Q1 2025 Suncor Energy Inc Earnings Call
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Speaker Change: Good day and thank you for standing by welcome to the Suncor Energy first quarter 2025 financial results call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
Speaker Change: Ask a question during the session you will need to press star one on your telephone you will then hear an automated message advising your hand is right to withdraw your question Press Star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker Suncor Energy's senior Vice president of external.
Speaker Change: Affairs, Mr toilet at all.
Speaker Change: Thank you operator, and good morning, welcome to Suncor Energy's first quarter earnings call. Please.
Speaker Change: Please note that today's comments contain forward looking information.
Speaker Change: Actual results may differ materially from the expected results because of various risk factors and assumptions that are described in our first quarter earnings release as well as in our annual information form both of which are available on SEDAR, Edgar and our website Suncor Dot com.
Speaker Change: Certain financial measures referred to in these comments are not prescribed by Canadian generally accepted accounting principles for a description of these financial measures. Please see our first quarter earnings release.
We 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 Peter as Deputy Executive Vice President oil Sands, <unk> Executive Vice President downstream and Shelly Powell Senior Vice President operational improvement and support.
Speaker Change: Services.
Speaker Change: Following the formal remarks, we'll open the call up to questions now I'll hand, it over to rich to Sharon's comments.
Speaker Change: Good morning, Suncor is first quarter was about maintaining momentum and starting 2025 strong I believe we successfully accomplish both objectives.
Speaker Change: Comment on some operational highlights and Chris will further focus on financial performance I'll start with personnel safety previously shared that 2024 as performance was as good or better in 2020 threes best ever with recordable and lost time events down significantly I am pleased to report the positive performance.
Speaker Change: Has continued year to date 2025 <unk>.
Speaker Change: Special Callout to Dean Wilcox based plant team winners of the John T. Ryan 2024 National Safety Award for Outstanding Safety performance and major projects in Civil work. This is awarded annually by the Canadian Institute of mining and it's the Holy Grail in mine safety.
Speaker Change: Process safety previously shared that 2020 fours performance was best ever first quartile in North America, Although first quarter of 'twenty five performance demonstrated continued improvement significantly better than 2020 fours personal beliefs, you can't be a well run.
Speaker Change: <unk> company without being a safe company.
Speaker Change: Extreme production 853000 barrels a day, our highest first quarter ever and our second highest quarter ever.
Speaker Change: 18000 barrels a day higher than our previous best.
Speaker Change: Best first quarter, which was achieved last year.
Speaker Change: Greater utilization of very strong 102% of fourth quarter out of the last five where we've been at 99% or higher.
Speaker Change: <unk> high performance from our profitability Pacesetter fire bag at 248000 barrels a day.
Speaker Change: <unk>, particularly good considering harsh weather for much of February in Alberta.
Speaker Change: Refining throughput 483000 barrels a day far and away the highest first quarter in our history 28000 barrels a day higher than our previous best first quarter again set last year refining utilization exceptional at 104% the third consecutive quarter.
Speaker Change: Above 100%.
Speaker Change: Fact, every refinery achieved higher throughput and higher utilization year on year and our overall bottom line is we've been 5000 barrels a day of our best ever quarter of any quarter refined product sales 605000 barrels a day here again far and away the.
Speaker Change: Highest first quarter in company history, 24000 barrels a day higher than the previous best first quarter again set last year.
Speaker Change: Third highest quarter ever with the top two quarters being the last two.
Roger Bannister: In fact, the past five quarters have been our highest in company history and $19 54, a gentleman named Roger Bannister. The world's first four minute Myler said records are meant to be broken and that is exactly what suncor teams continued to do break records.
Roger Bannister: Total cost <unk>, three 3 billion down a 143 million or four 2% in absolute dollars versus the first quarter of last year, despite higher production and throughput across the board.
Roger Bannister: 3% to 4% higher absolute volumes, 4% lower absolute costs operating leverage achieved with a culture and a mindset that every barrel and every dollar matter.
Roger Bannister: I want to take you back 12 months ago Investor Day May 2024, we established several objectives for the three years 24 through 26 to improved performance creates shareholder value and we're tied to production growth cost reduction free funds flow growth and net debt at the end of last year and into 'twenty.
Roger Bannister: Four we reported on the first your progress production growth, we've achieved 75% of our three year target.
Roger Bannister: Breakeven reduction, 70% or $7 a barrel U S. A.
Roger Bannister: Three year target.
Roger Bannister: Free funds flow to $3 billion or 70% of the three year target.
Roger Bannister: Of course net debt achieved our $8 billion target in the third quarter of last year. The bottom line one year into our three year plan. We've exceeded every single target essentially achieved two years of our planned improvements in the first year, but the best and most important part we aren't.
Roger Bannister: Done yet what gives me this confidence in the first four months of the year I've spent a lot of time in the field.
