Earnings Call: Q3 2020

Oct 29, 2020

Ladies and gentlemen, thank you for standing by, and welcome to the Suncor Energy Third Quarter 2020 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 I would now like to hand the conference over to your speaker today, Trevor Bell, Vice President of Investor Relations. Please go ahead, sir. Thank you, operator, and good morning. Welcome to Suncor's 3rd quarter earnings call. With me this morning are Mark Little, President and Chief Executive Officer and Alistair Cowen, Chief Financial Officer. Please note that today's comments contain forward looking information. The actual results may differ materially from the expected results because of various risk factors and assumptions that are described in our Q3 earnings release as well as our current annual information form, and both can be are available and can be found at SEDAR, EDGAR and our website suncor.com. Certain financial measures referred to in these comments are not prescribed by Canadian GAAP. For a description of these financial measures, please see our Q3 earnings release. Following formal remarks, we'll open up the call to some questions. Now, I'll hand it over to Mark for his comments. Great. Thanks, Trevor, and good morning, everybody. Thanks for joining us. On our call last quarter, I expressed confidence in the momentum of our business and the decisions we made to lower our cash breakeven costs, our ability to maintain financial health and deliver strong cash flow through these continued volatile times. The resilience of our physically integrated model was demonstrated again in the Q3 as we exited with over 95% refinery utilization. Our downstream business delivered solid results, and we're confident in the momentum and performance of the downstream for the remainder of this year and into 2021. Across the company, our costs and capital spend is tracking very well with our revised guidance. Despite the operational challenges, our model allowed us to fully fund our capital, our dividend and reduce debt in the quarter. Moving to operations. From the outset, let me say our 3rd quarter operational performance does not reflect our commitment to operational excellence and the incident at base plant was extremely disappointing to all of us. But as you will hear in this quarterly update, our team is focused and committed to operating our assets safely and reliably, and we're well along the path to improved reliability. At base plant, our work to ensure that our response to the August fire was grounded in operational excellence. We restored the full bitumen production capacity of the plant within a few weeks, but decided to constrain the plant to ensure that we're not putting too much sediment or fine sand particles into the upgrader. This decision prioritizes reliability and capital discipline by protecting the long term health and value of our assets. I'm pleased to say that all the repairs are substantially complete and we expect to be operating at full mining rates of approximately 300,000 barrels a day by early November. Earlier this year, we outlined plans to increase Spirebags production by 30,000 to 40,000 barrels a day by 2025 through capital efficient plans to debottleneck the asset. In September, we provided an update on the work being completed to realize the initial portion of these incremental volumes. We've accelerated some maintenance originally scheduled for 2022, allowing us to fully leverage the new additional emulsion handling and steam infrastructure. The new additional emulsion handling and steam infrastructure. With this work completed this week, the asset is ramping up to nameplate capacity, which has been increased by 12,000 barrels a day or 6% to 215,000 barrels a day. It's important to note that both the repairs at base plant and capacity increase at Firebag are included in our full year capital and production guidance, which remains unchanged from our September release. At Fort Hills, in September, the partners fully supported the decision to restart the 2nd mine train of production, reduce structural cost of the assets and fully deploy autonomous haul truck systems throughout the mine by year end. The phase ramp up at Fort Hills introduces new volumes at a very low incremental operating cost and lays the foundation for further cost structure improvements. The 2nd train has been in operation throughout October, and the asset is now on track to achieve our Q4 targeted guidance of 120,000 to 130,000 barrels a day. As a result of our cost reduction initiatives, the sustaining capital and operating costs required to operate at this level remains essentially unchanged from when we were only operating one train. We plan to increase the production of the 2nd train in 2021, guided by achieving and maintaining the overall reduced structural costs associated with any increased production, the economics and also driven by commodity prices. This continues to be worked by the owners. Last week, the Alberta government made the decision to suspend monthly limits on production under the curtailment system. While the mandatory production curtailment regulation may be in place until December 2021, the indication is that the government does not plan to resume production limits and this is a very positive signal for us. And we're really looking forward to this being a fully unencumbered market. We will be agile and disciplined