Suncor Energy Q4 2024 Earnings Report

Suncor Energy EPS Results

• Actual EPS: $0.89
• Consensus EPS: $0.82
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: N/A

Suncor Energy Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $13.44 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Suncor Energy Announcement Details

• Quarter: Q4 2024
• Date: 2/5/2025
• Time: After Market Closes
• Conference Call Date: Thursday, February 6, 2025
• Conference Call Time: 9:30AM ET

Suncor Energy (NYSE:SU) Inc. is a leading integrated energy company headquartered in Calgary, Alberta, with a primary focus on the development of petroleum resources, refining, and the marketing of petroleum products. Established in 1919 as a Canadian arm of Sun Oil Company, Suncor has evolved into a vertically integrated organization that combines upstream production with downstream refining and retail distribution. The company’s operations span the full energy value chain, from oil sands extraction to the sale of fuels, lubricants, and petrochemicals under the Petro-Canada brand.

In the upstream segment, Suncor is best known for its expertise in extracting bitumen from oil sands deposits in northern Alberta. Utilizing both mining and in situ recovery technologies, the company produces crude oil that is then upgraded and transported to refineries. Suncor also holds interests in offshore natural gas and oil projects in the North Sea, East Coast Canada and other regions, diversifying its resource portfolio and expanding its global footprint.

The downstream division operates several refineries in Alberta and Quebec, processing crude oil into a range of refined products, including gasoline, diesel, jet fuel, and petrochemicals. These products are supplied to wholesale customers, industrial users, and a network of more than 1,500 Petro-Canada retail stations across Canada. In addition to fuel sales, Suncor provides lubricants, speciality products and chemical additives, supporting both consumer and industrial markets.

Under the leadership of President and Chief Executive Officer Rich Kruger, Suncor continues to pursue operational excellence and sustainable growth. The company emphasizes environmental stewardship and innovation, investing in technologies to reduce greenhouse gas emissions and improve energy efficiency. With a commitment to responsible resource development and community engagement, Suncor aims to meet evolving energy needs while contributing to economic development in the regions where it operates.

Suncor Energy Q4 2024 Earnings Call Transcript

Key Takeaways

• Suncor set multiple full‐year production records in 2024—upstream output averaged 808,000 bbl/d (+11% YoY) and refining throughput hit 465,000 bbl/d (+10.5%), both surpassing guidance.
• The company drove OS&G costs down 2.5% to $13.1 billion despite higher volumes, demonstrating strong operating leverage and cost discipline.
• In the first year of its 2024–2026 plan, Suncor exceeded every target: 82,000 bbl/d production growth (vs. 60k target), $7/bbl breakeven reduction (vs. $4 target), $2.3 billion free funds flow gain (vs. $1.3 billion target), and early achievement of an $8 billion net debt goal.
• Q4 delivered $3.5 billion in adjusted funds from operations and $1.7 billion returned to shareholders via a 5% dividend increase and $1 billion in share buybacks, with a commitment to 100% excess-cash returns.
• 2025 guidance forecasts 810–840,000 bbl/d production amid a 91-day coke drum replacement turnaround at the Base Plant and other planned maintenance, which could constrain near-term volumes.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Soncar Energy fourth quarter twenty twenty four financial results call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Suncor Energy Senior Vice President of External Affairs, Mr. Troy Little. Please go ahead.

[Troy Little, SVP - External Affairs at Suncor Energy]

Thank you, operator, and good morning. Welcome to 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 SEDAR, EDGAR and our website, suncor.com. Certain financial measures referred to in these comments are not prescribed by Canadian Generally Accepted Accounting Principles.

[Troy Little, SVP - External Affairs at Suncor Energy]

For a description of these financial measures, please see our fourth quarter earnings release. We will start with comments from Rich Krueger, President and Chief Executive Officer followed by Chris Smith, Suncor's Chief Financial Officer. Also on the call are 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.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Good morning. Suncor's fourth quarter was about finishing 2024 strong and building momentum for 2025. I believe we accomplished both objectives. I'll focus my comments on key aspects of the full year 2024. Chris will primarily focus on the fourth quarter results.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Let me start with personnel safety, our top priority. As you've heard before, 2023 was our safest year ever. I'm pleased to report twenty twenty four's performance was as good as or better than 2023. Some statistics, the number of lost time injuries were down thirty percent year on year and down sixty percent over the last two years. Our lost time incident rate is tied for our best ever.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Number of recordable injuries were down sixteen percent year on year or thirty percent over the last two years and our recordable incident rate in 2024 was indeed best ever. Process safety, a function of our people, our work management processes and our facilities. Twenty twenty four's performance was best ever, a significant 30% better than our previous best and it positions us within the first quartile in North America. Upstream production full year 08/8000 barrels a day far and away the best year in company history, 51,000 barrels a day or 6.5% higher than our previous best and 82,000 barrels a day or 11% higher than last than 2023 and eighteen thousand barrels a day above the high end of guidance. Full year upgrader utilization, 98%, the highest annual average ever, 6% higher than our previous best.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Three of four quarters in 2024 had utilization of 99% or higher and both the base plant and Syncrude achieved best ever performance. Added perspective on the 82,000 barrel a day increase from 2023 to 2024, about half of it is related to the fourth quarter twenty twenty three acquisition impact of Total's thirty one percent interest in Fort Hills. The other half is straight up performance within the exact same asset base. Monthly, quarterly and annual records were set across the company led by Firebag at 234,000 barrels a day in 2024, up 17,000 barrels a day or 8% year on year. Over the last two years, Firebag added 35,000 barrels a day or 18%.

[Rich Kruger, President & CEO and Director at Suncor Energy]

It is our most profitable asset and internally known as the gift that keeps on giving. Refining throughput, full year 465,000 barrels a day, again, far and away the best year in our history. 24,000 barrels a day or 5.5% better than our previous best and 44,000 barrels a day or 10.5% higher than 2023. And again, 20,000 barrels a day above the high end of guidance. Full year refining utilization, 100%, our highest annual average ever, 5% higher than our previous best.

[Rich Kruger, President & CEO and Director at Suncor Energy]

All four refineries were outstanding ranging from 94% to 105% utilization. Edmonton, our most profitable refinery led the pack with a record 105. A fact for you, every major asset company wide upstream and downstream operated at greater than 100% utilization for the entire fourth quarter. This is extraordinary performance and a credit to Suncor teams company wide. Refined product sales, full year 600,000 barrels a day, again far and away the best year in company history.