Roger Bannister: At our plant sites in our minds.
Roger Bannister: And with and talking to the hardworking card-carrying operational and technical experts I've spent time at the base plant looking at are you one coke drum replacement project and reviewing autonomous haul truck operations time at Syncrude, Mildred Lake and Aurora mines observing best in class truck and shovel operations.
Roger Bannister: Turing includes heavy equipment maintenance shops at Fort Hills inspecting the major new state of the art heavy equipment arrival I've been at our Montreal, and Sarnia refineries with teams driving industry, leading utilization touring our retail site network meeting Petro Canada associates across the <unk>.
Roger Bannister: Country, why do I and my colleagues and all of this time in the field because suncor is leadership team knows the game is won on the field with the players and on the field is where you'll find us. So what did I see that reinforces we're not done yet.
Roger Bannister: <unk> planned Antonymous haul truck operations, Mike Gartenberg team at year end 2024, we achieved our objective of 91 autonomous haul trucks moving all productive or since then we've increased our fleet to more than 100 trucks on the way to 140.
Roger Bannister: Nine months, we've achieved performance equal to staffed operations versus a typical industry benchmark of two years.
Roger Bannister: We're leveraging data analytics, creating a new world class Ahl's Command Center, we're collaborating with our partners Komatsu and SMS to upgrade Hs software to improve all weather or what we call mud mode operating performance the productivity expectations.
Roger Bannister: We have in the in IHS at the base plant is expected to yield the equivalent of 10, three 400 ton haul trucks by 2026.
Roger Bannister: Coke drum Coke boiler replacement and Cogeneration project project, Mike Haig's team, where we replaced three old Coke drum or Coke fired boilers with two new 400 megawatt gas fired generators added new high efficiency heat recovery steam generation Raiders.
Roger Bannister: Excuse me, we completed the project and achieved startup in the fourth quarter of last year. We've now tested each unit at over 400 megawatts.
Roger Bannister: The project will meet steam steam needs for the base plant with surplus power exported to the Alberta grid improves reliability lowest cost generates power revenue and lowers emissions.
Roger Bannister: In crude Aurora mine truck loading operation, Alex Starks team Aurora supplies, two thirds of Syncrude mined bitumen. The mine is supported by our fleet of 70 to 75, Caterpillar 797, 400 ton haul trucks historically, we've loaded each truck $2.
Roger Bannister: 93% of capacity or 370 tons per truck Alex's team has increased its load factor to over 100% now a 10% increase 30 to 40 more tonnes of productive or on each and every track achieved through shovel operator.
Speaker Change: <unk> practices and load sensing technology, the impact lower unit costs higher productivity equal to 734 hundred tonne trucks Fort Hills, New hydraulic shovel shovel Alastair Givens team last Thursday, I attended a ceremony commissioning the.
Speaker Change: World's largest hydraulic shovel the PUC 9001st of its kind serial number number one designed in partnership with Komatsu and SMS purpose built for suncor to be perfectly paired with our <unk> 400 ton truck fleet larger bucket.
Speaker Change: Longer reach greater digging force swivel capacity for dual side loading the results faster loading less repositioning last village.
Speaker Change: Having seen it been walked on it personally the PUC 9000 is a beast.
Speaker Change: Personally I personally pulled out by a stopwatch on my phone and time loading operations four scoops 404 tons in one and a half minutes folks that's fast deployed in Fort Hills Center pit, we've got a second shovel scheduled for delivery in July in two more.
Speaker Change: Next year. This is an example of vision partnerships technology and scale driving productivity and lowering costs refining operations I spend time with Qatar Bhutanese.
Speaker Change: Sarnia team and Isabelle Arbor's, Montreal team seen how maintenance and reliability breast best practices are driving higher utilization, how turnaround benchmarking and risk base work selection are reducing capital and operating costs, how low cost debottlenecking is achieving record.
Speaker Change: Refining throughput two examples I want to share with you a grass roots focus on driving performance and adding value Brad Jones process, operator, Sarnia refinery, Brad had the idea to spend $200000 for tie ins to maintain flow.
Speaker Change: <unk> ability during our recent April turnaround.
Speaker Change: $200000 added $4 million in jet fuel margin of 22, one payout in one month, well then Brad Remy La Berge crude unit, operator, Montreal refinery, whose idea for minor pumping our piping modifications at a one time cost of three <unk>.
Speaker Change: <unk> hundred thousand dollars to increased refining capacity by 500 barrels a day is adding more than $1 million in margin every year 2025 will be the first full year.
Speaker Change: These examples illustrate the power of clear simple priorities focusing on the fundamentals understood and embraced top to bottom delivering results supply trading and marketing in the first quarter I witnessed Paula O'shaughnessy, Paul Ademas and Derek Davies teams supplier.
