, making suncor the sole owner of Fort Hills and.

In the quarter, we recognized that initial tax benefit of $880 million associated with the transaction, which supports the strong acquisition economics.

Kris Smith: With the asset now in 100% Suncor ownership, we're focused on continuing to drive the mine improvement plan and maximizing value through integration with our other regional operations. Now for a brief update on the Oil Sands Pathways Alliance to Net Zero carbon capture and storage project. As we continue to work closely with federal and provincial governments on the necessary fiscal and regulatory framework, major regulatory applications for the CO2 transportation network and storage hub are being prepared and are expected to be filed in the first half of this year. Meanwhile, front-end engineering and design of the proposed CO2 transportation line is now more than half complete. As well, more than 2,000 hours of environmental fieldwork have been completed so far, and formal consultation with Indigenous groups along the proposed transportation corridor and storage hub began in 2023 and continues.

With the asset 100% Suncor ownership, we're focused on continuing to drive the main improvement plan and maximizing value through integration with our other regional operations.

Now for a brief update on the oil sands pathways alliance to net zero carbon capture and storage project as we continue to work closely with federal and provincial governments unnecessary fiscal and regulatory framework.

Our regulatory applications for the <unk> transportation network and storage hub or being prepared and are expected to be filed in the first half of this year.

While front end engineering and design of the proposed <unk> transportation line now more than half complete as.

As well more than 2000 hours of environmental field work have been completed so far and formal consultation with indigenous groups along the proposed transportation corridor and storage hub began in 2003 and continue.

Kris Smith: Now, finally, before handing it back to Rich, I just wanted to make a few comments on our 2024 guidance released this past December. As set out in the guidance, we expect production to grow by about 6% or 44,000 barrels per day versus 23. The key drivers for that are the ramp-up in Fort Hills production as we move into the second year of our improvement plan, our increased ownership in Fort Hills as we move from effectively 70% of gross production in 2023 to 100% in 2024, and increased SCO production at Base Plant as it has a shorter maintenance schedule this year. As well, while we sold our UK E&P business in 23, we now have Terranova ramping up, which has us guiding fairly flat with 2023 E&P volumes.

Now finally before handing it back to rich I just wanted to make a few comments on our 2024 guidance released this past December.

As set out in our guidance, we expect production to grow by about 6% or 44000 barrels per day versus 'twenty three.

The key drivers to that are the ramp up in Fort Hills production as we move into the second year of our improvement plan our increased ownership in Fort Hills, as we move from effectively 70% of gross production in 23% to 100% in 'twenty four and in ink and increased SCO production at base plant is it has a sort of maintenance scheduled this year.

As well, while we sold our UK E&P business in 'twenty three we now have turnover ramping up which has us guiding fairly flat with 2023 E&P volumes.

Kris Smith: That guidance includes a number of large planned maintenance activities in the year. At Base Plant, we have a large turnaround in Upgrader 1 in the second quarter and Upgrader 2 annual COCR turnaround in Q3-Q4. And at Syncrude, we have an annual COCR turnaround starting in late Q1. And in the downstream, in the second quarter, we have large turnarounds at the Sarnia and Montreal refineries.

That guidance includes a number of large plants maintenance activities in the year.

At base plant, we have a large turnaround at upgrader, one in the second quarter and upgrade or two annual coker turnaround in Q3 Q4 and at Syncrude, We have an annual coker turnaround starting in late Q1.

And in the downstream in the second quarter, we have large turnaround at the Sarnia in Montreal refineries this year.

Kris Smith: With regard to our cash operating costs for 24, we're essentially holding our costs flat with 23 while bringing on additional Fort Hills working interest and growing production. That's an example of moving costs in the right direction, and we continue to be laser focused on driving costs down across the company. And finally, our capital guidance for 2024 is $6.3 to $6.5 billion.

With regards to our cash operating costs were 24, we're essentially holding our costs flat with 23, while bringing on additional Fort Hills, working interest and growing production.

That's an example of moving cost in the right direction and we continue to be laser focused on driving cost out across the company.

And finally, our capital guidance for 2024 to six 3% to $6 5 billion.

Kris Smith: This includes asset sustainment and maintenance capital largely consistent with what we saw in 2023 and higher economic investment capital versus the prior year, which reflects a number of key investments that will drive value for shareholders. These include the Fort Hills Mine Improvement Plan, the Upgrader One Coke Drum Replacement Project, the Mildred Lake Mine Extension at Syncrude, finishing up the Base Plant co-generation project this year, the West White Rose Project and Sea Rose Asset Life Extension, our Sales and Marketing Growth Plan, and investment in new mining trucks at Fort Hills and Base Plant, including the continued rollout of autonomous trucks at Base Plant. I'm confident that the team is 100% focused on delivering against these commitments and is building on the strong momentum we had when we finished in 2023. And with that, Rich, I'll hand it back to you.

This includes asset Sustainment and maintenance capital largely consistent with what we saw in 2023 and higher economic investment capital versus prior year, which reflects a number of key investments that will drive value for our shareholders. These include the Fort Hills mine improvement plan, you have greater one coke drum replacement project mill.

Lake mine extension at Syncrude, finishing up the base plant Cogeneration project. This year, the West White Rose project and see Roes asset life extension, our sales and marketing growth plan and investment in new mining trucks at Fort Hills, and base plan, including the continued rollout of autonomous trucks at base plant.

I am confident that the team is 100% focused on delivering against these commitments and is building on the strong momentum. We had finished up in 2023 and with that rich I'll hand, it back to you. Thanks, Chris Okay 2023 in the books, it's all about 'twenty four and beyond let me talk about what we're doing.

Richard M. Kruger: Thanks, Kris. Okay, 2023 in the books. It's all about 24 and beyond. Let me talk about what we're doing right now to continue to add shareholder value. As we look at the year, I think first and foremost, it is to achieve our volume growth commitments. I won't go through those in detail, as Kris just did.

Right now to continue to add shareholder value as we look at the year I think first and foremost it is achieve our volume growth commitments I won't go through those in detail, Chris just did it's a 6% year on year versus the midpoint of our guidance that will require continued strong upgrader utilization continued strong.

Richard M. Kruger: It's 6% year-on-year versus the midpoint of our guidance. That will require continued strong upgrader utilization, continued strong in situ, and then, of course, the growth that comes along with Fort Hills. In the downstream, we're about 4% year-on-year growth versus the midpoint of guidance. This will require continued strong performance at each of the Edmonton, Sarnia, and Montreal refineries and a full year of successful operations at Commerce City. And then, of course, last but not least on volume, it's about executing the turnarounds across all of our major sites.