[Rich Kruger, President & CEO and Director at Suncor Energy]

46,000 barrels a day or 8% higher than our previous best and 47,000 barrels a day or 8.5% higher than 2023, '20 thousand barrels a day above the high end of guidance. All four quarters in 2024 were the highest quarters in company history. In fact, it was back to back to back to back quarterly records. Suncor, we call that a four peat. Even Pat Riley, former coach of the LA Lakers would be jealous.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Total OS and G, $13,100,000,000 down $324,000,000 in absolute dollars year on year. And this is despite 11% higher upstream production and 10.5% higher refining throughput. Let that soak in for a minute, 10% to 11% higher volumes and 2.5% lower absolute costs. Every major operated asset upstream and downstream delivered lower absolute and or unit costs in 2023 or 2024 versus 2023. I'll offer another perspective on year on year cost management.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Let's assume that that fourth quarter twenty twenty three acquisition of Total's thirty one percent working interest in Fort Hills never happened, take on all the impacts of the additional ownership, production costs, apples to apples, 2024 versus 2023 performance with the exact same asset base. OS and G would have been down $1,000,000,000 yet upstream production would have been up 37,000 barrels a day and refining throughput 44,000 barrels a day. My message here is operating leverage is creating tremendous value company wide. Volumes delivery, asset utilization and cost management, each require discipline, determination, attention to detail and a mindset that every barrel and every dollar matter. That is the mindset and culture of today's Suncor.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Total capital, dollars 6,200,000,000.0 more than 200,000,000 below the midpoint of guidance. Again, discipline, attention to detail and rigor and execution. Free funds flow 7,400,000,000 in 2024, essentially flat with 2023. However, the business environment decreased free funds flow by about $1,500,000,000 year on year, downstream cracks, sweet sour synthetic differentials. Capital was $500,000,000 higher as planned in 2024 versus 2023.

[Rich Kruger, President & CEO and Director at Suncor Energy]

You recall the two drivers there were Peter's fifty five new 400 ton haul trucks and opening two pits versus one pit in the Fort Hills North Mine. And in addition, we had the absence of fourth quarter twenty twenty three tax pools from the Fort Hills acquisition of about $750,000,000 If you do the math, organizational self help, what Suncor teams delivered in volumes, cost margins added $2,750,000,000 in free funds flow year on year, essentially offsetting the headwinds dollar for dollar. Of that, we returned $5,700,000,000 in cash to shareholders, buybacks of $2,900,000,000 4 point 3 percent of shares and dividends of $2,800,000,000 Take you back nine months to our Investor Day, May twenty twenty four. We communicated several big objectives over a three year period from 2024 through 2026. Upstream production growth of 108,000 barrels a day, $10 a barrel reduction in our corporate breakeven, $3,300,000,000 increase in annual free funds flow and an $8,000,000,000 net debt target at which time we would shift to 100% buybacks.

[Rich Kruger, President & CEO and Director at Suncor Energy]

We told you we would report on our progress, so here we go. 108,000 barrel a day production growth. Our target in 2024 was 60,000 barrels a day. We achieved $82,000.10 dollars a barrel reduction in our breakeven. Our target in 2024 was $4 a barrel.

[Rich Kruger, President & CEO and Director at Suncor Energy]

We achieved $7,000 3 point 3 billion dollars increase in annual free funds flow. Our target in 2024 was $1,300,000,000 We achieved $2,300,000,000 8 billion dollars net debt. Our target was mid-twenty twenty five. We achieved it at the end of the third quarter twenty twenty four. Delivering on commitments, again, the culture of today's Suncor.

[Rich Kruger, President & CEO and Director at Suncor Energy]

We've uploaded a presentation on the Events and Presentations page under the Investors section of our website, where we detail the free funds flow update and the material shows the progress for the three year plan. We'll continue to provide this to help save folks some analytical time. Bottom line, one year into a three year plan, we're exceeding every target established. In fact, we've essentially achieved target improvements for 2024 and 2025 in the first year. We're accelerating capture of shareholder value and that will continue this year now with a full year planned at 100% buybacks.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Our objective in 2025 is to solidify the 2024 gains and proceed to capture the next tranche of value. My final comments. Twenty twenty four's results are a credit to our people across the company, their expertise, their dedication, their determination, Suncor teams delivered and personally I am so proud to work with these people each day. With that, I'll turn it over to Chris.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Great. Thanks, Rich. Good morning, everyone. 2024, what a great year for the company and our shareholders. So much happened across our business last year.

[Kris Smith, Chief Financial Officer at Suncor Energy]

All of the operational cost performance that Rich just highlighted, which allowed us to generate substantial free funds flow, retire $1,100,000,000 in principle of our debt, hit our $8,000,000,000 net debt target early, move to returning 100% of excess funds to our shareholders, and of course, raise our dividend. All of which resulted in substantial return of cash to our investors in 2024 to the tune of $5,700,000,000 in dividends and share buybacks. And we are set up for continued improvement in 2025. But let's first talk about the fourth quarter as we closed out the year very strongly as you saw from our operational update in early January. Now first with respect to the business environment in the quarter, we saw crude oil prices continue to weaken during the quarter with WTI averaging U.

[Kris Smith, Chief Financial Officer at Suncor Energy]

S. Dollars 70 a barrel, light heavy differential steady at $13 a barrel U. S. And synthetic crude averaging an $0.85 barrel premium to WTI. On the refining side, we saw cracking margins decrease driven by weaker gasoline cracks.

[Kris Smith, Chief Financial Officer at Suncor Energy]

However, our 5,221 refining index remains strong at $24.25 a barrel, which is $1.8 below Q3 driven primarily by lower cracks offset by lower crude oil pricing. Finally, natural gas prices increased by $0.8 a GJ, averaging $1.45 in the quarter, but obviously remained attractively priced for natural gas consumers like our business. Turning to our operational performance in the quarter and building on Rich's comments you just heard, we closed the year with exceptionally strong operational performance across the board. Total upstream production averaged 875,000 barrels a day in the quarter, including almost 818,000 barrels per day in oil sands and almost 58,000 barrels per day in E And P. This was the highest ever quarterly production in our history.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Firebag averaged a record 250,000 barrels a day in the quarter. Fort Hills was above plan at 162,000 barrels per day and continues to deliver on its improvement plan. And upgrader utilization at Base Plant and Syncrude were very strong at 102105% respectively. Refinery throughput averaged 486,000 barrels per day or 104% utilization in the quarter. This is the second quarter in a row with all four refineries operating at or above 100% utilization, Yet another first.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Refined product sales averaged a record 613,000 barrels a day and margin capture averaged 90% on a LIFO basis when compared to our 5,221 index. This sales performance, which was up 38,000 barrels per day quarter over quarter, reflects both the high reliability of our refining assets and the strength of our integrated supply and marketing channels. We also continue to demonstrate operating leverage with total OS and G expense of $3,400,000,000 which was flat quarter over quarter, while production and sales were up significantly in both the upstream and the downstream. Also in the quarter, we successfully completed the base plant cogeneration facility, which is now ramping up. This project will provide integrated steam and power to our base plant operations and the capability to export up to 800 megawatts of baseload electricity to Alberta's power grid.