Speaker Change: <unk> and trading in volatile east west crude and refined product markets to capture premium margins at lower costs, and lastly, I spend time with Pat <unk>, Petro, Canada, retail and wholesale and wholesale associates working in partnership to increase market share and site margins.
Speaker Change: Nationwide.
Speaker Change: I'll stop there, but here again these are only a few examples I could share of suncor teams technical operational and commercial working together to deliver industry, leading results teams with the drive of fierce competitors and the determination of champions teams Unstack.
Speaker Change: <unk> and their commitment to be the best of the best.
Chris: With that I'll turn it over to Chris.
Chris: All right, thanks, rich and good morning, everyone.
Speaker Change: Building on Richard's comments, it was yet another strong operational and financial quarter as we continue the positive momentum we built in 2024.
Speaker Change: But first with respect to the business environment in the quarter. There was obviously a lot of uncertainty around the impact of U S tariffs, but in the end the commodity prices across the quarter remained constructive.
Speaker Change: In the quarter WT eye in the light heavy differential remained relatively flat versus Q4 at $71 40, a barrel and $12 65 U S a barrel respectively.
Speaker Change: While synthetic crude decreased about $3, a barrel, averaging a discount of <unk> to $2 35, a barrel to ti.
Speaker Change: On the refining side, New York Harbor to one one cracking margins improved versus Q4.
Speaker Change: $2 25, a barrel driven largely by improving distillate cracks.
Speaker Change: And our 5221 refining index remained strong at U S $26.80 per barrel.
Speaker Change: Finally, natural gas prices increased by 60 Canadian at GJ versus Q4, averaging about $2 a G J in the quarter, but obviously remain attractively price for natural gas consumers like our business.
Speaker Change: Rich has already detailed our Q1 operational performance his remarks, so I won't repeat them here other than a few points.
Speaker Change: Oil sands production in the quarter was 791000 barrels per day within since you averaging 283000 barrels per day in the quarter Fort Hills, continuing to deliver solid operations with 176000 barrels per day in the quarter.
Speaker Change: While upgrading was strong at both base plant and Syncrude at 103, and a 100% utilization respectively.
Speaker Change: A&P averaged 62000 barrels a day in the quarter, which is up 5000 barrels per day from Q4, despite some temporary logistics challenges at Newfoundland loading terminal in the quarter, which have since been resolved.
Speaker Change: In addition to very strong refining throughput in refined product sales in the quarter. Our refining business also posted a very strong margin capture averaging averaging 99% on a LIFO basis, when compared to our 5221 index.
Speaker Change: This high asset utilization and margin capture as a reflection of the powerful combination of strong asset reliability, and our best in class supply and marketing business, which maximizes value across our various trade channels.
Speaker Change: We also continued to demonstrate operating leverage with total <unk> expense of $3 3 billion.
Speaker Change: Which is down quarter over quarter, while production and sales were up in both the upstream and the downstream.
Speaker Change: Capital expenditures totaled $1 $1 billion in the quarter, including $600 million of economic investments.
And $500 million of sustaining and maintenance capital.
Speaker Change: This strong operational performance and cost management led to very positive financial results in the quarter.
Speaker Change: We generated $3 billion of adjusted funds from operations or $2 46 per share in the quarter and adjusted operating earnings of $1 6 billion.
Speaker Change: Or $1 31 per share.
Speaker Change: I think it's worth noting that when comparing quarter over quarter Q1 dollars 25 to Q1 'twenty four despite a 7% decline in WTO and.
Speaker Change: <unk>, 24% decline in New York Harbor in Chicago, 211, cracks you see that our <unk> per share is the same and our free funds flow per share is actually 6% higher.
Speaker Change: This is a clear demonstration of the impact of our improving performance.
Speaker Change: As rich just said at Suncor every barrel in every dollar matters and this is proof of that.
Speaker Change: In the quarter, we also returned nearly $1 $5 billion to shareholders, including $705 million in dividends and $750 million in share buybacks, which was one 1% of our float.
Speaker Change: We continue to focus on returning 100% of excess funds to shareholders, while prudently investing in the business to grow returns to our shareholders.
Speaker Change: As expected we saw working capital increased during the quarter of about $1 billion.
Speaker Change: Contributing to net debt at quarter end being $7 6 billion, which is aligned with our debt management and capital allocation strategy.
Speaker Change: Overall first quarter operational and financial performance demonstrate our continued relentless focus on executing the fundamentals of our business and generating value for our shareholders.
Speaker Change: Now before handing it back to rich I just wanted to make a few comments on the second quarter.
Speaker Change: We're into our second quarter turnaround program and it is on plan for our 2025 guidance.
Speaker Change: The Sarnia refinery started Q crude unit one turnaround on March 29, which includes planned maintenance work on the cat Cracker and alkylation units and I'm pleased to say the team has made great progress on the event against the plan.