In <unk> and then of course the growth that comes along with Fort Hills in the downstream we are about a 4% year on year growth versus mid point of guidance. This will require continued strong performance at each of the Edmonton Sarnia in Montreal refineries and a full year of successful operations at <unk>.

City, and then of course last but not least on volume it's about executing the turnarounds across all of our major sites.

Richard M. Kruger: A second area that I've talked about before, and I want to give you a bit of an update on, is mining. You know, fundamentally, we, as a company, will improve our cost performance as our mining business improves its performance. And, you know, for context, again, I've said it before, the cost of moving ore from a mine to a crusher is the single highest cost component in bitumen production. And where we sit today, we know exactly what our unit cost competitive gap is relative to best-in-class. And there are really two components, a structural gap that's due to the relative age and configurations of our mines and deals with things like haul distances and strip ratios. And then there's a performance gap that's related to simply how well we plan and execute our work. Peter has a very definitive plan focused on closing our performance gap with a specific list of tangible actions to bring about improvement.

A second area that I've talked about before I wanted to give you a bit of an update on his mining fundamentally we as a company we will improve our cost performance as our mining business improves its performance.

For context, again, I've said it before the cost of moving ore from the mine to the crusher. That's the single highest cost component in bitumen production and where we sit today, we know exactly what our unit cost competitive gap is relative to best in class and there's really two components.

Our structural gap, that's due to the relative age and configurations of our mines and deals with things like haul distances and strip ratios and then Theres a performance gap that's related to simply how well we plan and execute our work Peter.

Peter has a has a very definitive plan focused on closing our performance gap with a specific list of tangible actions to bring about improvements and what we're doing is we're also evaluating alternatives to address our structural gap via alternate mining scenario.

Richard M. Kruger: And what we're doing is evaluating alternatives to address our structural gap via alternate mining scenarios or different technologies in our minds. More to come each quarter on the mining business. But I want to share two specific examples of closing the mining performance gap, the way we plan and execute our work.

Our different technologies in our minds more to come each quarter on the mining business, but I wanted to share two specific examples on closing the mining performance gap, how we plan and execute our work we've mentioned the trucks. The addition of 55, new 400 ton.

Richard M. Kruger: We've mentioned the trucks, the addition of 55 new, 400-ton ultra class trucks through the rest of this year. New and bigger trucks, 55 will displace about twice as many less efficient, smaller third-party trucks. We've received and are operating 13 of those 55 trucks, or about 25%. They're the Komatsu 980s, and recall that I've said before, with all 55 in operation, that will lower our overall corporate break even by about a dollar per barrel U.S. when they're all up and running by the end of the year. I've also commented on autonomous operations. We're continuing to ramp up autonomous operations, the haul trucks at our base mines. The last time we talked about three months ago, we had 31 trucks operating autonomously. Today, it's 45, and we'll be at 91 by the end of the year, so, in essence, by the end of the year, 100%.

Ultra class trucks through the rest of this year.

New and bigger trucks, 55 will displace about twice as many less efficient smaller third party trucks. We've received in our operating 13 of those 55 trucks are about 25% Komatsu 900, <unk> and recall that I've said before with all 55 in operation.

That will lower our overall.

<unk> corporate breakeven about $1 per barrel U S. When they're all up and running by the end of the year. I've also commented on autonomous operations, we're continuing to ramp up economists operations haul trucks in our base mines. The last time, we talked about three months ago, We had 31 trucks.

Operating economist sleep today, it's 45, and we'll be at 91 by the end of the year. We're in essence by the end of the year, 100% of the or at the base plant will be moved economists sleep and recall that conversion delivers about $1 million per truck.

Per year and sustainable annual cost savings, so it's a material improvement.

We will also get with the economy, what we believe to be a productivity increase where we will.

Affectively, moving the same or tonnage, but with fewer trucks, specifically our estimate is it will be the equivalent of three free.

400 ton haul trucks through the conversion to autonomy and you recall these trucks cost $10 million plus each what we will do in practice is move the surplus trucks to displace higher cost third party vehicles.

Elsewhere in our operation so the winning formula in mining continues to be fewer trucks bigger trucks more efficient trucks, antonymous haul trucks, but coupled with an industrial engineering like focus on all aspects of today's business existing fleet availability utilization may.

<unk>, all the ancillary equipment reliability across the board and.

Maybe in the Q&A I can ask Peter to address some of the specific things we're working on to bring about further improvement.

I'll comment a bit more on turnarounds, which ive shared give you a bit of an update on our efforts there.

You will recall I mentioned, we have formed a new central group under Paul.

In 2023, and they are singularly focused on turnaround performance, Dave and Shelly combined diebold or even celli, our executive co leads across both upstream and downstream calibrate our overall accountability on turnarounds. We are completing extensive third party benchmarking to identify our.

Opportunities and establish expectations, we are holding monthly reviews on scope cost duration and readiness, where previously these reviews have been held at an asset level.

And along with our theme and our unique competitive value proposition, we're capturing regional synergies or efficiencies because of the proximity of our operations the ability to coordinate turnarounds.

Examples of early onset of some of the improvements were seen all use refining as an example, Montreal second quarter. This year, we've got a material turnaround dealing with heavy crude processing through benchmarking pre planning we've cut the duration from the original 62 days to 53 days and are very comfortable.

With it a second example of shares at our Sarnia refinery, where again, we have a second quarter turnaround looking at risk.

<unk> worked selection our scope challenge, we cut 66000 hours out of that turnaround, 15% that would equate to about a $21 million cost avoidance and because we will be will be up and running earlier, another $12 million or so in value addition.

It's early in our improvement process here, but I wanted to share some of those examples we're already starting to see the benefits and as I've said our goal is to be best in class and turnaround performance across our business Bottomline Theres big prizes here lower cost shorter durations higher margins and two.

To achieve those its about benchmarking knowing who.

Who's the best and why.

Quality risk assessments.

Vance quality pre planning very clear accountability, and then high quality disciplined execution now as I wrap up I want to share with you two less visible, but also I believe very very fundamental changes, we have and are making at the company that will contribute to continued improved performance.

<unk>.

And my objective from day, one was to create a level of alignment between our strategies, our organizational structure and our corporate culture with the goal being to achieve a team based results oriented high performance culture, So with that in mind in the second half of 2023, we.

