Remarks by Mark Little, President and Chief Executive Officer and Alister Cowan, Chief Financial Officer
May 10, 2022
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Mark Little, President and Chief Executive Officer
Thanks Mike. Good morning everyone – thank you for joining us today.
Although we are meeting virtually today out of an abundance of caution with respect to COVID-19, we welcome shareholder engagement, and appreciate having the opportunity to report on the progress we are making to realize Suncor’s full potential.
In this regard, we were pleased to report strong operating and financial performance yesterday with our Q1 results, as well as significant increases in our dividend, share buyback program, and debt reduction efforts.
These results indicate we are making progress, have positive momentum, and are putting strong cash flow to work for the benefit of the shareholders.
At the same time, we still have work to do on safety, with four fatalities in the past 18 months, including one in the first Quarter. Our mission is to make sure everyone goes home safe every day, so clearly more needs to be done.
Today, I will share some highlights of our 2021 achievements in operational performance and strategy execution. Then Alister will speak to the financial performance of the company. And I will conclude with a look ahead to 2022.
Let’s start with what matters most: safety.
Safety is a core value at Suncor -- and strong operating performance is foundational to our success. That’s why, when we had safety and operational challenges last year, we took action to improve our performance.
That work is ongoing, but here are a few examples of what we have done to date:
- We completed a third-party assessment to help chart a path forward.
- We realigned the organization to strengthen operational excellence and safety performance in step with global best practices.
- As part of this we separated our Upstream Mining and Upgrading group from our Exploration and Production and In Situ operations, which had previously been under one executive. We did this to bring our senior leaders closer to the business, shorten spans of control, and create greater accountability for results.
- We created a centralized Operational Risk Management organization to provide leadership and accountability for analyzing process hazards, driving improvements, and implementing standardized protocols across the business.
- Peter recently joined us as Executive Vice President of Mining and Upgrading, with 20 plus years’ experience in oil sands mining and tailings. Known as a champion of safety and operational discipline, Peter is a strong leader with a compelling track record of delivering exceptional business results.
- We appointed Shelley Powell as Senior Vice President, Exploration and Production and In Situ. In this role, she leads all of Suncor's operated and non-operated in situ, and exploration and production assets. Shelley has significant experience and expertise running large, complex operations.
- Peter and Shelley join Bruno Francoeur, executive vice president of business and operations services. Bruno has decades of experience running complex operations from refineries to our operations in the Regional Municipality of Wood Buffalo.
- We implemented standardized risk assessments at our sites to gain a much clearer picture of what’s occurring at each of our assets and to allow us to transfer what we’ve learned at one site to another.
These are just a few of the steps we have taken to get things right on safety, reliability, and performance. This remains a work-in-progress.
But please know that the senior executive team, our Board and I are all fully committed to strengthening our processes, accountability, employee engagement and leadership to continue to improve Suncor’s safety and operating performance -- because every worker should go home safely every day.
These fundamental changes are also aimed at increasing competitiveness and driving excellence, and I am pleased to report that we continue to improve our operating performance:
In 2021 -- and despite the largest annual maintenance program in the company’s history --we increased annual production by over 5.0%.
Oil Sands achieved the second-highest Oil Sands production on record, which included record production from In Situ.
And our downstream business continued industry-leading performance. In fact, our average refinery utilization was 89% -- that’s 12% higher than the Canadian average and 4% higher than the North American industry average. These are the best downstream financial results in North America.
Suncor’s updated strategy is focused on increasing shareholder returns and accelerating progress in reducing greenhouse gas emissions with an objective to be net zero by 2050. It is underpinned by the principles of operational excellence and capital discipline.
This calls on us:
- To sustain the base business while improving its cost and carbon competitiveness through structural long-term improvements and low-capital strategic investments;
- To optimize our integrated value chain and asset portfolio;
- And to grow low-carbon businesses that are complementary to our base business.
In addition to achieving strong ESG performance, we continue to work towards delivering an annual $2 billion of incremental free funds flow to the business by 2025.
This planned free funds flow growth will be dedicated to returning significant value to shareholders through increased dividends, ongoing share buybacks and fortifying the balance sheet through continued debt reduction.
As I look back on 2021, we acknowledge that there were challenges. However, we made substantial progress on our plan for incremental free funds flow and returning significant value to shareholders:
In Oil Sands:
- Suncor became the operator of Syncrude and completed interconnecting pipelines between Oil Sands Base Plant and Syncrude.
- We completed the debottlenecking project at Firebag and increased production from MacKay River.
- We resumed two-train operations at Fort Hills by the end of 2021 and we’re on track to operate it at average utilization rates of 90% this year.