as we consider the impacts of these changes on our production plans for Fort Hills. At Terra Nova, we're undertaking activities to safely preserve the vessel. We've deferred the asset life extension project until an economically viable way forward can be agreed upon with all stakeholders. Together with the owners, the province of Newfoundland and Labrador and the federal government, we're working hard to develop such a plan. Progress is being made, although much slower than we had hoped for. Once an agreement has been achieved, we will work to develop a plan to return the vessel to safe and reliable operations. The interconnecting pipelines between base plant and Syncrude are nearing completion of construction and will be commissioned in the Q4. We expect the bidirectional pipelines to enhance integration between these assets and provide increased operational flexibility. As in the second quarter, our downstream business continues to outpace our peers across the continent. We averaged 87% utilization in the 3rd quarter, once again performing about 15% higher than the Canadian refining average. This outperformance included the impact of planned maintenance at our largest refinery in Edmonton. In addition, our trading expertise and investment in logistics assets meant we continue to capture significant value in crude and refined products. This is evident in our refining margins that are significantly higher than benchmark crack spreads. Despite continued COVID-nineteen pandemic restrictions resulting in lower demand and challenging cracking margins, our downstream business once again proved its strength, contributing nearly $600,000,000 of funds flow from operations in the quarter. As we exit October, we're expecting to have base plant back to full rates, Firebag ramping up to its new nameplate, Fort Hills increasing capacity by bringing on the 2nd mining train and Syncrude moving forward now that planned maintenance is fully complete. In addition, with downstream utilization continuing to build pre COVID-nineteen levels, we expect strong Q4 operating performance, which positions us very well for 2021. I'll now hand it over to Alistair to go through our quarterly financial results. Thanks, Mark. At the end of March, you'll recall we announced a $1,000,000,000 reduction to our operating costs in 2020 compared to 2019. As you've seen during the quarter, we continue to progress towards this goal as evidenced by our decreasing cost guidance for both Fort Hills and Syncrude, all of which we had shared in our September update release. Our absolute cash costs across the company are tracking in line with our $1,000,000,000 reduction target. On capital spending with a significant planned maintenance activities, we spent approximately $910,000,000 in the Q3. Our year to date capital spend of 2,900,000,000 dollars positions us well to deliver a capital plan within the current guidance range of $3,600,000,000 to $4,000,000,000 Within this reduced capital guidance range, we continue to invest in assets to improve the efficiency of our business, reduce future operating and sustaining capital costs and drive towards a $2,000,000,000 incremental free funds flow target by 2025. The incremental free funds flow target includes the Suncorp Syncrude into connected pipelines that Mark previously mentioned. These initiatives are expected to contribute to increasing shareholder returns in the future as the vast majority of the $2,000,000,000 free funds flow benefit is as a result of structural costs and productivity changes in our business and is largely independent of commodity prices. During the Q3, we generated $1,250,000,000 of cash flow provided by operating activities, which covered all our capital expenditures and dividends. We achieved this despite the operational performance issues that Mark discussed at base plan, some significant plant maintenance and before we were ramped up the volumes at Fort Hills and Firebag that Mark mentioned. We recorded an operating loss of $300,000,000 in the quarter, of which approximately half is related to higher derecognition charges of property, plant and equipment and exploration and evaluation assets. These higher derecognition charges, just for some detail, are largely related to the incident at the ACE plant and the surrender of the Frontier Carbon. Our commitment to returning value to shareholders while maintaining our financial strength remains. In fact, during the Q3, we returned over $320,000,000 to shareholders. Even after investing in cash flow growth projects, we were able to deleverage the balance sheet and ended the quarter with total debt to capitalization ratio of 36.8%. So just to emphasize that, that does include all our capital lease obligations of approximately $3,000,000,000 and does not net our cash position of $1,500,000,000 That also includes the impact of the income tax refund for the cash taxes previously paid, which we do expect to receive as cash in late 2021, and that amount is currently estimated to be approximately $800,000,000 If I look at the debt metrics, this amount will reverse when we receive the refund in 2021 and that would take our ratio down close to 35%. And as I look at debt going forward, I'm looking at over the next 12 to 24 months and a trajectory of cash flow, debt levels and the accounting impacts of certain transactions such as impairments on debt metrics. All