A new redesigned employee performance evaluation system designed to evaluate an individual's performance based on their impact versus their effort or the activity behind their work. The goal is to better differentiate individual performance and recognize and reward individuals accordingly.

The outcomes of the performance evaluation.

<unk> are directly linked to individual's compensation in terms of base salary increases and the individual component of their annual incentive.

Also effective going into 2024, we are implementing a new redesigned employee annual incentive program. Our previous program have multiple scorecards, even at the level of those sitting around the table with me. This morning, each with a separate series of measures are new program has.

One single Suncor scorecard, we win and lose as a team it will be applicable to all and it will have far fewer very priority measures what measures surprise, the fundamentals safety and environmental performance production and throughput costs and profitability we want.

To ensure that we incentivize what's most important and that we have an entire workforce focused on delivering on commitments and that our performance parallels the experience of the shareholder our new annual incentive program is very much aligned with my philosophy to clarify simplify focus which I think.

Is the key to delivering consistently delivering superior results. So as I sit here today I feel as an organization. We've got the right people. The right leadership, we're focused on the right work and we're committed top to bottom to perform.

My final comments employees I'd like to thank our employees for first and foremost working safely and their commitment and dedication to making suncor. The best it can be our shareholders I'd like to thank our shareholders for their trust and confidence we don't take it for granted and we know it must be continually earned so with that.

That all pass alternative Detroit.

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

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 with <unk>. Your question. Please press star one again.

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.

Thanks, Good morning, and.

Rich, there's a lot of content in there I don't think I could write fast enough.

I've got a couple of questions for you, but maybe just before I start.

We see a big welcome to Mr. Ferguson now and.

And the Suncor Biz.

There's really kind of really two things I wanted to come back to the question I asked to the last time and I think a lot of the things you've already said would reinforce this change that's going on in the company but.

What inning do you think you are at now maybe versus when you arrived that was probably the first inning. When he arrived but I'm curious where you're at now in terms of in terms of the turnaround and then what are the steps you need to take maybe over the next year or two to maybe get back to the leadership position that suncor used to be in.

Thanks, Greg.

If I look at it I would say 2023, there was just a large amount of change and we've talked about that but I would describe a lot of that change is disruptive and potentially distracting.

New leadership team people coming and going we had a workforce reduction.

A lot of things that could distract people from performing so given that I'm really proud of the organization. How we did perform despite that so as we get into the <unk>.

As we turn the page on 2024, I think we built a lot of momentum in the fourth quarter I think our starting pitcher is throwing strikes and we.

I think where.

We're well into the game.

I think the momentum that we've created and I can comment on how we're doing through the first half of the first quarter of folks would like I think we're in a really good position to focus some of these other things that I mentioned, we've got a lot of very tangible operational things, but a lot of these things that I would refer to as cultural that performance.

<unk> system, the annual incentive program things like this.

Those are part of the secret sauce to getting 16338 people focused like a laser on performance and I feel really good that we've put a lot of that in place now and our best days are ahead of us and I don't think its so much of.

I don't think it's <unk>.

Trust Us believe us have faith, I think youre going to start seeing that I think the fourth quarter give you a pretty good glimpse of that.

What's next.

Yeah.

Just doubling down on things, we're doing keep on the keeping the pedal to the metal unimproved meant efforts lowering that cost structure, maintaining the highest levels of operational excellence and safety.

And just continuing to create value and we are we've got I've got examples and favorable I'll, let Dave add Peter comment on some of the things we're doing to create that clarity deep deep into the organization about what we're trying to achieve so I got to tell you Greg I wake up every day feel pretty excited to come to work 10 months.

I feel more excited everyday that I did 10 months ago.

Very good and then maybe just two two.

Shifting gears, a little bit because you touched on the first quarter. So the I guess the simple question would be how much of a weather how much did favorable weather.

Impact fourth quarter production because of it is warmer but and this quarter has been different and then within that context could you give us an update just on how ops are going thus far in <unk>.

Yeah, absolutely I mean, we did have good weather in the fourth quarter, but typically we don't have a lot of our motor.

Most severe time the mining business likes it when it's minus 10 15 that just everything operates the best they don't like it when it's minus <unk> 43, which it was in January so I would say the fourth quarter weather played a bit of a role, but not not a big bet, but when we came into the new year. The first cut.

Weeks, we had a very.

Very uniquely cold spell there seems like we would expect that but what I'm really pleased about and that is although we had some issues with the mobile equipment.

Fuel filter is plugging in things like that.

Plants kept running really really well the upgrader is Dave kept all the refineries up and running so yeah, we had a bit of a slow spot in the mining in the first couple of weeks of the year, but as I sit here as we sit here at the midpoint of the first quarter.

Refining for them is at 98% utilization for the first six seven weeks of the year I'll, let you do the math on throughput, but there. They are continuing the very strong performance. We saw in the second half of last year and on the upstream despite a little bit of slowdown in the mining the first week or two of the.

Here, we are now at or above in the for the first quarter to deliver a quarter that is higher than our fourth quarter watts. So we're kind of.

We started out a bit slow the first couple of weeks, but we're gaining week by week. So I don't know exactly where we'll end the first quarter, but I think I think when we put in the books youre going to see that that operational momentum has been has continued.

Quite frankly to the entire second half of last year and on into the first quarter.

Terrific, 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 here focuses on Fort Hills.

Production in Q4 reached near nameplate capacity and we understand that the focus in 2024.

And maybe the early part of 2025 is opening up two faces in the north pit access sufficient or more consistently into the facilities.

My question here is can you discuss how you see the opportunity set at Fort Hills. Once you will call it fixed or remediated. The feedstock bottleneck. In addition to applying the more trucks and smoothing out operations.

Yes, Thanks, Dennis I'll turn it over to Peter and just a second but I think I think what the fourth quarter showed is when we can feed the plant just how good that plant is we average 186 or something for the quarter.

If you squeeze Peter hard he would tell you. He had days over 200. So that plan is quite strong. So you rightly said that the challenge is ensuring that we feed it and that's why the opening the two pits in the North mine is so important so we're able to do that but Peter you want to maybe comment a little bit on kind of the whole.

The mining where you are in the mining and confidence in continuing to feed the beast.

Thanks, Rich and thanks, Dennis I think it is a good point rich is absolutely correct fixed plant assets at Fort Hills are extremely robust and we are confident that we can push higher volumes through the back end of that facility. Our focus is indeed on the mine as you said it is opening up.

