Powering our purpose: Trusted energy through turbulent times
President and Chief Executive Officer
Chief Financial Officer
May 4, 2021
Please check against delivery
Mark Little, President and Chief Executive Officer
Good morning and thank you for joining us.
Before I get into my remarks, I wanted to pick up on the comments Mike made about Mel Benson, as Mel has had a significant impact on me professionally and personally. Mel and I go back over three decades to the start of my career in the energy industry at Imperial Oil. Mel has always been a huge champion, mentor and support - and it has been a great privilege to have had him as an advisor and guide — especially in relation to Indigenous engagement in the energy industry, an area of particular passion for me. As Mike mentioned, when Mel, a member of the Beaver Lake Cree Nation, joined Suncor’s Board in 2000, he was the first and only Indigenous Board member for a TSX-listed company. Mel, with my deepest gratitude, thank you for your leadership, for your 21 years of service on Suncor’s Board, and for your patience and thoughtful advice and guidance to me through my career. I know many others in our industry and our country feel the same way. Kinanâskomitin, hai hai, and merci, my friend.
Well, here we are at our second virtual Annual Meeting, a reflection that working remotely — and as safely as possible in-person — has been, and continues to be, the reality. I hope everyone has been safe and well. I’d like to take a moment to recognize the dedicated health care personnel and essential workers across all industries — including the people in the energy industry. All of these folks are doing an amazing job to help keep us healthy and safe, making sure we have the energy our society relies on so that communities have access to vital goods and services.
A lot has changed since I made my remarks last year, including another wave of COVID infections that is proving to have a much larger impact across the globe and in our communities. Economies like the UK and the US show the positive effect of vaccines, which were developed and approved in record time, providing some light at the end of the tunnel. Their rollout will lead to helping economies recover and a corresponding increase in demand for energy. We are already seeing some of these benefits.
To set the agenda for my remarks today, I’ll highlight Suncor’s focus and actions in 2020, Alister will speak to the financial performance of the company, and then I will conclude with our view of the path forward.
Looking back on the year that was, what’s clear is that in times of adversity Suncor rises to meet the challenge. And, in fact, the flexibility of our integrated business model and the steps we took to preserve the financial health of the company, set the foundation to emerge stronger.
Our anchor through the turbulent waters of 2020 was — and continues to be — Suncor’s purpose – to provide trusted energy, that enhances people’s lives, while caring for each other and the earth. Our ability to provide trusted energy that enhances people’s lives hinges on strong operational performance. While we’ve had our challenges, we’ve made and are making changes to address them, and we’re starting to see results — exiting the year with strong operational momentum, which continued into the first quarter.
Within the last 12 months, we increased the nameplate capacity at Firebag and our Edmonton refinery; commissioned the interconnecting pipeline between Syncrude and Suncor, and completed an expansion at our Burrard products terminal. These investments have improved reliability, enhanced production and created additional operational flexibility so that we can maximize the value of every barrel produced.
And we’re seeing the results now in our performance. In the last six months upgrading utilization was the highest in Suncor and Syncrude’s history. Our refinery utilization significantly outperformed the North American average. Firebag set an all-time production record in the first quarter of 2021. Our Downstream business continued to perform strongly particularly in comparison to other Canadian and North American refiners. In 2020, our Canadian utilization was 91%, 15% higher than the Canadian average, demonstrating the benefit of our physical integration with upstream and our wholesale and retail refined-products business.
Through it all we’ve stayed true to our purpose of caring for each other and the earth, as we navigate some of the most pressing global health, social and environmental issues of our time — like COVID-19, racism, and climate change.
Caring for each other took on additional meaning in the face of the pandemic as we implemented new protocols and practices to care for our physical and mental health and keep our integrated operations running. Our work on this front continues to evolve and is being challenged by the third wave – which we continue to manage by adding layers of protection to keep people safe and adjusting our work plans. For example, we are running a rapid testing program for essential workers across many of our facilities. These tests can detect COVID-19 in asymptomatic individuals in a matter of minutes.
This means we can quickly identify at-risk cases and isolate these individuals from the rest of the workforce. This not only supports safer operations by reducing the risk of further COVID-19 spread, but it also takes some of the load off health authorities as we perform these tests with our workforce. We’ve also extended this rapid testing support to communities like Fort McKay First Nation, so they can do the same. In fact, there’s now a playbook that outlines how any organization – regardless of size or industry – can set up their own rapid testing program. This program and playbook are the direct result of our collaboration with over a dozen Canadian companies with large workforces through the Creative Destruction Lab Rapid Screening Consortium. It’s a shining example of how multi-sector collaboration — including governments — can work together on a public interest objective: to develop a cost-effective solution for keeping people safe and reopening the economy.
In 2020, we also lived our purpose to care for each other through the launch of the Petro-Canada CareMakers FoundationTM, bringing awareness and support to the more than eight million family caregivers in Canada from coast-to-coast.
Within Suncor, we’re working to build an inclusive and respectful workplace. Events in 2020 cast even greater light on racial injustice and inequity issues and the need for social change. We’ve worked with thousands of our employees to talk through these issues. And we’ve made progress on our commitment to inclusion and diversity through our organization by supporting the launch of employee-led inclusion networks, enhancing our education programs to address unconscious bias, and implementing more inclusive parental leave policies. We know there is more work to do – and we’re committed to listen, better understand, learn and support.