Speaker Change: As well the Edmonton refinery spring turnaround, which includes the sour crude unit hydro treaters sulfur trained and delayed Coker unit started on April 15th and is also proceeding very well and on plan.
Speaker Change: And lastly, the base plant upgrader, one turnaround which includes the Coke drum replacement project is also underway. The event started on May one and is a planned 91 day outage.
Speaker Change: We are extremely pleased with the planning and preparation of the team has done going into this event and we're very well positioned for the execution of both the turnaround and this important project.
Speaker Change: And we look forward to completing all of these events and reporting on them at the end of our second quarter.
Speaker Change: Finally, I want to take a moment to acknowledge the market conditions. We're currently facing with WTO prices currently and bouncing around $60 a barrel amid the market uncertainty we have seen over the last few months.
Speaker Change: I'm very pleased that the significant strides we've made over the last two years to improve our operational and financial performance.
Speaker Change: Significantly reduce our WTO breakeven and strengthen our balance sheet has significantly improved our company's resiliency and physician suncor to weather. These uncertain times and continue to generate solid free cash flow for our shareholders.
Speaker Change: Suncor is a resilient company with a best in class integrated business model and a highly focused and capable team you heard many examples for bridge both of which will prove to be a significant advantage. During these times like these and position us extremely well into the future and with that rich I'll turn it back to you. Thanks, Chris.
Speaker Change: A couple of comments before we just dive into the Q&A.
Speaker Change: Our objective today is suncor high performance sustained excellence 24 was a good year 'twenty five is off to a good start Chris talked about our strength and resiliency.
Speaker Change: <unk>.
Speaker Change: I'll end with a quote from the late Academy Award winning actor Gene Hackman in the 2000 film the replacements Hackman's Darden's County Reeves said.
Speaker Change: Winners always want the ball when the game is on the line folks I'm seen Suncor teams companywide continued to show me they want the ball with that I'll turn it back to Troy.
Troy: Thank you rich I'll turn the call back to the operator to take some questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced soon withdraw your question Press Star One again, please standby, while we compile the Q&A roster.
Speaker Change: And our first question will come from the line of Dennis Fong with CIBC. Your line is open.
Dennis Fong: Hi, good morning, and thanks for taking my questions as well as congratulations for a very strong first quarter.
Dennis Fong: My first question here, just you had to contend with the impact of colder weather in January and February can you talk towards your strategy around managing the various oil sands assets and operations that you have through kind of the challenging conditions.
Dennis Fong: Okay.
Dennis Fong: Yes, I'll take it.
Dennis Fong: Thanks Dennis.
Speaker Change: Don't mean to be commitment here, but the last time I checked it's always cold in Canada in the first quarter. So we have taken a strategy of philosophy, we're not going to be a weather taker, we're going to be a weather maker and so what Peter and Dave has done is they focus they've designed.
Speaker Change: Into our operation the resiliency for extremely cold weather conditions, whether that's the fuel in our haul trucks, whether thats supplemental winterized nation at our refineries.
Speaker Change: We face this uncertainty this variability every year for the last two years, we have been very focused on how do we engineer or design out that risk of that variability. So if.
Speaker Change: If you want any further examples I can I can ask Peter and Dave to comment but.
Speaker Change: Like so many other things in our company we've looked at it and just not accepted the outcome, let's say what can we do that can change or improve our performance independent of what the circumstances are.
Speaker Change: B and I think our winter <unk> program is a you didn't you didn't read about winter iteration in our press release, because we've engineered to accommodate and deal with it.
Speaker Change: I appreciate that color not true with Peter was going to step in there.
I don't know Peter you have anything to any particular that maybe I'll just add a couple couple things Dennis leave you much.
Speaker Change: But I also you really start to see the strength of our integration across our oil sands.
Speaker Change: Out here so we're.
Speaker Change: Infant issue crop up in a single asset we can really lessen our buffer out that impact by moving barrels across our integrated production ecosystem.
Speaker Change: You saw that in the high asset transfers that we reported on this quarter, that's really the strengths of suncor and the strengths of Suncor integration coming through.
Speaker Change: I can add a little bit for refinery perspective, as well, it's Dave here.
Speaker Change: There's thousands and thousands of things you have to get ready for winter renovation to work in a complicated refinery that I've seen these things all over the world and that the key really is to learn from past winters and make sure you capture the learnings of the instruments and the various things that frees up and make sure you have a disciplined approach to ensure that they are in good shape.
Speaker Change: For the fall and winter and the other thing that is probably interested in people may not appreciate as we start our winter aviation program some time around July.
Speaker Change: It's the middle of summer and Thats, what were starting to focus on it because we know winter comes every.
Speaker Change: Every year.
Speaker Change: Thanks, guys.
Speaker Change: Thanks, really appreciate that that underlying context, my second question shifts a little bit towards technology.
Speaker Change: And in aggregate improving operations I know back with the May Investor day.