Ultimately.

Or from from the north pit and reducing the mining bottleneck and hence our focus at Fort Hills is really on mining efficiency improvements the purchase of the altra cost contracts, obviously helps that but beyond that we're really focused as Richard said, we're focused on the fundamentals are really focused on the little things that drive efficiency.

<unk>.

That extra ton on the trucks that extra kilometer per hour and the whole cycle and leveraging that efficiency not only to deliver or enter the production facility, but to reduce our unit costs.

Remove higher cost mining volumes out of out of our fleet and delivering that with our own trucks and the two pits in the North mine will give us that opportunity to blend ore. So we won't have the natural up and down variation of a variable inputs. So I think it's as we improve the <unk>.

The capacity to deliver or we'll also have a bit of a stability in it because of the approach Peter's taking in mining it.

One other key factors is to reestablish a robust inventory of minable oilsands in front of us and we have lots of options for the shovels that we can bring into the fixed plants.

And that has been key to the success that we've seen at Fort Hills and that team has done a fantastic job of that.

Opening up those pads reestablishing the inventory managing the risks are now driving productivity improvements.

Great Great really appreciate that color.

My second question and shifting focus more to the base mine and rich really appreciate the context around the oil sands mining fleet as well as any adjustments, you're making the operation to drive controllable costs lower I know in previous conference calls our previous conference call. Peter discussed the kind of cadence of production through time as well as the need to.

Balance that with <unk>.

Sourcing or to build tailings ponds and other Earth based infrastructure can you talk a little bit about how again some of these tweaks and changes to improving controlling costs may impact or effect or even maintain or improve some of the flexibility and development, specifically with Norske bank and the other areas of the baseline.

Sure, let me I'm going to give Peter the opportunity here in a second but one of the things I wanted to start a little broader Dennis with now with 100% ownership of Fort Hills, and our level of physical integration Fort Hills bitumen to the base plant fire bag too we increasingly are looking at this basin as well.

One large bitumen supply source and what's the optimum way the lowest cost the greatest value way to do it and what that does is it gives us flexibility at each individual site, where we're optimizing the whole versus what would previously have been in optimizing of the site. So that's.

Where the options at the base plant come in I've talked about we're moving to more autonomy. We're looking at where we deploy new trucks and shovels were looking at the rate at which we deplete the remaining.

Or at the base plant and so it's that physical integration that allows us to do this and everything we're going to be looking at is going to be ultimately.

Long term value on it but but maybe that's so that's kind of a broad set up to your question that Peter if you want to maybe comment a little bit more specifically on on some of the things at the base plant, Yes, no absolutely rich and as you said really at base plant is in excess of our Benjamin supply into the region. We are.

Leveraging that integration with Fort Hills, and with fire bag, so really being able to flex, which rich man is going to the upgrader is when that obviously translates back into additional mining flexibility of base.

And I think with the investment that we made on the traction as I mentioned before and the productivity improvements. The team is driving coupled with autonomous I gives us more mining flexibility and it will give us more choices in the future on the rate in which we want to mine bitumen at base plant and that's something that our.

Teams under counter evaluating as we look to what we're going to do in the future with respect to the base timeline I've got it maybe just another comment it's a little bit from the base plant away from the base plant that I.

I mentioned, we produced 746000 barrels a day I know all of you on the line at complete confidence with that last fall that were going to meet guidance I know that.

But but Peter running his upgrader is at record high utilization he actually put more bitumen from fire bag in Fort Hills into it that have a shrinkage component to it so.

Because there's more value in it but absent that Peter we have been over 750000 barrels a day, but there again as an example of that physical integration and it's all about value for us not volume and I think that was a to me as I saw the two.

The fourth quarter as they redirected barrels to capture what was in the market that again is something that makes us different.

I know that's not on your question Dennis.

I Couldnt help it go there.

No I appreciate the color as always thanks, rich and Peter I'll turn it back.

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.

Thank you rich tremendous continued progress so congratulations to everything you've done them the changes you've made.

I feel like I ask you. This question every quarter, so forgive me for being predictable but.

I guess I'm not sure I've seen the analyst day date, yet so maybe it will get it there, but the $5 target originally set up where do you think you are I guess, it's a different way of asking the question about what inning. You are in that was asked earlier, but how much of the $5 do you feel you've now.

We've to this point.

Yes, I think Doug we've we've talked about things like that.

The workforce reduction which was.

More than a buck about a buck 50, so that that has happened and I think with many of the other things I think we've captured a couple bucks of that already is kind of where where I'm at.

And.

You do have we do have some headwinds we've got inflation and things like this but our but our $5 goal is a net goal we've got to offset whatever headwinds we're facing on it and so I think we've captured a couple of that but we have an urgency over the rest of this year with the new trucks, we've talked about.

Improvements in turnaround performance.

<unk> got a list of things of value he's capturing on the downstream. So I don't have an absolute timeline on the $5, but no better time than the present and so I think this will be a big year and continuing to see that accumulate in quite frankly, when we get to five well what <unk>.

<unk> is better than five six is better than five sevens better. So it's going to be it's going to be a continued priority, but I think we're off to a quite a good start on it.

Am I right in thinking you haven't given us an analyst.

I was going to kill me for that but maybe we'll get clarification Lisa.

Yes.

Good morning.

Okay.

Those are always right.

I was going to say so here's what we're thinking of doing it Troy joined looking at me and I Hope. This what you were thinking and we have some big big decisions some big analytics the base mine the.

The rate at which we mined it toward depletion we've got some big things that we're tackling right now whats the priority on our continued development I'm looking long and hard at in situ opportunities I like what I see and so we could hold an analyst day sooner and tell you the things we're looking at or we could hold it later.

And tell you where we land on these so what we are inclined to do right. Now is have a sometime probably in the second quarter, a pretty comprehensive update I don't know what we'll call. It it wouldn't be a full blown analyst day, but we dig in and detail, particularly think about this $5 a barrel et cetera, and then later.

This year have a a full blown analyst day that looks at answering a lot of these longer term key strategic questions don't think we can wait till late this year and do all of that so I am feeling we're going to need to give you something sooner, but thats more Troy nice heads are right now and we're trying to land on those dates.

That's what we're thinking.

Well rich I didn't intend not to be my second question, but you did address some of the portfolio, which I guess you.

Having resolved yet so.

I will get another one.

Oh I do.

Yes.

That's good.

It was actually than the freebie, it's Kevin.