And caring for the earth means we continue our two-pronged approach of investing in sustainability projects that reduce the environmental footprint and improve the energy efficiency of our operations, while advancing low emissions solutions aligned with our core business. This includes the re-start of our cogeneration project at Oil Sands Base and our Forty Mile Wind Project, helping to produce sustainable aviation fuel through our investment in LanzaJet, turning household garbage and waste into fuel through our partnership with Enerkem, and our recently announced investment in Svante, a Canadian carbon capture company.
If we’re going to change the climate trajectory of the globe, it’s critical we work together - within our industry, across sectors and governments and invest in technologies like carbon capture utilization and storage. It is a tremendous opportunity for Canadians. What’s also clear is that our climate commitments, future innovations and energy expansion investments will depend on a strong base business to support them. And with that, I’ll turn the call over to Alister to speak to the financial performance of the company.
Alister Cowan, Chief Financial Officer
The challenge of 2020 demonstrated the importance of financial resiliency. Ensuring that you have a low-cost structure, a strong and healthy balance sheet and access to liquidity. We took hard actions last year to respond to what I would characterize as a double black swan event – never in our history had we faced a severe downturn on both sides of our business – Upstream and Downstream – at the same time. Normally one mitigates issues in the other and reduces our volatility.
Through much of 2020 we were focused on addressing our operational performance, managing the impacts of lower demand by leveraging our integrated model and remaining true to our plan to concentrate on value over volume.
Our focus on cost reduction opportunities, lowering our capital spend, and increasing our access to liquidity were key levers for us to respond to the economic downturn, keep the company strong and agile, and preserve our financial strength. We cut operating costs by $1.3 billion or 12% (exceeding our target of 10%) and reduced our total planned capital expenditures by $1.9 billion or 33%. Our 2020 capital spend concentrated on sustaining capital and continuing with a limited number of low capital, high value projects like: the interconnecting pipeline between Suncor Base Plant and Syncrude; the deployment of autonomous haul trucks at Fort Hills; and improving underlying systems and processes to drive further capital and operating cost reductions.
In addition to these steps, we made the difficult decision to suspend the share buyback and reduce the dividend. Management and the Board know the importance of returning cash to shareholders and our commitment to create and return value to shareholders remains. In the face of two large simultaneous events of unknown length and impact, we took proactive and prudent steps to maintain the financial strength and health of the company.
With the benefit of hindsight some may say we were too aggressive. However, I recall talking to you this time last year with no-one knowing how long and deep the impacts of the Covid -19 pandemic would be. The impressive speed of development and rollout of vaccines has been unprecedented and as a result economies and commodity prices have rebounded sharply, although some countries still have significant issues and recovery ahead.
As Mark mentioned, we exited 2020 with strong operational momentum and this performance, combined with incremental free funds flow benefits from our strategic investments means we’ve generated enough cash flow to make significant progress towards our debt reduction and share buyback targets. In fact, in the first quarter of 2021, we reduced our debt by $1.1B and year to date we have repurchased over $500 million in common shares, or 1.3% of the shares outstanding.
In 2020, our upstream production totaled 695,000 barrels of oil equivalent per day. That production included: 466,000 barrels per day of high value synthetic crude oil, 102,000 barrels per day of Brent priced offshore crude, and 127,000 barrels per day of bitumen.
Our upgraders ran at a combined utilization of 85% and our refinery utilization was 88%. As Mark said, our refineries significantly outperformed their North American peers. Our integrated model, broad asset base, strong marketing expertise and mid-stream logistics assets and capabilities combined with our financial and capital allocation discipline enables Suncor to be more agile than many others in the industry and confirms our competitive advantage.
We are well positioned for the future to create significant value for shareholders. I’d encourage you to listen to our Investor Day session on May 26th for more details. I’ll now turn the call back to Mark.
Mark Little, President and Chief Executive Officer
Alister highlighted the actions we’ve taken to maintain the financial strength of the company. Moving forward, we’ll continue to strengthen the company as we focus on three key elements.
The first is to execute on our near-term plans through operational excellence, which includes an unwavering commitment to operate in a safe, reliable, cost-efficient and environmentally responsible manner. Integrating Syncrude - which is expected to generate annual synergies for the joint venture owners of approximately $300 million - will be a big part of this story.
The second is executing our plan to deliver $2B in free funds flow growth, which includes strategic initiatives that help us increase revenue and margin while driving down costs. For example, accelerating our digital technology adoption through initiatives like robotic process automation or remote monitoring, makes us more effective, efficient and reliable, which in turn keeps us safer, improves cash generation, reduces our environmental footprint and helps keep us connected to one another.
Finally, we’ll continue our deep and longstanding commitment to sustainability as we invest strategically to grow the company. We know that all forms of energy will be needed for the future and that we’ll all need to work together to drive broader innovation, engagement, meaningful collaboration and benefits. And while we continue to move forward, we need to be mindful of staying focused on our strategy and leveraging our strengths; while delivering on our objective of increasing the cash flow of the company and increasing shareholder returns. We’ll do a deeper dive later in the month about our path forward and I encourage you to attend our Investor Day on May 26th for more details.
In closing, I would like to thank Suncor’s shareholders and Board for their ongoing support. I’d also like to acknowledge the Suncor team, who’ve managed the challenges of the past 12 months — both the things we could control and things we couldn’t — with flexibility, creativity and grit. You’re paving the way for us to emerge stronger, and it’s been a great privilege to work alongside you.