In our Exploration and Production business:
- We increased our ownership of Terra Nova, and we’re moving forward with the Asset Life Extension project.
- Buzzard 2 achieved its first oil.
- And we completed the sale of our working interest in the Golden Eagle Area Development.
We also made progress on a number of other strategic initiatives such as:
- Harnessing digital technology capabilities to bolster operational excellence and drive value;
- Advancing construction on the co-generation facility at Oil Sands; and
- Expanding our supply, marketing and trading capabilities.
In 2021 we also shared our strategic objective to be a net-zero greenhouse gas emissions company by 2050.
And we have a clear strategy that builds on our core capabilities to get there.
First, we’re reducing emissions from our base business. We’re doing that through energy efficiency, fuel switching - such as the Co-Gen project at Base Plant - and technologies like carbon capture and storage.
Second, we’re expanding into areas that are complementary to our base business such as low emissions power, renewable fuels and hydrogen.
Third, we’re working with our customers, suppliers and other stakeholders on reducing emissions.
To that end, we entered several new partnerships in 2021 to support our net zero objective. To highlight just a few:
- We’re working with ATCO to potentially advance a world-scale clean hydrogen project.
- We increased our investment in carbon capture and storage technology with an equity investment in Svante.
- We’re investing in Enerkem’s Varennes Carbon Recycling biofuels facility.
- And finally, we helped launch the Oil Sands Pathways to Net Zero alliance. Suncor and five other oil sands companies -- representing almost 95% of oil sands production -- are working together to become net zero by 2050.
2021 was a pivotal year.
In addition to the achievements already noted, we also formed a historic partnership between eight Indigenous communities in the Regional Municipality of Wood Buffalo and Suncor.
The partnership – called Astisiy -- acquired a 15% stake in the Northern Courier Pipeline, which connects the Fort Hills asset to Suncor’s East Tank Farm asset. The result -- reliable income to these communities for decades to come.
We heard from communities that opportunities like this are key to helping their communities thrive and I was personally honoured to have been a part of this historic collaboration.
Finally, we continued to deliver competitive returns to shareholders. And with that, I’ll now turn the call over to Alister to speak to the financial performance of the company.
Alister Cowan, Chief Financial Officer
The operational and financial achievements of 2021 enabled Suncor to make significant progress towards fortifying our balance sheet and meeting our capital allocation targets.
Our adjusted operating earnings were $3.8 billion and $10.3 billion in adjusted funds from our operations. This is the second-highest adjusted funds from operations in our company’s history.
Our confidence in our ability to generate sustainable and increasing cash flow led us to increase shareholder returns and accelerate debt reduction.
We doubled the dividend to an annualized rate of $1.68 per common share.
We also increased our share repurchase program, repurchasing $2.3 billion dollars of our common shares, or 84 million common shares, during 2021.
We reduced debt at the highest annual pace in the company’s history, reducing net debt by 18% or $3.7 billion to 2019 levels.
With our first quarter 2022 results released yesterday, we continue to make significant progress on operational and financial results, allowing us to accelerate increasing shareholder returns and debt reduction.
In the quarter:
- We bought back nearly 1.5% of the outstanding shares for 830 million dollars and reduced debt by 730 million dollars.
- Suncor’s Board of Directors approved a quarterly dividend of 47 cents per share, which represents an increase of 12% over the prior quarter dividend, and the highest quarterly dividend per share in the company’s history.
- Also, the Board approved an increase of the company’s share buy back program up to a maximum of 10% of Suncor’s public float.
I’ll now turn the call back to Mark.
Mark Little, President and Chief Executive Officer
As you’ve heard, Suncor made significant operational and financial progress in 2021.
And we’re continuing to make progress -- achieving new milestones on our plan in the first quarter of this year. We are confident this trajectory will continue -- because we have an unwavering focus on operational excellence, capital and cost discipline, increasing shareholder returns, and optimizing our existing base business while progressing emission reduction initiatives.
Despite market volatility, we remain committed to becoming a stronger, more resilient, and more competitive company.
And with the world confronted by concerns about energy security, our intention to deliver the most responsibly produced barrel on the planet is more important than ever.
As we progress on our ambition to be Canada’s leading energy company, we are confident we can significantly increase returns to investors while progressing to net zero to meet growing energy needs -- positioning us to be a long-term global supplier.
This is all part of our strong ESG strategy and performance.
And finally, you can be assured that we will ground our decisions in our purpose – to provide trusted energy that enhances people’s lives, while caring for each other and the earth.
In closing, I would like to thank the Suncor Board of Directors for their continued support and guidance.
I also want to thank our employees for their hard work and dedication.
When I look at the momentum we are building, I am confident that we will create and deliver strong value for our shareholders for decades to come.