Is kind of on that exact topic actually because when you and I have chatted about this before you've said look we don't necessarily have to replace bitumen.

Because we could use that capital commitment to buy back an enormous amount of stock with the capital and draw on basically shrink the share count and I guess my question is what are you any further forward in that thought process and I guess, you've kind of addressed it in your last question, but any updated thoughts and I really appreciate it.

Well I think youre spot on for us its all going to be about value and I think the one area that is just pretty intuitively obvious to us is keep the upgrader is because in doing that and the value uplift from a barrel of bitumen.

A barrel of synthetic crude whether it's sweet or sour is is kind of obvious by inspection that that creates tremendous value going beyond that it's just like anybody else, whether we were in west Texas or.

The South China Sea does adding new capacity make economic sense. So we don't have a bias towards maintaining production levels at a given level or not but it will be about value now I also do believe that as we have good valuable development opportunities.

They can create more long term value, but we don't have a it's not a biased one way or another the upgrader is full yes anything beyond that will have to stand on its own two feet in terms of the value it creates to shareholders and we're going to look at that at the end of the day on free cash flow per share.

Terrific well look forward to that when it comes thanks, so much guys.

Thank you one moment our next question.

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

Thanks, and good morning, everyone I'll start with a question on upstream Opex given your comments rich on the <unk>.

<unk> performance gap.

Thinking changed at all in recent quarters in terms of where longer term per barrel opex could land over the next several years and I'm thinking along the lines of Oilsands ops Syncrude and.

Fort Hills, and if not maybe you could just remind us of what the current goalposts Sir Thank you.

I don't know mineral that I'd say are our outlook has changed obviously I won't go back over the examples but our intent is to drive them down I do think if I take Fort Hills, specifically, we would have been driving it down if we go back a year or two ago.

Faster with the opening of the two pits in the North mine is kind of delayed that a year or so.

Yes.

We have specifics I'm looking at Peter if he's got anything.

To say on it but we do believe in our existing business by by executing the day to day work we do.

We can continue to bring about improvements and that is so I don't know if that translates I think if you could talk about this $5 a barrel Peter himself is talking about $5. A ton dollar time excuse me a dollar a ton which would be equivalent of $5. A barrel. He is targeting that in the mining I've kind of hedged.

My Bad Spain will Peter is going to give me a big chunk of that day is going to give me some more of that so our corporate number is $5 a barrel that Peter has an inventory list that wed largely give him the $5 a barrel or a dollar a ton.

Just with all the things he is pursuing Peter do you have any other.

Any other comments on our outlook on Opex.

Thanks, Rich and I think.

And we talked a lot about the mining efficiencies and improvements and really that is the big gearing to reducing our operating costs.

But beyond just investment of haul trucks driving mine productivity, we're looking at lots of dimensions in our mining business. So whether that's online civil strategy, whether that's our maintenance and reliability expenditures.

Benefits that we're going to get from the autonomous haul trucks at that rich spoke about earlier fuel contractors everything we can as it relates to the operating cost buildup for mining is where our focus areas for team is challenged to go out and find $1 a ton quite a substantial amount of cash if you project that.

How many times, we move in the air which is north of 1 billion tons a year.

And that is the objective.

Factors not just one site, but it all online operating sites across across our upstream portfolio. So Peter comment on what's different today about how we're going about this than say maybe a few years back before your time here.

Your perception of how the company was going about it and really thinking about the im looking at your Little chart here, the tangible nature and the accountability by the component parts of it so I'm, giving you the Q on how to answer the question.

Let me take it from there.

Very high degree of specificity and the tactics that were taken to drive efficiency in the mine I mentioned it earlier.

This isn't just something that we look at it on a monthly basis and our performance stewardship.

Day by day shift by shift in Ontario, say, even by hour hour by hour draw.

Driving efficiencies and improvements in our operation that is owned by the operating leaders at the sites.

I understand what the targets are they have a strong commitment to deliver on they understand what the big picture is and how that fits into it.

Driving the overall corporate performance and going back to a comment I made earlier on is with a common organizational structure at all of our sites now upstream and downstream, whether thats a maintenance opportunity on operational reliability and engineering technical solution, we have natural network.

Now across the company, who can collaborate on bringing sharing ideas and bringing about in a faster way the execution of an idea companywide.

You might say well why werent you organize like that before alone. That's a different question, but we are now and I think that will help not only identify new opportunities and accelerate their implementation.

One of the clear things on when we reorganized through the back half of 2023 and really crystallize. The accountabilities for our site. So that has enabled us to implement very efficient work processes not just within a given site, but indeed across the breadth of the suncor operating asset so give enroll.

And my assets are very similar to exactly the same as what <unk> has in the downstream in refining assets Shelley Central team is focused on delivering value to the asset. So it's a very asset centric.

Organizationally design.

Enabled by consistent work processes. So we are very clear on what's required who is accountable to deliberate on what a measure of success looks like and that oncotype.

Showing to deliver some really good results for us across across our operations.

Terrific. Thanks for that that was a very thorough rundown. So maybe the second question for rich <unk>.

<unk> been in the seat for almost a year. So I have a question on your take on strategic fit for the four refineries I think the fit is really obvious for Edmonton and Sarnia, but maybe a little bit more nuanced for commerce city in Montreal. So the question is how core do you consider commerce city of Montreal, and if we look across the.

Entire downstream portfolio, what are you seeing in terms of near term.

Opportunities to further enhance our margin capture.

Well I think any of our assets wherever they are they are about the value. They can provide and I would go a step further and say is there something unique about our capabilities or competencies are we've talked a lot about the physical integration is there a unique level of value that we can bring to <unk>.

Owning and operating the asset versus an alternative I mean, I think commerce city is a bit more of an island compared to the rest of our operations, but it also is in a strong market and it's got some.

Logistical advantages there that we believe can add and create value. So the key for us over the last year and a half there is keeping that thing up and running and when it's up and running and it generates a lot of cash I would say you look at the east coast operations kind of in the same way you've got it's a bit of a you've got the dichotomy.

The Hebron and Hibernia non operated different kind of operations and then you've got the two floaters, but again its the idea of can we can we keep things in these assets up and running with high reliability high integrity and when we do they can add material value to the enterprise. So we look at our assets individually.

Collectively and it all comes down to what kind of value do we believe they can how well can we operate them and what kind of value can they provide to us.

Thanks, Rich I'll turn it back.

Thank you one moment for our next question.

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

Yeah, good morning, rich and team.