[Kris Smith, Chief Financial Officer at Suncor Energy]

This strong operational performance led to strong financial results in the quarter despite a drop in crude prices and refining cracks from Q3. We generated $3,500,000,000 in adjusted funds from operations or $2.78 per share in the quarter and adjusted operating earnings of $1,600,000,000 or $1.25 per share. In the quarter, Suncor returned $1,700,000,000 to shareholders, including $713,000,000 in dividends, which reflects a 5% increase in our quarterly dividend to 0.57 per share, underpinned by sustained operational improvements across the business and progress on our free funds flow growth initiatives. This is consistent with our commitment to a steadily growing and sustainable dividend. Share buybacks in the quarter totaled $1,000,000,000 reflecting a step up in share repurchases with the shift to returning 100% of excess funds to shareholders now that we're at our net debt target.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Speaking of which, we were very pleased that we hit our $8,000,000,000 net debt target early and it is down $3,000,000,000 from end of twenty twenty three and $10,000,000,000 from our high watermark in 2020. In under five years, we've more than cut our net debt in half, while expanding our refunds flow. As I indicated last quarter, you should expect our net debt to move up and down around that target from quarter to quarter as we manage working capital movements. In Q4, we saw a large release of working capital related to receivables, inventory and taxes and expect to have a working capital increase in Q1. But rest assured, we are fully committed to returning maximum cash to shareholders per our capital allocation framework, while prudently managing our business and balance sheet.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Overall fourth quarter performance is a result of our relentless focus on the fundamentals of our business and demonstrate our continued execution acceleration of our $3,300,000,000 free funds flow growth target set out in our May Investor Day. And as Rich mentioned, we've uploaded a slide on our website specifically highlighting our progress towards that target. Now before handing it back to Troy, I'd like to take a few moments, a few comments on our 2025 guidance released in December. We expect upstream production to average 810,000 to 840,000 barrels per day with continued strong production performance across our assets, including increased bitumen sales to market and factoring in planned maintenance, specifically planned downtime at base plant with the ninety one day coke drum replacement project scheduled to start in the second quarter. Annual coker turnarounds at both Upgrader 2 at Base Plant and Syncrude, both of which will be starting in the third quarter.

[Kris Smith, Chief Financial Officer at Suncor Energy]

And Fort Hills has small plant turnarounds in both the second and fourth quarters. Downstream, we're guiding to an average refinery utilization of 93% to 97%, which is higher than our 2024 guidance to reflect higher reliability, offset by planned maintenance activities at our Sarnia refinery starting in Q1 and our Edmonton Refinery starting in Q2. Our capital guidance for 2025 of $6,100,000,000 to $6,300,000,000 is consistent with the plan outlined in our at our May Investor Day, including asset sustainment and maintenance capital largely consistent with 2024 guidance and economic investment capital, which is comprised of selective high value investments like the UN coke term replacement that I mentioned just a moment ago. 2025 is all about building on the incredible momentum sparked by the success that we saw in 2024. We've only begun to see the impact of the initiatives we've started in the last year and a half.

[Kris Smith, Chief Financial Officer at Suncor Energy]

And like we said during our May Investor Day, our focus is on growing the bottom line, refunds flow, which will ultimately drive increased returns for our shareholders. And rest assured, the entire organization is focused on not only delivering upon our commitments, but beating them. And with that, Troy, I'll hand it back over to you.

[Troy Little, SVP - External Affairs at Suncor Energy]

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

[Operator]

Thank you so much. Our first question is from Gregg Pardy with RBC Capital Markets. Please proceed.

[Greg Pardy, Equity Research Analyst at RBC Capital Markets]

Yes, thanks. Good morning and thanks for the rundown. Rich, when you look at 2024, I mean, the organization drove huge operational improvement both upstream and downstream. And when you look at 2025, does either segment shine more brightly or is this still expected to be fairly balanced between the two?

[Rich Kruger, President & CEO and Director at Suncor Energy]

Greg, I'm going to let me start out answering your question and I'm going to turn it over to my two all star linebackers here on the left, Peter and Dave, supplemented. But I think the philosophy we're bringing about the business of getting the most out of our existing asset base that is company wide, looking at what are the constraints, what are the debottlenecks, how can we structurally change not only the performance, but the potential of the organization. So that will go on. We got a good taste to success in 2024, but we're not done yet in 2025. But maybe if I could ask Peter and Dave to comment from each of your businesses, kind of your own thoughts on that

[Greg Pardy, Equity Research Analyst at RBC Capital Markets]

going forward?

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

Yes, sure. Thanks, Rich. Yes, I think Greg, the way to think about it is on a daily basis, on a shift by shift basis, we're really looking at where the constraints are in our production units. And so when we find those bottlenecks, when we find those pens, we're looking to see what technical work we can do to re engineer that to unlock additional barrels and move those barrels into the upgrading ecosystem. So I would say in the Oil Sands segment, we absolutely have more potential that we're looking at.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

But these are low to kind of no costly bottlenecks that the teams are looking at consistently across the plot. Dave?

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

Yes. And thanks, Peter. And great question. We were actually just talking about this at our downstream leadership team meeting just yesterday where the team was saying do we need to re rate or not. And really the conclusion we drew was we don't think we're done yet, so it's not really the right time to go re rate because there's still some more potential in our capacities.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

The way we've been gaining increased capacity in the downstream similar to feeders kind of informs how we might think about 2025 as well. We're seeing shorter turnarounds as we drive for competitiveness in our turnaround area. We are seeing better optimization during turnarounds and during other outages. For example, in our Q2 turnaround in Sarnia, we took some intermediate components for the first time ever, moved them from Sarnia to Montreal. That allowed more crude rate in Sarnia and more conversion capacity in Montreal.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

We did that again during a short maintenance outage in Sarnia in the fall. So we see more opportunities like that to help our integration. And like Peter said, constraint busting, we have a results focused mindset with our engineers and operators looking at the constraints every day, following our OEMS systems and really within our operating envelopes trying to debottleneck. We find the constraint, we remove the constraint, then we look for the next one. Few examples of that in 2024 and look, we don't know what 2025 will bring, but we think we'll see more of the same kind of examples.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

We modified some air registers in our crude furnaces in Montreal to get about 13 kilobytes D rate increase. Sarnia, we replaced a control valve on the crude unit, three kilobytes D. At Edmonton, we're working with Peter's team to optimize the crude slate into Edmonton to optimize every draw on our crude unit every day. And that gave us three or four kilobytes D in the year. So we're going to continue to look for more opportunities like that and I think there's potentially some upside in 2025.

[Rich Kruger, President & CEO and Director at Suncor Energy]

So I think, Greg, if I just circle back to the start of your question, we see these opportunities still across the enterprise upstream and downstream. Is it more one or another? I don't look at it like that. I think just the overriding message is we're not done yet.

[Greg Pardy, Equity Research Analyst at RBC Capital Markets]

Okay. Thanks for that. Very, very complete. And then related to that, but I know Peter, you've talked a lot about just the ability to source the shipment across the organization. Can you talk about maybe what I'd almost refer to as like multidimensional integration within Suncor that you've established?

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

Yes, absolutely, Greg. I think increasingly it's good to think about our upgrading capabilities more like we do refining. So we can source bitumen from multiple sources within our bitumen production units in the region and we can move those barrels to whatever upgraders requiring them when they're needed and in largely the volumes that are required. Our goal at the end of the day is to maintain, keep those upgraders full and be relatively bitumen agnostic. So if we Synchrony needs more bitumen, we can move Firebag barrels over there.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

If the base plant upgrade or needs topped up with additional bitumen, we can move Firebag barrels in there. We can move Fort Hills barrels in there. And so we have a team that looks after value optimization, moving the right barrels of bitumen to the right places at the right time to generate maximum profits.