of these combined as we make decisions of future capital allocation over the next 12 to 24 months. And with that, I'm going to pass it back to Mark to discuss the outlook. Great. Thanks, Alistair. Early in October, we shared with Suncor employees plans to reduce our overall workforce by 10% to 15% throughout the next 18 months. We did not take this decision lightly as we know this has real impacts on our employees who have worked hard to contribute to the strength of the company. However, we are making decisions that take into account the long term health and sustainability of Suncorp, which is pivotal for our future success. These reductions are primarily associated with process and technology improvements and will occur with the implementation of these improvements across the business and are part of our progress to achieving our $2,000,000,000 of free funds flow from operation initiatives. But COVID has accelerated certain aspects of these changes. These technology investments reduce manual work, standardized processes, increase efficiency and clerical accuracy, while reducing the need for supervision and review. It also includes expanding our autonomous haul truck fleet in our mines. Further benefits are seen through reduced management layers, improving communication, enhancing flexibility and decision making, and better engaging employees on the front line. We communicated internally on Monday that most positions in our downstream business currently located in Mississauga and Oakville will now be based at our headquarters in Calgary and will result in workforce reductions, which is part of the overall company reductions. These transition is expected to largely be completed in 2021, although we will adjust accordingly to make sure our employees stay safe during this uncertain time. As we head into the final quarter of 2020 with over 95% refinery utilization, we have confidence that the strong performance of our downstream business will continue to lead the recovery. We believe our downstream business is best in class. While we recognize the challenges to refining complexes across North America, our business through physical integration has a significant advantage due to its geographic location and is therefore positioned to disproportionately deliver impressive results. We remain firmly confident in its ability to deliver pre pandemic levels of free funds flow with easing lockdowns and normalizing demand as we move into 2021 and beyond. We've also noted a shift in market commentary this year, where investors are encouraging companies to live within their means and focus on returns rather than just production growth. As you're aware, Suncor has long embraced this philosophy, which we continue to describe as value over volume. The industry has moved from an environment of resource scarcity to one of resource abundance and therefore an environment of extreme price volatility. An energy producer can still thrive in this environment with an emphasis on capital discipline, cost management, consistent generation of free funds flow and returning the cash to shareholders. Our reset cost and capital structure, low decline asset base and physically integrated model, along with our continued investment in making our business more efficient through this downturn, will contribute to growing our free funds flow in the years to come. I've been virtually on the road recently, meeting with many investors, and I'd like to address 3 themes that just keep coming up in all these conversations. As we move into 2021, we remain extremely disciplined on our capital spend. We've said in the past calls at our $35 WTI price, we would expect a similar capital profile to 2021 as 2020. Assuming WTI pricing in the low 40s, we anticipate a moderate capital increase next year of approximately 10% to 15%. And part of this is in because of the scheduled 5 year turnarounds next year. We also anticipate a 10% increase in 2021 production. As you are aware, we and our joint venture partners, like most of the industry, have restricted investment across many of our assets this year, resulting in a more moderate production outlook than what was communicated pre pandemic at the beginning of 2020. We're working on finalizing our 2021 budgets and plans. Consistent with prior years, we expect to release the 2021 corporate guidance later in Q4. With M and A starting to take off, I want to also be clear, we remain steadfast in our three criteria that must exist for M and A to occur. 1, high quality assets and secondly, synergies that can be achieved by combining the assets to increase shareholder value and thirdly, the transaction must be accretive for our shareholders. I can't overstate it enough. We did not cut our capital budget, operating costs and reduce our dividend to leverage up our balance sheet to do M and A. We're also getting asked a lot about energy transition and our investment approach going forward either organically or inorganically. I'd like to point out that we've been participating in energy transition for a significant period of time. We've allocated 1,000,000,000 of dollars in capital towards advancing bitumen treatment technologies at Fort Hills with resulting greenhouse gas emissions in line with the average crude barrel refined in the U. S. On a wells to wheels basis. Further, we own Canada's largest ethanol plant and generate power through