My first question is just around.

Your framework for capital allocation, so that slide five maybe rich you can step back and talk big picture about how you're balancing the operational turnaround Youre also prioritizing return of capital.

We've anchor to this 9% to $12 billion being the right net debt level.

At which you shift to a 75% to 20 versus 25 50 50 payout.

But how are you tracking towards that.

Are those the right levels as you've spent more time thinking about it.

Speaker Change: Neal I'm going to ask Chris to comment here in a second, but but I want to step back again and frame. It in the context of why we keep talking about this $5 a barrel or breakeven now is kind of 50 ish low <unk> and we want to take $5 out of that so that we have a greater level of financial resilience.

Speaker Change: See in.

Chris Smith: Inevitable ups and downs of this the business that we're in and so in doing that that allows us from a capital allocation standpoint to weather the storms when we get in weak market conditions and be more opportunistic when maybe others are in a bit more of a difficult position. So.

Chris Smith: The $5 a barrel objective, we have aligns with than having a ensuring we have a strong balance sheet. We have financial resiliency, we can pay all of our bills in good times or bad I put dividend in those bills and then have the.

Chris Smith: The added flexibility of continuing to return.

Chris Smith: Return.

Chris Smith: Cash to shareholders, but Chris you maybe want to talk more specifically about the current structure, we have in our thoughts, yes, Sir Hey, Neil.

Chris Smith: Yes, I mean as you pointed out our capital allocation structure is pretty clear when we hit in the $12 billion net debt. We go to $75 25 buyback and reduction and then once we get to $9 billion and I think that is a net debt basis, including capitalized leases.

We're focused on that framework I think to.

Chris Smith: Piggyback on Rich's comments, what we're trying to do is drive more free cash flow out of the business. So we can drive to those targets even more quickly now obviously, it's all going to be dependent on where commodity price lands and people will take varying views of when we're going to hit the 12 billion, but we're focused on driving that debt down while <unk>.

Speaker Change: <unk> to return cash to shareholders I mean, I think your other question about will the targets change I mean, we're always looking at the resiliency of the business and do these targets makes sense, but in a commodity business like this as you know having really strong balance sheet and we want our balance sheet in a place that is going to whether or not even mid cycle low well below mid cycle price.

Speaker Change: And that's really what the $9 billion driving towards but we're continually looking at our capital position, we're driving but the allocation framework isn't changing at this time.

Thanks, Chris and then the follow up is just on slide 13 is a pretty heavy year for economic investment capital between West White rose the well pads Mildred Lake that drum.

Speaker Change: Chad and Fort Hills, and the trucks. So maybe you could just talk about that set of projects how they're tracking.

Speaker Change: Relative to expectations and update on the investments that you're making here.

Speaker Change: I think on West White Rose I'll, let the operator ready comment a bit more on that but I think.

Speaker Change: We do have a lot of things going on.

Speaker Change: The portfolio of replacements will be wrapping up later this year as we approach startup well pads are.

Speaker Change: Quite economic investment for us.

So we're we're wrapping some things up and now we're really looking at kind of what goes on from here forward in terms of what is the right level of Capex, but maybe if there's any.

Speaker Change: In terms of the execution Shelly you want to comment a little bit on the capital projects <unk> Peter.

Shelly: Bulk of the money is and you guys was areas any any comments you could offer there yes, I think you hit the high points the execution for all of those major projects is on track proceeding as we expect them to be.

Speaker Change: The certainly the.

Shelly: Copa replacement oriented system turnover is starting to commission some of those key system. So we're expecting that fence are progressing as we expected it to be one thing I would comment on projects projects is just like operations or others. Its a specialty expertise that goes with planning and executing.

Shelly: <unk> projects.

Shelly: Same on US we learned a lot through terra Nova but as we've been learning it we've been strengthening our execution capability in other areas and although turnarounds are different. They also have a lot of similarities in the importance of preplanning, ensuring you have the necessary resources scheduled out in time.

Shelly: So this is a whole area of emphasis for us on planning and executing our work and that applies really across the board, but you'll really see it tangibly in project execution.

Speaker Change: Thank you Sir.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And that will come from the line of Patrick O'rourke with <unk> capital markets.

Patrick O'rourke: Hey, guys good morning, and congratulations on a strong quarter. Thanks for taking my question here.

Patrick O'rourke: You spent a lot of time going over sort of mining operations, but you touched on in <unk>.

Opportunities earlier in the call I'm sure a lot out there just like myself have been watching very impressive results at fire bag Mek.

Speaker Change: And youre running from what I can see very close to nameplate capacity. There. So I'm just wondering if you could kind of maybe unpack a little bit more what the opportunities and the thermal units or are they growth are the capital efficiency are.

Are they on the operating cost side, and what that could look like going forward.

Speaker Change: Yes, sure. If you look back over our last 10 years, we had such intense focus on mining with the initial investment at Fort Hills, and things, it's not I'm going to use a word I don't mean, it quite as strong, but but in a sense are in CIT, you kind of took a bit of a back.

Speaker Change: Seat in some regards because we had so many other capital needs, but as we look at the quality of that operation.

Speaker Change: Fireback fire bags of Rockstar I.

Speaker Change: I wish I wish we had a couple more of them and we do have opportunities to continue to debottleneck at lower relative cost per flowing barrel at fire bag, we've got opportunities for new developments Lewis or fire bag, South and what we're doing right now in this this gets in concept to the Investor day, we're doing a lot of.

Speaker Change: Work right now to answer some key questions. There about what's next what's the most capitally efficient and win.

Speaker Change: And.

Speaker Change: I'd love to have those questions earlier, rather than later, but it's going to take us the bulk of the spring and the summer to get there on some of those but I think in situ plays into our future in a in a bigger way. So that your questions are good set up youre going to hear more from us about in CIT you some of the opportunities are very.

Speaker Change: Much low cost debottlenecking at the at the <unk> plant in itself water handling capability whatnot, where you can spend a small amount of money.

Speaker Change: Open up 234, 5000 barrels a day of additional capacity, we're also testing solvent technologies.

Speaker Change: Solvent to me is a winning formula if you can convince yourself, you get equal to or better recovery and lower carbon emissions with it lower steam use. So we've got some pilot work that some of it that's wrapping up this spring.

Speaker Change: So you can expect to hear more on that.

Speaker Change: Greenfield developments for all.