[Rich Kruger, President & CEO and Director at Suncor Energy]

I'll just add to that. It's not only the maximum volumes and things, but then with Dave's team looking at what is the market demanding at points in time and what products the ability to whether it's upgrading, but the slate of products we can produce whether it's crude or products, we're very tied in there. So that integration goes way beyond just simply the physical integration of an asset base, but it all is about ultimate value all the way through the customer. And so how the teams work together, I would say is at an increasingly uniquely integrated manner. And here again, my overriding message is we're not done yet.

[Greg Pardy, Equity Research Analyst at RBC Capital Markets]

Excellent. Thanks very much.

[Operator]

Thank you. Our next question comes from the line of Dennis Fong with CIBC. Please proceed.

[Dennis Fong, Equity Research Analyst at CIBC Capital Markets]

Hi, good morning. I guess first congratulations on the significant progress you've made to date on your plans and frankly looking forward to 2025. My first question here relates to Fort Hills. I was actually hoping if you could provide a bit of an update in terms of mine progression. I know on the last call you discussed a little bit or Peter discussed a little bit around moving from South Pit to Center and then obviously Center to North.

[Dennis Fong, Equity Research Analyst at CIBC Capital Markets]

Just wanted to understand a little bit more about that as well as heavy equipment deliveries and how you're making progress on the two cuts?

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

Yes.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

Thanks, Dennis. We're actually really pleased with the developments and the establishment of the Center pit and the North Pit at Fort Hills. Maybe to give you a bit of perspective right now, things are well underway. We have 10 big mining shovels in the North Pit right now, moving both overburden and ore to the crushers. There's five shovels in the center pit and there's only one left in the South Pit and that is kind of doing that last final cleanup of the pit walls and the last little bit of ore in there and we'll be out there in the next couple of months.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

So I would say really pleased with the transition. Ore delivery is predominantly from the center in Northpits right now. Northpits one is up and established. Northpits two is in the queue for later this year. So I'm feeling really good about that.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

And obviously, Fort Hills continues to meet the commitments that we set out in our three year reset plan in terms of production and our improvement in mine health. So I'm pleased with that. On the equipment delivery to the second part of your question, and Rich had mentioned my 55 trucks at the start. I'm not sure they're mine, but we did receive 45 of those trucks through 2024 exactly on schedule from our supplier. Happy with those.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

They went to both Fort Hills, but also to our base plant, received four more by the January and the remainder will be coming by the end of this month in February. So exactly on track with the equipment deliveries. And we're really starting to see the productivities in the mines come up with that. It's about getting the right class of equipment, ultra class equipment in the right places in the mines to generate maximum efficiency and move those tons at the lowest unit cost that we can possible. So we're starting to see that and you see that show up in the cost performance of the company through 2024.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

It's showing up in the bottom line. It's about mining efficiency at scale to deliver big production volumes, but also to do it in the most efficient way.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Peter also comment on autonomous implementation. That's kind of the other a big element of your strategy. Where are you on that?

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

Yes. We've set out our plan last year to have all of the ore delivery at base plants under autonomous trucking that was completed in December. So happy to see all of your that is delivered to the crushers of big plant by the end of twenty twenty four is done by autonomous trucking. We also set an objective to have 91 trucks converted over to autonomous operation by the end of the year and that was also accomplished. And now sets base plant Millennium Mine and North Sea Bank as the single largest deployment of autonomous trucks anywhere in the world.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

And so we're really pleased with the implementation of that technology, but perhaps even more so our ability to really fine tune all of the variables to make sure that we're moving those tons as efficiently as possible. It is really next level and the team has done some fantastic work. Again, similar to what we're doing in production, where is the bottleneck? How can we overcome that with engineering solutions with operational techniques and procedures and really getting the delivery out of that system that we expect.

[Rich Kruger, President & CEO and Director at Suncor Energy]

And the way I would ask you to look at that is in our May investor deck. We had the fewer trucks, bigger trucks, autonomous trucks were kind of a core of Peter's improvement strategy. 2024 was we had the build up curve, the trucks arrived throughout the years, the conversion to autonomous arrived throughout the year. So now as we get into 2025, particularly here in the first month or so, all of that will be in place and you'll see a full year of the value creation from that, whereas in 2024, you only saw partial year as that buildup occurred.

[Dennis Fong, Equity Research Analyst at CIBC Capital Markets]

Great. No, I really appreciate that color and that context as well. My second question, frankly focuses more on turnaround. So you have some obviously some major planned turnarounds coming up later this year, including the U1 coke drum replacement program. Can you talk towards some of the steps or measures you put in place that drive cost controls as well as moderate downtime risk, especially as it relates to this very significant project and relating to the ninety one day turnaround?

[Rich Kruger, President & CEO and Director at Suncor Energy]

Certainly, Dennis. I'm going to turn it over to Shelly here in a second, but I think it's one of the things as we put out our guidance and look at the year 2025, it is a heavier planned maintenance year, both in the upstream and then of course some material turnarounds at in Edmonton in particular. So how 2025 shapes out is we'll have much better sense as the year goes on and some of this work is completed. The cochlear implant replacements at the base plant are probably perhaps the biggest event of the year. The last time we did it was kind of the same year Moses part of the Red Sea.

[Rich Kruger, President & CEO and Director at Suncor Energy]

This was a long time ago. These things last fifty plus years, but Shelly and her team are leading that, driving that. So Shelly, offer some specific comments on that work.

[Shelley Powell, Senior VP of Operational Improvement & Support Services at Suncor Energy]

Yes, for sure. So we've been working on the Koch Derm replacement project actually for quite a few years, to this point. Just to give you a sense of the size of that project, in total, it's about 2,800,000 to complete the entire project. We've already completed 2,300,000 of those hours. So coming into 2025, it's actually a small scope.

[Shelley Powell, Senior VP of Operational Improvement & Support Services at Suncor Energy]

There's only about five hundred thousand hours left, albeit it's the critical scope of the actual drum replacement, in the turnaround. So to your point, we've had extensive reviews, we've had extensive project planning sessions, we've got our own internal experts deeply involved in the project, And we've also brought in external cold eyes, folks who have done this type of work before, people that have experience replacing Coke drums in other plants around the world. So we're really bringing the best of the best of what we have internally as well as externally just to crawl all over this project and make sure we're set up and ready to go. In terms of actual kind of project readiness, we're in really good shape. We're really happy with how we exited last year.

[Shelley Powell, Senior VP of Operational Improvement & Support Services at Suncor Energy]

We're slightly ahead of plan. All the coke drums are on-site now. We've put our hands on them. All the major equipment is on-site. And we've also gone so far as to build some kind of practice mock up structures so that our maintenance personnel are they're practicing on them as well as our operations personnel are also able to kind of train and practice on new equipment.

[Shelley Powell, Senior VP of Operational Improvement & Support Services at Suncor Energy]

So we feel like we're in good shape. It's definitely a big critical piece of work for us this year, but we're definitely watching it very closely.