Speaker Change: Update you guys talked a little bit around the mine connect tool, which really kind of helps optimize the mine fleet in aggregate, but I think the other thing that you've mentioned at least a few times on conference calls is that.
Speaker Change: While you present, some of the really interesting opportunities a lot of those kind of new ideas come from we'll call. It within the organization. So wanted to kind of like addressed like how is the mind connect to connected tool doing in terms of optimizing operations and secondarily, what does that may be spun out in terms of incremental benefits that you maybe.
Speaker Change: Didn't realize right when you kind of implemented the tool to begin with.
Speaker Change: Peter and I got we were up at Fort Hills last Thursday, and we weren't folks took us through and they were given us their their dashboards and their screen. Peter you want to comment on some of the things we will.
Speaker Change: Yes.
Speaker Change: Dennis to Mike connect tool is only that it really is a tool but it provides insights to the operations team. So that they can take action and that's obviously, where the value is generated when rich and I were up at Fort Hills last week.
Speaker Change: Talk about the Port Hills team about their short interval control.
Speaker Change: The use of some mine connect data and how that.
Speaker Change: Comes into our operating cadence in our operating performance through our operational excellence management system. So it's really about identifying an outlier.
Speaker Change: Which is delivered by the mine connect tool taking immediate action and then generating the value in the field and that's really kind of where the power companies.
Speaker Change: From data and insights and technology took quick action by the leadership team and Peter one of the things that really struck me as we sat there is the real time nature of the team leads who have the gentlemen in the room with us he talked about how they meet periodically multiple times a day every few hours as the opportunity is.
Speaker Change: Migrating from whether it's a shovel operation area truck efficiency and so we don't we don't lose our moment in the ability to optimize or improve overall performance to meet that was that was really a powerful discussion that we had a really is a timely response to a variant condition.
Speaker Change: Great.
Speaker Change: Thanks for that color I'll turn it back.
Speaker Change: Yeah.
Speaker Change: Thank you one moment our next question.
Speaker Change: And that will come from the line of Greg Pardy with RBC capital markets. Your line is open.
Greg Pardy: Yes, thanks, good morning.
Speaker Change: I Wonder if we could maybe just pivot to the to the downstream and then specifically.
Greg Pardy: Progress made on retail EBITDA growth I guess.
Greg Pardy: Hey.
Speaker Change: Ride my bike around Toronto, what I see are Youre closing some stations I know theres enhancements going on elsewhere. Just curious how the strategy is unfolding and whether the retail kind of in the same question, but whether the retailers is ultimately core to your business longer term.
Speaker Change: Thanks, Craig I'll ask Dave to comment in a second but you're exactly right. If you go back to either a retail review or our Investor day, we talked about how that we're looking at that portfolio of some 600 plus sites nationwide and we're high grading and upgrading major markets.
Speaker Change: The highest volume highest margin sites, we're growing those and then we're rationalizing on the other end of that Dave do you want to comment on how we're doing it for sure and Greg riding your bike around it's not helping our retail business will have.
Speaker Change: Our Burger and ASW.
Speaker Change: The loyalty program.
Speaker Change: We do have other options for you Greg in our convenience stores and our quick serve restaurants, but we are executing plans to grow our domestic retail business I would say actually retail and wholesale and we mentioned back in may that we're committing to grow that by EBITDA by $200 million by the end of 2026 and in fact, we have plans that go beyond 2020.
Speaker Change: As well and that serves us well in terms of finding good domestic outlets for our products and that plan involves high grade into transforming 20% of our network between 24, and 26% I would say it is well on track as rich mentioned he likes to say we are building sites that you can take the family too for the day and.
Speaker Change: And enjoy joy hours upon that our retail sites.
Speaker Change: There are larger sites with larger <unk> quick serve restaurants car washes at all really designed to achieve top returns.
Speaker Change: In the first quarter, we actually completed eight site enhancements and one newbuild.
Speaker Change: We also rebranded seven competitors Petro, Canada, Brad and that's part of our program of 20 sites.
Speaker Change: Or actually.
Speaker Change: We completed <unk>.
Speaker Change: Until today, so seven in the first quarter 2017 today in the final three are actually opening today's 20, new rebrand is there.
Speaker Change: And we're enhancing our sites to drive to drive increased fuel sales and reduce our overall pumping costs and have resilient types over time. We also mentioned previously our Canadian tire relationship that continues to go strong.
Speaker Change: And that has helped us over the past year increases our petro points membership by over 30%.
Speaker Change: So that's really material increases we're starting to see that now in the volumes and buy into the strong Canadian brand that we have that's been really helpful. Through the first quarter, we saw a 6% year on year increase in retail 9% year on year increase in our Petro past truck stop business. So we continue to grow on that business.