Speaker Change: Like Louis for example, we're looking at synergies given its proximity to the base plant with surplus steam utilization. So here again it comes back to the concentrated geographic footprint of our assets the physical integration of what we have and the ability to do things or add value.

Speaker Change: That are above and beyond what our competitors can say so.

Speaker Change: You answered or you asked a great question for me because instituted something youre going to be hearing more and more from us about in the in the months and the quarters ahead.

Speaker Change: Okay, great. Thank you and just a follow up here.

Speaker Change: Just looking ahead at the year I know a lot of these risks are completely unpredictable we've had things like wildfires in the past, but one of the things we've been watching as drought conditions here Athabasca River water levels and flow rates look okay. So far but just wondering.

Speaker Change: If you have any contingencies or any concerns on that end.

Speaker Change: Yes, I'm going to ask Peter to comment on that specifically, because obviously the importance of water to a resource and of course, our operations are where the vast majority of the source of water is in Alberta, and we in industry use a relatively small fraction of that source. The Peter you want to comment a little bit about our kind of our overall.

Peter Zebedee: Approach in wound water use and management.

Peter Zebedee: Absolutely right. So I think I'd like to start by just saying.

Peter Zebedee: And our operations today, we are recycling, 94% of the water we use in our operations and we are very key.

Peter Zebedee: Careful in the amount of water that we're drawing off.

Peter Zebedee: The river.

Peter Zebedee: We are we have contingency plans in place, yes, absolutely and we're also.

Peter Zebedee: Casting our eyes to the future to look at investments that will reduce our water intensity across our operations first and foremost at base plant.

Peter Zebedee: To develop a potential water treatment plant.

Peter Zebedee: Bring that on.

Peter Zebedee: By the towards the end of the decade here.

Peter Zebedee: First in our operations. It is all about efficiency and scarcity of use heavy focus on recycling and building the contingency and so that we can.

Peter Zebedee: Other through these drought conditions that we are going to see across the province. This summer.

Peter Zebedee: Okay.

Peter Zebedee: Yes.

Speaker Change: Thank you. Thank you very much.

One moment for our next question.

Speaker Change: And that will come from the line of Manav Gupta with UBS. Your line is open.

Manav Gupta: My last question here is it looks like you don't have too much downtime in the refining segment in <unk>.

Manav Gupta: Our fourth quarter of capture number was 103% anytime the captured goes on 100%, we view that very favorably.

Speaker Change: Looks like a lot of North America is in a turnaround.

Speaker Change: And you're running all out in <unk> does that set you up very well for the at least the first half of the outside of downstream earnings are concerned.

Speaker Change: Yes, I think we.

Speaker Change: We like the 100% to that that's good right, Dave we like there is more than a 100%.

Speaker Change: Ill ask Dave to comment we do have turnarounds at Montreal in Sarnia and come on this year and in the.

Speaker Change: <unk> kind of second quarter ish.

Speaker Change: But youre right for the rest of the bulk of the first quarter, we're going to be up and running but Dave.

Dave: Comment on that but I also want we've up.

Dave: I've asked you to give your quota pint of blood on the $5 a barrel. So answer that question. But then also talk about what the downstream is doing to contribute to our $5 a barrel corporate breakeven reduction so manav sorry, you still get another question.

Speaker Change: Want Dave to comment on what his team is doing in that regard as well so thanks rich and thanks for the question.

Dave: Well, that's actually a lot of material to go work, but I could probably spend a bit of time on this one but.

Speaker Change: You mentioned margin capture and I think the story for the first quarters can be fairly similar to the story for the fourth quarter.

Speaker Change: And for the fourth quarter, we delivered.

Speaker Change: Strong strong margin capture and when I think about it Chris mentioned some of the reasons why we were able to run our refineries fall weather economic and we've got some structural advantages.

Speaker Change: A R. G E R location R. R.

Speaker Change: Connectivity to our to our upstream as well as our retail business.

Speaker Change: We ran full and saw strong margin capture I'd also flip that around.

Speaker Change: <unk>.

Speaker Change: Running full allows you to capture strong margin margin capture strong margin capture it gives you the economics of unfolded, we had we saw both.

Speaker Change: In the downstream in the fourth quarter.

Speaker Change: We haven't we have optimization.

Speaker Change: Our downstream teams do aggressively everyday and we saw some really good examples of that.

Speaker Change: First off reliable operations allowed us to optimize our molecules through our refineries and innovative integrated value chain to the customer.

Speaker Change: We were also able to give economic full signals to all of our refineries. Despite falling gasoline prices now that was assisted by deeper west can crude discounts, particularly on SCO are lower <unk> ratios relative to our competition and our ability to export diesel across both coasts and that will continue through the first quarter as well that ability to move.

Speaker Change: Diesel across both coasts.

Speaker Change: And the ability to move volume between the two regions east to West on rail is a real good advantage for us to allow us to take advantage of that.

Speaker Change: Our inventory refinery is highly integrated with our upstream assets, we optimize that everyday.

Speaker Change: To make sure that we fill out the refinery to all of its constraints as well as trying to tailor the mix to meet our customer demands and that's a unique capability in the industry are trading organization has done a great job in the fourth quarter continues in the first quarter to move volumes.

Speaker Change: The code set.

Speaker Change: Really good net backs we saw that in December we see that through January while gasoline cracks were low gasoline cracks have picked up that should continue to help us and our rack forward business was just continues to be strong and provides a nice push it also provides a little bit of cushion in our following.

Speaker Change: Pricing market, which we saw through the fourth quarter and our wholesale pricing.

Speaker Change: When our street price kind of lagged wholesale prices. So really good fourth quarter in terms of margin capture we would expect that to continue through.

Speaker Change: Through the through the first quarter in terms of value capture that's a really really exciting thing for us in the downstream.

Speaker Change: We think about.

Speaker Change: There are opportunities.

Speaker Change: Peter talks a lot about how we reduce cost of mining that's a big opportunity in the upstream and the downstream our volumes are a little bit smaller and the cost of production. It's a smaller it's a smaller piece to work with to begin with so there's some opportunities in the dollar per barrel opex side of things, but our bigger opportunity is our ability to capture value.

Speaker Change: <unk>.

Speaker Change: And that's really where we're focused and our team is really excited about it we're building plans to capture value in a number of key areas.

Speaker Change: And that value will turn into cash and its alba cash which to the bottom line of the enterprise, which overall helps our breakeven for the enterprise.

Speaker Change: We're looking at a structural reliability improvement at all of our assets and our refining business.