[Rich Kruger, President & CEO and Director at Suncor Energy]

And a little bit more than a year ago, this was more than one hundred day work scope in our estimation, but the turnaround improvements that both Shelly and Dave are leading across enterprise have found the ability to further improve that, optimize that to this current ninety one day schedule. So it's we've built in the our improvement we're seeing, but it I wouldn't say it's a fingers crossed kind of thing, but we got the the critical work is ahead of us and they'll be all the high fives will be later in the year when we complete that.

[Dennis Fong, Equity Research Analyst at CIBC Capital Markets]

Great. Thank you for taking my questions. I'll turn it back. Really appreciate those responses.

[Operator]

Thank you. Our next question comes from the line of Manav Gupta with UBS. Please proceed.

[Manav Gupta, Executive Director at UBS Group]

Good morning, guys. Congratulations on all the milestones. My question here is that like nine months ago, you kind of set a target of lowering your all in breakeven by 10. And I think in the first year you're looking for four to five and then the balance between the remaining two. You're already at seven, which is very commendable.

[Manav Gupta, Executive Director at UBS Group]

I'm just trying to understand, like would you also look at a situation where this can go more than 10. So once you get to year end two, could you make it like 10 or from 10 to 12. And similarly from your normalized free cash flow assumptions, you're almost 70% at your target already at the end of year one. So as you work through the system, could there be upside to these numbers that you gave us about nine or ten months ago?

[Rich Kruger, President & CEO and Director at Suncor Energy]

Manav, based on your question, you are qualified to be one of my bosses on our Board of Directors because they're asking me the same thing. And I think what's important is when you break down the three year plan had very tangible activities that built up to the $4 in the first year, dollars two in the second year and $4 in the third year. The achieving the 7 in the first year, it's a combination. We did a few things earlier than we expected, but also the delivered benefit on other things was more than we expected. So our inventory of continued improvement largely remains.

[Rich Kruger, President & CEO and Director at Suncor Energy]

I use that tangible example of Peter's trucks. We will now have a full year benefit of that, which we did not have in 2024. So does the 10% growth? We have quite frankly, we haven't spent a lot of time recalculating that. We've spent more time with our head down, tail up delivering value.

[Rich Kruger, President & CEO and Director at Suncor Energy]

And I think time will tell what it ultimately is. I will tell you, I'm encouraged that the value creation that our we're not depleting our inventory of ideas. As we capture things, we are seeing new ideas, new opportunities to add to the list. So our own ambition, I don't have that number for you, but our own ambition as a result of twenty twenty four's performance has been elevated.

[Manav Gupta, Executive Director at UBS Group]

Perfect. My quick follow-up is you guys have a very informed view on refining. We started the year on somewhat of a bearish note. It's been very well until now. Some of the global capacity additions got delayed.

[Manav Gupta, Executive Director at UBS Group]

Some capacity is already going offline and diesel cracks are moving up, which obviously helps you out a lot. So just trying to understand from you like six to nine months outlook that you have for refining.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Dave, you want to offer I know it's speculative. Give a couple of quick comments.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

I mean, I would say we there were a few years over the past few years where I'd say the refining margins were above where you'd expect kind of unusually high and I'd call them what we call a lower everyone's calling lower refining margins now are probably more typical. I think there's potentially some upside into the next year, but at the end of the day, we're focused on winning in any environment here at Suncor. Our integrated model helps us win when the cracks are low, helps us take advantage of the market when the cracks are high. And we continue to optimize that integration over time. We're putting more throughput, which is lowering our dollar per barrel costs.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

We're optimizing our business across our portfolio. Sales and marketing business, we're growing that to have more profitable domestic sales. We're growing our trading business to make more money selling direct to customers and we're really optimizing our integration throughout the downstream. So really we're our focus is we want to win in any environment. We'll see where the cracks go.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

I can't really speculate on where they'll go. But as you pointed out, there may be a little upside and we're ready to take advantage of that.

[Rich Kruger, President & CEO and Director at Suncor Energy]

And I made the comment earlier about the teams, the integrated teams, whether it's the crude slate we produce or the products, but I think that extends further into Dave's team that we have kind of a balance of the East and West in our refining capacity. The markets and the growth opportunities vary between East and West, but increasingly Dave's folks are figuring out ways to get product that may be manufactured in the West, get it delivered in the East or vice versa. And I think that's going to allow us that whatever the market environment is, we're well positioned with market know how, with logistics and then the capabilities of our asset base to maximize whatever value is there in the market, we're going to get it.

[Manav Gupta, Executive Director at UBS Group]

Thank you so much.

[Operator]

Thank you. One moment for our next question. It comes from the line of Menon Holzof with TD Securities. Please proceed.

[Menno Hulshof, MD - Equity Research at TD Securities]

Thanks and good morning everyone. I'll start with a question on consolidation since we've seen quite a bit of it in recent quarters including your consolidation of Fort Hills and CNQ's consolidation of the AOSP through two transactions and high level that that leaves Syncrude. And I understand that you can't speak on behalf of your partners, but how much time do you spend thinking about Syncrude consolidation these days? And I suppose along the same vein, how active is the least 29 discussion at the moment? Thanks.

[Rich Kruger, President & CEO and Director at Suncor Energy]

You know, Mittal, for the last year or two, we've been heavily focused on that 99% of our workforce that drive trucks, operate shovels, run refineries and get things right. And as we have increasingly achieved that, that allows that 1% of us to think about how do we add shareholder value long term. And certainly with the integrated nature of our asset base, you mentioned Fort Hills, that is a tangible example. So we're going to be continuing to look at those opportunities that can add value based that perhaps the current owner doesn't have the opportunity to achieve, but through our ownership, operatorship that we can achieve. So we look at any and all of those opportunities.

[Rich Kruger, President & CEO and Director at Suncor Energy]

It always comes down to do you have a willing buyer, a willing seller. Obviously, I can't comment on any specific assets, but it's about creation of a unique level of value where it's not just about a speculation on what oil price is going to be. That's where we're focused.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Meno, it's Chris here. And just on that last part of your question around lease 29, just come back to what we've been talking about for the last twelve to eighteen months. We've set ourselves up with our business in terms of our bitumen supply with our current assets and leases as well as the leases that we have the opportunity to develop. Lease 29 is something that's been talked about in the market a long time. Certainly, it is an opportunity for a mine extension.

[Kris Smith, Chief Financial Officer at Suncor Energy]

There's always conversations in the background that happen around those types of things. But for us, lease 29 is not the focus. We have more than ample bitumen supply in our portfolio to keep our upgraders full and lots of bitumen development opportunities going forward.

[Menno Hulshof, MD - Equity Research at TD Securities]

Terrific. Thanks for that. And then maybe the second question is egress related since you often emphasize your marketing and sales and trading capabilities as an advantage. So in the context of tariffs risk and with the understanding that you're far less exposed than most, how much ability does Suncor have to shift cargos away from The U. S.