Speaker Change: It's delivering and David I would just build off of that one I think it's important Greg do recognize all barrels are created equal there is a clear.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: <unk> chart, our priority of the highest value barrels the branded company owned retail in major markets top of the food chain and so on and what I like David Pat Ritchie's teams understanding that it's not about volumes it's about <unk>.
Speaker Change: <unk>.
Speaker Change: When you can couple volume with value that's when you get the exponential effect.
Speaker Change: What I see the steep doing.
Speaker Change: Okay, rich so kind of a part of the same question mean back in back of the material you did that big transaction, where you you guys sold off the retail for a huge price at the time not to put words in your mouth, but are you is this an asset that youre absolutely went to or is it.
Speaker Change: How do you think about the retail ultimately.
Speaker Change: As a core part or not a core part of the business.
Speaker Change: The only thing I unconditionally love or my Kids and my Grandkids.
Speaker Change: Body else has that everybody else has to earn their seat at the table.
Speaker Change: And I'm not making a statement about retail at all but we look at all of our assets for their ongoing contribution in their value to us.
And with right now with the value that's being created here. This is a very very very valuable part of our portfolio, where we think there is continued growth in an uncertain world like we're in today that whole integration all the way through the value chain is another set of value opportunities for us.
Speaker Change: I never say never but right now that is a very very valuable part of the company's operations.
Speaker Change: Okay. Okay. Thanks for that and I feel obliged me maybe just on the.
Speaker Change: On the second one so if I roll back the clock.
Speaker Change: This time last year, you talked about $3 3 billion of incremental free funds flow you've accelerated it.
Speaker Change: So what <unk> been able to achieve but I'm just curious from what I understand that that number was actually bigger that there were headwinds that you've kind of factored into the estimation of that number and I'm. Just curious what are you seeing in terms of are the headwinds as acute as you expected or what have you.
Speaker Change: I think we're seeing examples where.
Speaker Change: Can you talk about inflation or things like this that's part of it but I also like the proactive things both David and Peter are doing that also affect those headwinds as we for example, and I'll use a simple example, as we deliver and take ownership of bigger haul trucks.
Speaker Change: We send home rental trucks that are smaller that also influences the market.
Speaker Change: So I would say.
Speaker Change: The headwinds, we're facing and Joe Mondello me put words in your mouth or we're probably counteracting more of those headwinds than we would have anticipated a year ago fair.
Speaker Change: With that it is all about driving efficiency and productivity and getting more out of the assets that we have.
Speaker Change: What has been historically generated so that is something that is at the forefront of our minds in our daily drive each and every day I'll come back to a point I made just a few minutes ago, Greg, though we're approaching everything is we don't want to be a market taker, but a market maker and so whether that is <unk>.
Speaker Change: For goods and services, whether thats, how we participate in the refined product sales is historically you can look at things and while this is up this is down what can we do to alter that.
Speaker Change: Outcome for Suncor, it's a mindset, it's our culture. It's just a it's a passion for me, making things the absolute best they can be and I think this area and the headwinds is the same thing we didn't get those out whatever that number was in our in our Investor day. It was an offset and we're saying okay well that's just.
Speaker Change: Everything else, what can we do to reduce that impact and create more value.
Speaker Change: Got it thanks very much.
Speaker Change: Thank you one moment our next question.
Speaker Change: And that will come from the line of Manav Gupta with UBS. Your line is open.
Manav Gupta: Good morning, I wanted to first focus on the refining side on 99 listen to capture one of the highest <unk> seen in North America.
Speaker Change: Help us understand a little more what's driving this high amount of capture.
Speaker Change: <unk> to your peers and how you continuously unemployed battle basis remain one of the most profitable North American refiners.
Dave: Dave how are we doing how we're doing it.
Speaker Change: Really it really comes down to two where integration and capturing value all the way through the value chain.
Dave: Our our Suncor integration helps us and why we.
Dave: How do we grow our branded channels, we're leveraging our training capacity, we are optimizing our production and upstream and downstream assets and as I mentioned.
Dave: In response to Greg's question, one of the big things that drove margin capture is improving our channel mix and we saw that specifically in the first quarter. We saw retail volumes up 6%, we saw our truck stop business up 9% and more importantly, even with.
Dave: With increased throughput of record throughput at the refinery as we saw our exports down 25% in the quarter and that's really what helped drive that as a big factor in driving the margin improvement. So we're capturing or the yes. The margin capture in the improvement of that margin capture so we're capturing the full value and we're trying to keep more and more of that domestically.
Speaker Change: I'd say the other thing I'd add to that David I think you kind of the philosophy that over the last couple of years is are we has said to our refining teams run your facilities to the full extent of their capacity that drives down unit cost increases the throughput and then the.
Speaker Change: The opportunity for your marketing teams is go out there and capture that improved volume mix. So as opposed to in the past at times, We've said, okay, well here's what the demand is so we might have and we have actually adjusted refining throughput to meet anticipated demand of our <unk>.