efficient cogens and wind farms, which allow us to export approximately 600 megawatts of power to the grid, displacing higher sources like coal. In our portfolio today, our projects like our sanctioned 800 Megawatt cogen at base plant or our 200 Megawatt 40 Mile Wind project as well as several other biofuels 1000000th Enerkem just made their 1 millionth liter of ethanol from municipal garbage. So that's an exciting milestone. Our investments in any form of energy are always governed by our ability to fund the projects to generate competitive returns on capital and contribute to our ESG targets, specifically our 2,030 goal of reducing greenhouse gas emissions intensity by 30%. We will not invest in energy transition projects that don't meet our corporate hurdle rates or projects in areas where we do not bring for our customers are 2 areas where we can and will bring our expertise to the energy transition. In the meantime, we fully expect to continue to leverage our investments and produce oil resources for many decades to come with better and better ESG results. As we've stated, our purpose is to provide trusted energy while enhancing people's lives while caring for each other in the earth, And Team Suncor is doing this with vigor. To summarize, our near term primary focus is on the safe and reliable operations of our assets. Doing this allows us to strengthen our financial advantage, meet our target of returning 6% to 8% cash returns to shareholders and to grow the cash flow of the company by 5% a year. The decisions we've made this year give us the ability to advance all of these areas in 2021 rather than being forced to choose amongst them. We expect to make significant progress on all of these important areas in 2021. And with that, I'll turn it back to Trevor. Great. Thank you, Mark and Alistair. I'll turn the call back to the operator now to take some questions. Operator? And your first question is from Greg Pardy with RBC Capital Markets. Yes, thanks. Good morning and thanks for the rundown. Couple of questions. Maybe the first one, Mark, is just to pick up on the bidirectional pipeline. Just curious how close that is going to get you think to the objectives you laid out a few years back, which would have been sort of a sub $30 OpEx and 9% utilization rate. Is that going to do it? Or do you think there's a lot more work to do there? Well, it's interesting, Greg, and thanks for your question. We've made a lot of great progress. And the Syncrude team in 2019 delivered their 2nd best ever utilization. So on the reliability side, our target of 90%, I think we're this will actually give us the infrastructure we need to be able to deliver it. On the cost side, we said $30 We have more work to do. The owners have been working hard to figure out how do you collapse the cost structure to get to that $30 And so there's lots of discussion going on amongst the owners. And quite frankly, I'm really encouraged with some of the stuff that's going on recently. And hopefully, we'll make some progress and get that across the goal line. Okay, terrific. And then the second thing is that I just want to pick up on the integration, the physical integration you guys have in the business, which really extends into the 1600 retail sites you have. So in a world in which we're living and whereby you want to take your debt down and so on, how critical is it that you would own all of those stations or would it suffice to have control over them? Imperial, 2 years ago, sold retail stations off for a huge price. Just curious how you think about that now? Well, I think it's important to note that half of those stations we don't own. So we only own about half of them. And but one of the things we're finding, Greg, is and you see it in the downstream results when we're 15% above the Canadian market. We think this direct connection to the consumer and seeing the change in consumer habits and behaviors and stuff has been a real advantage in being able to deliver the downstream results. So at least in the near term, we don't see this as a priority. Okay, terrific. Thanks very much. Your next question is from Neil Mehta with Goldman Sachs. Great. Thanks guys for taking the question. The first question is just on refining. You guys came out with a view a couple of months ago that I think some of us were skeptical of that oil would be sitting here at $35 and that refining your refining utilization would be inflecting and I guess oil sitting here at $35 and your refining utilization was 87%. Can you just talk about durability of that refining utilization as you see it? And given how challenged most of North America refining is right now, whether you see an ability to sustain that as you go through 2021? Yes, Neal, great question. I mean, nobody really knows. The 2nd wave of COVID is a bit of a challenge. I think the relative performance of us relative to the market, we're extremely confident in because of the physical integration you talk about. The good thing about it is we're seeing right now in the markets, gasoline is off something like 5% in North America, probably 5% to 10% on the distillate side, jets off 50%. So could this soften if we get a big wave and everybody shuts everything down? I think it could. Do I see it going back to where we were in the Q2? I don't because lots of governments are working very hard keep their economies going. I think it's