[Menno Hulshof, MD - Equity Research at TD Securities]

And U. S. Markets and West Coast markets in particular, especially given the potential for an uptick in throughput at the Westbridge Marine Terminal towards the middle of this year, I believe?

[Rich Kruger, President & CEO and Director at Suncor Energy]

Well, I would say that I don't know that anyone on the planet knows exactly what's going to happen on tariffs. So we won't I won't speculate on that. But then if I take it more directly to your question, the kind of who wins and who loses in this. And I think when you all Canadian companies, they're going to experience the impact differently. If you're a heavy oil producer that rely moves your crude across the border, that's one thing.

[Rich Kruger, President & CEO and Director at Suncor Energy]

But if you get into our situation, probably what 60%, sixty five % of our barrels stay north of the border and they either go through our refining network, other refineries customers and or off of the coast. So that's a high fraction. We have a large Canadian refining footprint and I believe among our peers, we have more capacity to get crude off of either coast than the other peers who also have those Canadian refining footprint etcetera, etcetera. So if you march on down, this gets back into that fundamental that kind of integrated nature of our asset base gives us more resiliency, kind of a natural hedge in whatever the market environment upstream, downstream and or tariffs would play. We believe in free trade.

[Rich Kruger, President & CEO and Director at Suncor Energy]

We think The U. S. Needs us. We need The U. S.

[Rich Kruger, President & CEO and Director at Suncor Energy]

But if we were in a world of tariffs, I like our position relative to our peer group.

[Menno Hulshof, MD - Equity Research at TD Securities]

Thanks for that, Rich. Maybe just on the Westbridge Marine Terminal, is that expansion does midyear sound about right? If I can put you

[Greg Pardy, Equity Research Analyst at RBC Capital Markets]

on the tomorrow.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Sorry, Madam, can you repeat that? Sorry.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Yes, you broke out a little bit there.

[Menno Hulshof, MD - Equity Research at TD Securities]

Sorry about that. Just in terms of the Westbridge Marine Terminal, is does that sound in terms of the expansion of throughput, does midyear sound about right?

[Kris Smith, Chief Financial Officer at Suncor Energy]

Sorry, you're talking about

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

the Westridge Dock at the TMX?

[Menno Hulshof, MD - Equity Research at TD Securities]

Yes, that's right.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

Yes.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

Yes. Okay. I think there's a couple of things at Westridge Dock that TMX is working on. One is lighting to allow ships to load at night or dock at night. That will help drive some expansion and then and that's on track to happen very soon.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

And then later in the future will be some capability to dredge under the Pineros Bridge, which will allow large cargos. We've been pretty happy with it took a little couple of months to work out the logistics on the Westridge stock, but it's a we knew it was going to be a busy logistics situation. The team's done we've worked with the TMX team, others have worked and we've really we think the logistics are working out really well over there.

[Menno Hulshof, MD - Equity Research at TD Securities]

Okay. Thank you. Thanks for letting me squeeze in a third. I'll turn it back.

[Operator]

Thank you. Our next question comes from the line of John Royall with JPMorgan. Please proceed.

[John Royall, Executive Director at JP Morgan]

Hi, Good morning. Thanks for taking my question. So my first question is on the production guidance for 2025. It's flat at the midpoint with 2024 as actual with 2024 obviously being a terrific operational year. And I know you had some incremental turnaround activity in 2025, which Rich mentioned, which is probably why we're not seeing more growth this year.

[John Royall, Executive Director at JP Morgan]

But is it fair to think that the midpoint of the range is perhaps assuming operations and reliability aren't quite as strong as they were in 2024, where everything kind of seemed to go right? And if operations do come in somewhere to 2024, should we be thinking kind of more high end or maybe even above?

[Rich Kruger, President & CEO and Director at Suncor Energy]

John, I think you called it right. When we put out guidance, of course, we didn't quite have the fourth quarter. And I got to tell you, the team kicked ass in December. So it was higher than I thought. At the time we put it out, I didn't think it would be right at the midpoint.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Quite frankly, I thought 2024 results would be a little bit lower than they were just because of where things were tracking. But I think the big thing in 2025 is this is a question once Shelly gets all this coke drum replacement done, I'll be in a much more confident position to answer. If that goes as we would hope and expect and all of our teams are focused, you're probably right, we're probably toward the high end of that. If it doesn't, because the last time it was completed was fifty plus years ago, that would move it around in that. So, we've got fundamentally the same asset base, so we're assuming continued high performance.

[Rich Kruger, President & CEO and Director at Suncor Energy]

We have not the company today, we are not saying, well, we did really good this year, we're probably not going to do that again next year. That is not the mindset, the culture of this organization. But it's really the maintenance work that it kind of gives us a bit more of the unknown.

[John Royall, Executive Director at JP Morgan]

Okay. Thank you. And then my follow ups on Firebag, it's been an asset where you increased production pretty significantly. Can you talk about the types of things you've done there? And is there maybe more kind of low hanging fruit type of potential in that asset from here?

[John Royall, Executive Director at JP Morgan]

Or maybe even something that could require some capital that could move that production up even more? Should we think of it as kind of having hit its true potential here?

[Rich Kruger, President & CEO and Director at Suncor Energy]

Well, the gentleman I'm going to turn this to didn't know I'm going to turn this to him because he's now our Chief HR Officer, but for the last several years, he's been driving the improvement at Firebag. Adam, can you all what the hell have you done over the last couple of years at Firebag that's added 35,000 barrels a day in two years? How many growth investment?

[Adam Albeldawi, Chief Human Resources Officer at Suncor Energy]

You bet, Rich. Thanks for the question. Maybe just building on Rich's comments, the mindset and the culture at the Firebag asset is consistent with the rest of the organization. So what I mean by that is, the teams are constantly looking for what is actually constraining the production and what can we do in the short term to safely unlock further production. That is the focus at Firebag, which is consistent with the rest of the organization.

[Adam Albeldawi, Chief Human Resources Officer at Suncor Energy]

So a couple of examples, we had a water constraint, small piping arrangement to unlock water management that was completed. We had a PSV constraints. We added a fifth PSV, remove that constraint that was completed to unlock further production. We are constantly looking for other opportunities to do that. And I'm confident that the team has a long list of opportunities to further unlock and increase production further.

[Adam Albeldawi, Chief Human Resources Officer at Suncor Energy]

And you've seen that in December with a 250,000 barrel per day production rate at Firebase.

[Rich Kruger, President & CEO and Director at Suncor Energy]

John, just a quick add to that. We need to be sure we stay well long in terms of capacity long as we increment the facility capacity. So Shelley's got a drilling team and others that are looking at, okay, we're probably going to have to add some well pads quicker because of the capacity. That's a great problem to have in the resource base at Firebag is high quality and long life. So, there are a lot of opportunities there.

[Rich Kruger, President & CEO and Director at Suncor Energy]

But this is a fun one for us because this is our single most valuable asset corporate wide.

[John Royall, Executive Director at JP Morgan]

Thank you.

[Operator]

Thank you. One moment for our next question that comes from the line of Adam Wiehaha with Goldman Sachs.