Speaker Change: We're looking at supply and logistics opportunities, we're taking a look and the supply side that a lot of our contracts that maybe we haven't looked at a number of years and checking whether they still.

Speaker Change: Still have served us well.

Speaker Change: And we're seeing some opportunities in that space, we spend a lot of money and logistics moving large volumes of product all across North America and even in export.

Speaker Change: Theres vessel leases theres railcar leases as pipeline contracts all of that stuff. There's a lot of money being spent there we think there's some opportunity to squeeze some of that.

Speaker Change: And find some some really good value there our trading organization is world class and we've been growing that over the last few years and we continue to see opportunity to capture more value through that organization.

Speaker Change: On the refining side, we have a number of kind of really small investment opportunities low capex high return that we're going to look at it each of our assets to continue to grow that and of course folks are aware of our retail growth strategy. We began implementing that in 2023 and thats going to that is actually delivering very well for us we're seeing some really.

Speaker Change: Promising signals on some of the early sites that we've developed.

Speaker Change: And we're going to continue that through the next few years. So we see a lot of opportunity to contribute.

Speaker Change: Upwards of a couple of dollars a barrel to that $5 a barrel challenge over the next number of years through downstream value capture I just wrote that down day. Thank you.

Speaker Change: The bankers.

Speaker Change: My quick follow up and thank you for the detailed response my quick follow up is it looks like the med Dev test went up a little because of the photo that can get the concern more depth of that transaction and maybe there was some lease liability things I'm just trying to understand now that photos within there.

Speaker Change: Crossing higher volumes I think what would be an optimal depth level. After that you would see and I'll give you a very comfortable holding to this amount of depth and then most of the other proceeds can just go to buybacks.

Speaker Change: Yes.

Chris Smith: It's Chris here.

Chris Smith: Similar to the question you had earlier from Neil Mehta.

Chris Smith: Our capital allocation framework is quite clear so we're driving to $12 billion net debt as our next target and then we will change the capital allocation framework from 50 50 to $75 25, and we're honored and our goal is to get down to 9 billion net debt, including capitalized leases. So that's the framework we have in place.

Chris Smith: And as I said earlier in the call. This is all about as you look as you've listened for the last period of time, we're looking to release as much free cash flow as we can so that we can actually drive to that net debt target and returned more cash to shareholders.

Chris Smith: And the net debt only went up because of the photos transaction right I just wanted to clarify that and.

Chris Smith: In the quarter, Yeah, that's right I mean, our net our net debt at the end of the day was.

Chris Smith: Flat year over year, and we had the acquisition, which was $1 5 billion Canadian plus closing adjustments adjustments and closing costs and as you pointed out there was some capitalized leases that came with that so when you look at that.

Chris Smith: On that basis, we did the transaction, we kept the net debt level or our debt excluding capitalized leases actually went down.

Speaker Change: Thank you so much.

Speaker Change: Thanks.

Speaker Change: Thank you one moment our.

Speaker Change: Next question.

Speaker Change: Okay.

Roger Read: And that will come from the line of Roger read with Wells Fargo.

Roger Read: Yes, good morning.

Roger Read: I'd like to just follow up on one thing as you mentioned being able to supply Fort Hills from fire bag kind of.

Roger Read: It gets placed plan and others does it matter.

Roger Read: What you are putting through the upgrader is in terms of bitumen and bitumen quality, what's the flexibility there as we think about the long term question of replacing space plant production.

Speaker Change: I know.

Speaker Change: Next decade kind of question, but it's out there and so I'm. Just curious are you learning something about the ability to be more flexible with the feedstock.

Speaker Change: Roger Thank you.

Speaker Change: Upgrader is have the capability of handling whatever the feed is but.

Speaker Change: The cocktail that comes from fire bag is not exactly the same as the cocktail that comes from Fort Hills, and what we've learned with the paraffinic froth treatment that Fort Hills that basically is taken the heavier asphalt teams out of it before it comes what Peter is getting at base plant when he runs that through.

Speaker Change: We've talked in the past about getting the uplift in volume that when it goes through there, but literally we've been testing that long and hard and with more Fort Hills.

Speaker Change: Barrels going through Peter keep me honest, we've talked about the volumetric uplift of bringing a fort hills barrel in on the kind of the 4% range.

Speaker Change: Increasingly we're thinking it's more than 6%.

Speaker Change: And what we think is we're getting that four but as you stare those fort hills barrels in with all the other barrels they have a synergistic effect that get an uplift from a larger volume and so they're again lies what's the value proposition. When you can look at where the paraffinic froth treatment bitumen gets in the market.

Speaker Change: Versus a fire bag, we have the ability to move barrels literally day to day week to week to get the highest value. So all barrels are not created equal Peter you have anything you'd add to that or I love. This topic.

Peter Zebedee: This is awesome and actually that is what the results are showing north of 6% yield uplift on those.

Peter Zebedee: Paraffinic froth treatment barrels from Fort Hills again, we can bring those into the upgrader at a maximum of 60000, a day right now and that's one of the things. The teams do every day on where we're going to generate the most value.

Peter Zebedee: For the company and what what the mix is what the cocktail and so we're bringing into those on graders.

Speaker Change: So I guess just as a follow up on that I mean does that imply as youre looking out.

Speaker Change: 10, plus years that there's actually a lot more flexibility in the way to think about bitumen.

Speaker Change: Being laser.

Speaker Change: Absolutely minor some absolutely.

Speaker Change: Yes, no no doubt about it we will look at the most most holistic way so that we ensure we can accurately see what value can be captured and here again I think I think this is part of what makes us a bit different than others is the way we can look at a barrel of bitumen.

What we can do with it we have options and that will be part of as we look forward on what are the best long term sources of bitumen that will be very much a consideration as we look at where value can be created.

Speaker Change: Alright I appreciate it thank you.

Speaker Change: Thank you I'm showing no further questions in the queue. At this time I would now like to turn the call over to Mr. Rich Kruger for any closing remarks.

Rich Kruger: Yes, I'd, just wrap up pretty quickly before giving it back to Troy. Thank you for the time.

Rich Kruger: The questions today, we had a lot to cover I'll, just reiterate really what Greg started us where we are right now and as we get into 2024 I believe we've got the right leadership. The right people were focused on the right work, we have an inventory of things that can make a good operation great and thats.

Trial: Exactly what we intend to do so with that I'll, just turn it back to trial.

Trial: 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 operator, you can end the call.

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

Speaker Change: Yeah.

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