Speaker Change: Spectation of the markets last time, I checked I can never sell a barrel I don't producer refined so we've turned that around.
Speaker Change: Get after it and we will find valuable homes and I think our teams have risen to that opportunity.
Speaker Change: Thank you. My second question is you do have a big turnaround on upstream coming up help us understand the risks planning around it and how you will make sure that this turnaround completed on time and on budget. Thank you.
Speaker Change: It's a combination of a turnaround and then a era project a project on our Coke drum replacement. So Shelly let me, let me ask you to comment on that because the real the real determinant of the success of this is the 91 day Coke drum replacement project talk about the preparation you your teams and the risk managed.
Your teams have undertaken on that.
Speaker Change: Yes for sure. So we're in a very good spot with this project.
Speaker Change: Team is in place and as you said, we are well into the start of execution with that turnaround now under way and in fact that this weekend.
Speaker Change: In one of our first important with how it is.
Speaker Change: <unk> been very good to get that behind us it sets the team up well for the remaining lift activities.
Speaker Change: And as he said coming entity that we did a lot of work focused on risk management risk mitigation.
Speaker Change: We're really well prepared we have all of the pre work done and that included actually doing some early planning and preparatory lift. So we practice. Some of this stuff ahead of time to make sure that we had the equipment in the right spot.
Speaker Change: We had the people trained and ready to go and everybody knew what their role was going to be so we're very confident with the team that we have in place a lot of these folks have actually done some of this type of work before not necessarily at our site, but certainly the crane the crane operator, they go around the world lifting coke.
Speaker Change: Drums into place. So this is just a different site for them to do that work and we were up there as a leadership team what six weeks ago, six seven weeks ago or something I was going to say, we crawled all over that steel that we call over a lot of concrete as well and so it's a mix. It's a project, but it's extremely integrated with the opera.
Speaker Change: <unk> and I would say the shell.
Speaker Change: Shelly is your team your team coupled with Peter's team that has the best collaboration between technical.
Well operations and projects that I, probably witnessed in my career and that's what it will take for this to be a huge success, we have to be seamless and our execution in our hand offs in the.
Speaker Change: We won't declare victory until were until we're done, but we feel quite good about our level of preparation and planning.
Speaker Change: Thank you so much for the detailed response and congrats on another strong quarter every quarter you seem to be sending new positive record congratulations.
Speaker Change: Thank you dial in next quarter.
Speaker Change: Thank you one moment our next question.
Speaker Change: And that will come from the line of Neil Mehta with Goldman Sachs. Your line is open.
Neil Mehta: Yes, good morning, rich and team.
Speaker Change: So let's start off with.
Speaker Change: In a choppy year macro.
Speaker Change: Capital flexibility has been a hallmark of the businesses were cheap run over the years and so.
Speaker Change: When you think about that six 1% to six three a capital hi.
Speaker Change: Thinking about that and how do you how do you drive and maximize capital efficiency to ensure that there's there's headroom to continue to return capital to shareholders.
Speaker Change: Yes, thanks, Neil if I can if I may let me step back just a little bit further than that if you go back to may of last year, we outlined what our strategy how do we win with the asset base, we have and we talked about industry, leading performance and operational integrity reliability. We highlighted it in fact it was on page four.
Speaker Change: If I remember correctly of the deck that that driving to a cost structure that gave us financial resilience in a less than a $45 <unk>.
Speaker Change: Business environment, I think I heard someone recently and are.
Speaker Change: In our call referenced there tagline that they are built for this well Suncorp version. We are rebuilt for this we are rebuilt for this business environment and what it allows us to do is execute our plans without hitting the gas.
Speaker Change: Kevin on the brakes and doing what we know is in the best long term interest of the business and I think thats important we go to commodity swings in this business whether that's the early ninety's. The early two thousands of late <unk> early two thousands 2014 2020, if you've been in this business long enough.
Speaker Change: <unk> seen this movie, it's not new but I'll take your question more explicitly you do get more judicious.
Speaker Change: On on your economic spend does it do to establish a high hurdle for the economic payout do we need to spend it today or can we let the dust settle and see where we are six months or a year from now those are the prudent things, we're doing and looking at and as we drive down our sustainment.
Speaker Change: Capital through improved turnaround performance and just work risk based work selection, our overall capital D compresses.
Speaker Change: Also at a stage, where a lot of our economic capital is wrapping up and so we have the ability to say kind of what's next and at what pace, we I talked about.
Speaker Change: CVR project.
Speaker Change: Shelley just commented on the <unk> so as those tail off we will determine what economic capital replaces those does it replace it now does it replace it later in the macro and I like that flexibility, but it all starts with a rock solid balance sheet.
Speaker Change: Low a low and very very competitive wty breakeven and today's suncor is rebuilt for this business environment.