[Adam Wijaya, Equity Research Associate at Goldman Sachs]

Hey, good morning, Rich and team and thank you for taking my questions. Maybe want to start on the retail side of the business, just going back to the Investor Day in May. Where do we stand as it relates to some of the margin improvement targets there for this part of the business? And then can you comment maybe on what is surprised to the upside or downside versus prior expectations? Thanks.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Thanks, Adam. I think last time I saw you, I was sitting next to you in Miami, if I remember right. Dave, you want to comment quickly on how we're doing on the retail growth plan?

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

Sure, absolutely. The retail growth plan is one of the things that completely underpins our overall sales and marketing growth. And as you know, we continue to grow our sales and marketing volumes with 600,000 barrels a day for the year. We shared on May 21 plans to high grade our Petro Canada network, leveraging strategic partnerships and deliver $200,000,000 by the end of twenty twenty six. We are still on track to do that.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

And in fact, we're evolving our plan as we continue to learn. It's a pretty competitive market out there as you see with other folks who are reporting retail earnings. It's a competitive market out there and we continue to evolve our plans. We're enhancing our quick serve restaurant offerings with new A and W sites, new express format concepts to get more restaurants and more sites. And we're seeing the results.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

Our retail pumping costs are actually down year on year and our same site store volumes are up year on year. We're just getting started. If you look around major markets in Canada right now, you'll see a bunch of Petro Canada sites with fences around them. That's because we're rebuilding the sites and really our goal is to offer full offer locations that are just simply better than what our competitors are offering. That will give us better margins, lower pumping costs and retail sites will stay on the test of time.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

We're also working on our Canadian Tire Partnership. That's a great partnership. We're looking at to convert 200 sites over the next couple of years and increase our sales volume by about 1,000,000,000 liters a year. So lots going on in the retail side, still on track. I'll just

[Rich Kruger, President & CEO and Director at Suncor Energy]

add to that. It's about value and volume and we're getting the volume, but we're also getting it value at the high end of the food chain. The retail, the branded sites, I won't repeat Dave's examples, but it's kind of that two pronged approach. And we hit we had a little bit of a bubble in mid-twenty twenty three with the cyber attack that we kind of went through. But ever since then as we've come out of it, we're right back on the plan we've outlined.

[Rich Kruger, President & CEO and Director at Suncor Energy]

And I think in an uncertain world that having that retail network and those high value distribution channels, that is also a source of competitive advantage.

[Adam Wijaya, Equity Research Associate at Goldman Sachs]

Great. That's super helpful. And yes, Rich, your memory is correct on Miami. Maybe just my follow-up is just on, when we look at 2024 versus 2023 results, see that total operating, selling and general expenses were down about $300,000,000 Can you touch maybe a little bit on some of the moving pieces there? And then any color on expectations for 2025 as it relates to the rate of change from 2024? Thank you.

[Rich Kruger, President & CEO and Director at Suncor Energy]

I think expense management is one of those things that I commented on it. It's attention to detail, it's rigor, it's spending money like it's not your own, it's someone else's and you're accountable. I think expense management is a much a representation of the culture of an organization as almost any other measure. And so what you're seeing here is this evolving high performance results oriented culture at Suncor being developed. Both Dave, Peter and Adam commented on how do we unlock capacity without spending money, low, no cost barrels.

[Rich Kruger, President & CEO and Director at Suncor Energy]

You saw that. The other area I would say is getting more rigorous about the value of what we spend, the risk based assessment of as opposed to going through maintenance at our regularly scheduled interval independent of what the condition of a piece of equipment is, critically looking at it and say, what do we need to do on it? So it's just it's rigor and discipline. And the $1,000,000,000 we took out year on year ex the Fort Hills acquisition, it exceeded my expectations. That was more than I thought.

[Rich Kruger, President & CEO and Director at Suncor Energy]

But here again, I think it's kind of on a broken record here. I don't think we're done yet. Will the rate of change in 2025 on absolute costs be the same as 2024? I don't know. That's a pretty ambitious objective, but we're not done yet.

[Adam Wijaya, Equity Research Associate at Goldman Sachs]

Great. Thank you.

[Operator]

Thank you. Our next question comes from the line of Doug Leggate with Wolfe Research. Please proceed.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Thank you. Thanks Rich for having me on. Rich, I don't want to go back to the seven out of 10 question from earlier, but I do want to ask you about the production volumes because you've already talked about far back ad nauseam, but you did say 100,000 barrels a day, you're clearly there. What do you think the volume trajectory can look like from the incremental line of sight you have on what happens next across the asset base? Yes.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Thanks, Doug. We got 82,000 barrels a day out of the 108 in the first year. I'll tell you what we're doing kind of a glimpse under where we've got more work going on. You said firebag ad nauseam, man, I can talk about firebag all day long. So there's still growth So this whole idea of looking at the constraints, ensuring we have the well capacity, looking at the export pipelines, there's more there to be captured.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Some of the other areas as we continue to execute the Fort Hills, the three year plan, now we're spending more time looking at years four through '44, not one through three. So looking at what we can do, we know we have a plant or two trains in that plant that when combined are more than the 194 nameplate capacity. So we're looking at what do we need to do to have the ore delivery to feed that beast at the rate at which can eat. So those are probably two areas that offer the greatest potential that if we're sitting here a year from now talking about blowing past 108,000 barrels a day, those are probably the two areas that I think my guess today that we would be highlighting that will allow us to drive further.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Okay. I appreciate that. I mean the progress obviously since you've been there has been extraordinary, but there's always someone out there trying to knock the story in some regards. And the thing that has come up again, as I'm sure you're aware, is this issue of baseline ARO liability long term. So I wonder if I could just ask you to frame on an annual basis.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

As I see it in the annual report, it's probably $400,000,000 a year or something like that. Can you just frame for us how you think about that? How you think about managing it? And is it it sounds to me like it's relatively modest in the grand scheme of everything else that's going on, but just put some numbers around it for us on a discounted basis if you can.

[Rich Kruger, President & CEO and Director at Suncor Energy]

Yes. I'm going to ask Chris to comment on the numbers on it, but I think there's kind of two dimensions to it is the long life of the upgraders and the long term bitumen supply. And part of that, it all intertwines together in terms of abandonment, reclamation, timing and obligations. But Chris, comment on kind of the as you said, kind of the moderately de minimis spend that goes on each year.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Hey Doug, and Doug, you put your finger on a key number that you see in our financials related to it. So think about ARO this way. I mean, we have a number in there that shows the discounted ARO that is over a very, very long period of time. So we have reclamation activities, reclamation closure activities going on continually across our asset base up north, averaging both that $400,000,000 5 hundred million dollars a year kind of I'll call it ratable spend. It might go up a little bit more in one year, it might actually be a bit lower in another year.

[Kris Smith, Chief Financial Officer at Suncor Energy]

I can tell you that Peter Zebedee's team is doing a terrific job on working our mine and reclamation and our closure plans and actually continuing to optimize. It is an area of optimization opportunity as well. But think about this as kind of a very long term ratable spend, right? It isn't a case where you get to an end of mine life and you got a big balloon of reclamation activity and cost that all of a sudden shows up. This is an activity which is very ratable over time.

[Kris Smith, Chief Financial Officer at Suncor Energy]

So we're very confident in the plans. We've got a lot of specific plans in place and I think you can kind of just count on that sort of ratable approach to ARO and reclamation. Peter, is there anything you want to add?

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

Maybe a couple of other things for perspective, Doug. And another good example of Suncor integration now that we're operating multiple mine sites is that we've standardized engineering assumptions and our engineering planning for ARO across the asset base. So that certainly helped in making sure we've got our assumptions correct and that they're consistent. The second part is beyond just the immediacy of improving our mining efficiency and the result on our bottom line, that also translates into about moving material, moving dirt and moving water. We do a lot of that today.

[Peter Zebedee, Executive Vice President of Oil Sands at Suncor Energy]

So the efficiencies that we've driven into those activities today have ultimately resulted in reducing our ARO liability because our confidence in executing that type of work has increased tremendously. Thank you guys.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Chris, guys, thank you for the detailed answer. A very quick follow-up if I may Chris. Cash CapEx versus the funding of this, does it come out of working capital on the balance sheet? How does it flow through the cash flow statement? And I'll leave it there. Thank you.

[Kris Smith, Chief Financial Officer at Suncor Energy]

Yes. So you'll see it. It does run through that. It's an expense and then you'll see it obviously as we do the bridge from operating earnings to AFFO, Doug.

[Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research]

Okay. Got it. Thank you so much guys.

[Operator]

Thank you. And we have a question from the line of Patrick O'Rourke with ATB Capital Markets. Please proceed.

[Patrick O'Rourke, MD - Equity Research at ATB Capital Markets]

Good morning, guys. Thanks for the comprehensive rundown thus far and congratulations on another very strong operational execution quarter. Just a few very quick questions from me. First, with respect to the balance sheet and the working capital build and release, obviously, that worked in your favor here, bringing the debt materially down below that $8,000,000,000 I know you talked about some reversal in the first quarter here and then throughout 2025. Can you maybe walk through the potential cadence of that?

[Patrick O'Rourke, MD - Equity Research at ATB Capital Markets]

And then as you sort of determine what's structural versus what's cyclical, how and when you make the determination on returning some of that capital to shareholders?

[Kris Smith, Chief Financial Officer at Suncor Energy]

Yes. Thanks, Patrick. Great question. The working capital story, I think for the company has been a really good one this year. It's been a tremendous amount of focus on it.

[Kris Smith, Chief Financial Officer at Suncor Energy]

I mean, we certainly see a lot of variability. It's the nature of our business. You'll see that variability quarter to quarter. I commented a bit of that in my opening remarks. So we did see a big release in Q4.

[Kris Smith, Chief Financial Officer at Suncor Energy]

A lot of that it was related to AR, moves in commodity price. We saw timing of cargo settlements, as well as timing and commodity taxes and then a drawdown in inventory. I do expect that to come back as I mentioned in Q1 as we build inventory for turnarounds. We've got some other timing in working capital. So you'll always see a variability, but there is structural change underlying the working capital story here at Suncor.

[Kris Smith, Chief Financial Officer at Suncor Energy]

And it's been part of the story of actually hitting that net debt target early. What I can assure you is we've got huge focus in our organization on our working capital. And we're really managing against that net debt target. We use the words at or near. We want to make sure we're comfortable where that net debt is.

[Kris Smith, Chief Financial Officer at Suncor Energy]

We're very comfortable with it. And as we get more confidence in structural leases of working capital, that cash is going to be able to be returned to shareholders.

[Patrick O'Rourke, MD - Equity Research at ATB Capital Markets]

Okay, great. And then just in terms of the return of capital policy here, having sort of outperformed on a lot of your milestones, You talked about being ahead on the $10 improvement on breakevens. How do you think about allocating that outperformance between sort of the return of capital mechanisms, the dividend, which is more of a commitment or structural versus the share buyback program that you've had in place?

[Rich Kruger, President & CEO and Director at Suncor Energy]

Yes, I mean, I think it's starting. We outlined this in the May deck. We had a page that kind of we've got to take care of our existing asset base that's sustaining capital. The goal of Vision is a reliable and growing dividend over time and then quality investments and return surplus cash to shareholders. We in that plan as we were going as we got to the $8,000,000,000 net debt target.

[Rich Kruger, President & CEO and Director at Suncor Energy]

The idea there is we kind of wanted a one times coverage at a $50 a barrel world. So that kind of that philosophy of what we're looking to achieve is still intact. And as the business improves, we will look at that. What is the what the AFFO generation or the pre funds, what are we able to deliver, but as we want to be strong and resilient in weaker market conditions and then be obviously the ability to be opportunistic in stronger market conditions. So the fundamental philosophy hasn't changed, but the commitment to returning cash to shareholders is every bit as high, if not higher than it was a year or a year or so ago.

[Dave Oldreive, Executive Vice President of Downstream at Suncor Energy]

Okay. Thank you.

[Operator]

Thank you. As I see no further questions at this time, I would like to turn the conference back to Mr. Troy Little for closing remarks.

[Troy Little, SVP - External Affairs at Suncor Energy]

Thank you, operator. I'll actually turn it back over to Rich for some closing comments.

[Rich Kruger, President & CEO and Director at Suncor Energy]

And I'll be brief here guys. By now everyone knows I'm a big sports fan. I love competition. I love the concept of winning. I respect, admire excellence, the dedication, determination, anything you want to describe it of being a champion, the Gretzky's, the Brady's, the Jordan's, the best of the best, the Hall of Famers.

[Rich Kruger, President & CEO and Director at Suncor Energy]

We all know they did not get there with one or two good seasons. It takes excellence year after year. That is the objective of today's Suncor, sustained excellence. 2024, a good year, arguably a very good year. Don't worry about this company reading our headlines, drinking the Kool Aid.

[Rich Kruger, President & CEO and Director at Suncor Energy]

We are as hungry as we have ever been. We want more and we started on January one of this year to deliver more. That's all I have. Troy, I'll turn it back to you.

[Troy Little, SVP - External Affairs at Suncor Energy]

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.

[Operator]

Thank you all for participating and you may now disconnect.

Participants

Executives

• Troy Little, SVP - External Affairs
• Rich Kruger, President & CEO and Director
• Kris Smith, Chief Financial Officer
• Peter Zebedee, Executive Vice President of Oil Sands
• Dave Oldreive, Executive Vice President of Downstream
• Shelley Powell, Senior VP of Operational Improvement & Support Services
• Adam Albeldawi, Chief Human Resources Officer

Analysts

• Greg Pardy, Equity Research Analyst at RBC Capital Markets
• Dennis Fong, Equity Research Analyst at CIBC Capital Markets
• Manav Gupta, Executive Director at UBS Group
• Menno Hulshof, MD - Equity Research at TD Securities
• John Royall, Executive Director at JP Morgan
• Adam Wijaya, Equity Research Associate at Goldman Sachs
• Doug Leggate, Managing Director - Senior Research Analyst at Wolfe Research
• Patrick O'Rourke, MD - Equity Research at ATB Capital Markets