Speaker Change: Got it that's fairly clear and it might be too early to comment on this rich, especially given the macro but as we start to bridge to 2006, which is coming rapidly in front of US here, how should we think about the moving pieces around capital.
Speaker Change: It.
Speaker Change: Is it fair to say there is a downward bias relative to this year.
Speaker Change: I think again, if you go back to the Investor deck of a year ago. We showed that 'twenty four 'twenty five 'twenty six we showed that coming down and a part of that is improvement in the overall level of sustaining spend as we just make better wiser decisions. There and then of course the rest of it is the economic.
Speaker Change: And will I think.
Speaker Change: Specific number I think for 2006 that we showed was $5 seven so it does show coming down year on year on year, and I think that's exactly what we'll be draw.
Speaker Change: Driving toward and is the business environment.
Speaker Change: Warrants that further that's exactly what we will that's exactly what we'll evaluate as we go through our business planning process. This year.
Speaker Change: Okay, Alright, Thats really helpful. Thanks rich.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And that will come from the line of mono whole shelf with TD Securities. Your line is open.
Speaker Change: Good morning, everyone.
Speaker Change: I'll start with a bigger question on the political landscape.
Speaker Change: I think it's probably too early to comment but has there been any response from the feds on the group industry letter that was issued in recent weeks and I guess the.
Speaker Change: Or specific part of the question is have you been given any loose guidance on pathways are the oil and gas emissions cap. It feels to me like it's all generally are part of the same conversation, but any thoughts there would be would be helpful.
Speaker Change: I think you've described it well it's pretty early in it but if I go back to the the two letters that industry signed the first one was of seven or eight weeks ago now before the election were 14 CEO signed a letter to the all of the political leaders on when we looked at the ambitions of the leadership.
Speaker Change: For economic growth and prosperity for Canadians that was our call to action that energy can and should in fact must be a part of that and we said for that to occur we are ready willing enable to do that but we need these conditions and so the more recent letter, which you as those original 2014 and we have.
Speaker Change: Another long list I think final count was 38 energy Ceos signed on to that letter, where we iterate. It those conditions that we need to be a part of the ambition of the economic health and prosperity of Canadians and it's a bit early I won't get into you know there are.
Speaker Change: Our conversations going on I won't get into what he said she said, but I think that the alignment within the industry. The importance of the industry to the economic health and well being of the country I think that is understood.
Speaker Change: And I hope our call to action, which has a sense of urgency to it I hope we see the political.
Speaker Change: The political powers that be the will to enable that investment via environment to allow this industry to.
Speaker Change: Perform to its full potential and when we do that Canadians nationwide will benefit.
Speaker Change: And suncor looks forward to being a part of that.
Speaker Change: Thanks for that Rich and then my second question is on fire bag, which continues to.
Speaker Change: Perform exceptionally well is there anything you would want to flag in terms of recent changes to surface or sub surface.
Speaker Change: This is or is it more a function of improved execution on existing standards and protocols.
Speaker Change: Fire bag is one of the few big assets that I have not.
Speaker Change: Went to yet year to date, primarily because I want to stay out of their way that team is focused like a laser on incremental value, but what I will tell you is is several of us here and the leadership team. We've had what five now I think it's five sessions with our technical experts geophysicists in.
Speaker Change: Geneva is geologist with logs maps cores looking at how can we continue to extract and develop the full potential of this asset were looking at completion technologies, we're looking at.
Speaker Change: Non condensable natural gas utilization further infill drilling.
Speaker Change: The folks around the table with me, we've rolled up our sleeves to engage with the folks that see the opportunities.
Speaker Change: Every time I'm in one of those sessions I walk away with a higher ambition a higher expectation of what that asset can do not only in the short term, but the long term I referred to it as everything is from a rockstar to the gift that keeps on giving I got to come up with some new phrases port because that.
Speaker Change: Is a winning asset and that team understands that we're prioritizing the work the allocation of capital to achieve it and I think you can get used to on.
Speaker Change: Call calls to come we are going to continue to talk about progress at fire bag. Because it is just an incredible it is a pace setting asset that I.
Speaker Change: As I've said before you gave me a choice of any single and sit you asset in the province.
Speaker Change: Everyone graphics fireback.
Speaker Change: Just a point of clarification are you applying NCG already or is that future upside.
Speaker Change: Small amounts, but we see when we look at and this is a great example, in today's suncor when we look over our fence line and look at what others are doing.
Speaker Change: And try to capture and accelerate their learnings, we see an opportunity for us to further expand that redistribute steam lower our steam oil ratio and develop incremental barrels. So yes, we've been applying it but our future will be applying it at a larger scale.
Speaker Change: Perfect. Thanks, Rich I'll turn it back.
Speaker Change: Thank you I'm showing no further questions at this time I would now like to turn the conference back to Mr Toy Little for closing remarks.
Speaker Change: 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: This concludes today's conference call. Thank you for participating you may now disconnect.
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