far more apparent now that we're really balancing 3 challenges, the COVID physical health issues, the mental health issues and then the economic issues. And the economic issues are very significant, as you know. Very clear. And Mark, you said in the press release, but I think a lot of us agree that the operations this year have been not where you want them to be. You obviously had some volume guides and some of your peers have been outperforming you from an upstream performance perspective. How do you when you do the look back of what's gone wrong, what do you think is the core of it? And how do you think about the pace of inflecting going into 2021? Yes, great question, Neil. Part of the issue is any time an incident occurs, you look back and find something where we didn't have the discipline that we needed to be able to do it. We could literally sit and look at the last decade where we've made, I think, huge progress on improving the operational excellence and execution of the company. Was it perfect? No, it hasn't been because we had these incidents. But it's amazing how when we go and look at other fundamental indicators, like right now we're on track probably to have the best safety year in the history of the company. So there's lots of positives that are happening. Yes, this incident happened. This just needs to be 24 hours a day, 3 65 days a year, a relentless focus by our operating organization. That's the conversation that us as a leadership team and I've been having with all the operational leaders in the company and it has our 100% focus to deliver and meet the expectations of our shareholders. Okay. Thanks, Mark. Thanks, Neil. Your next question is from the line of Manu Gupta with Credit Suisse. Hi, guys. Thank you for taking my question. In the past, you have highlighted some of the issues of ramping up foothills because of the production curtailments. Now that these curtailments are gone and you talked about it earlier in the call, do you actually see Fort Hills performing up to your expectations as to it can run-in the way you designed it initially? Would these production curtailments get removed getting removed help you out at Fort Hills? Yes, Manav, thanks for the question. I mean, essentially, we fully expect Fort Hills to get to full rates and perform as originally designed. The question is, is how fast will we get there? And part of the issue with it is we've shed an enormous amount of cost through this. We took $200,000,000 out of OpEx and $100,000,000 out of CapEx this year. So by bringing on the 2nd train and going to 120,000 to 130,000 barrels a day, we essentially retain that benefit. And so we're not spending that money. And what we're wanting to do is ensure that as we step up, it's done in 'twenty one. Expecting it to get there in 2021, but this is an area that we're continuing to work with our owners and we'll let you know as we get out with guidance. A second quick follow-up is you guys actually generated about $400,000,000 in free cash in refining, which I don't think any refiner out there is able to match up. But you also have a unique perspective, you are operating both in Canada and in U. S. And I just wanted to understand, is there a big difference in the refining margin capture in the Canadian assets versus the U. S. Assets, assets, because most U. S. Refiners are really struggling on the free cash flow front and you as a company were able to make about $400,000,000 in free cash in 3Q. So I'm just trying to understand what's driving that. Well, it's interesting because, Madhav, every customer or every refinery actually has its unique signature because it's the crude that runs and the market dynamics and those sorts of things. All of our refineries are actually good performing refineries. And so it depends like our Edmonton refinery tends to be a little stronger, but partly because it runs very heavy crude and physically integrated with oil sands. That's not true of Denver as an example. So it's not nearly as good as in Denver as what we would see in Western Canada, but Denver is competitive with some of what we see in Eastern Canada. So it just depends on crude slates, market dynamics, market competition. But Denver is doing fine. Thank you for taking my questions. Your next question is from the line of Phil Gresh with JPMorgan. Yes. Hi, good morning. First question on the workforce reductions and the expectation that they'll contribute to the cost savings initiatives that you've laid out. How much I apologize if I missed it. Did you quantify how much you expect that to contribute, say, starting, I would think, in 2021? Yes. In 2021, it's a little hard to say, Phil. When you go and look at it, we said we were going to increase our cash generation capability by $1,000,000,000 If you look at the cost reductions we have from headcount right now, it would add something like $300,000,000 to $400,000,000 of structural change in our cost structure. And then even some of the implementations that we did this year, we think about 30% to 40% of that structural. So if you take our headcount reductions, what's the structural cost reductions we ended up getting this year, you're getting very close to our 2023 target. But some of these reductions won't happen until early 2020 2. So it's going to be a little noisy as we go through some of these changes. We'll see part of this 2021, but some of that might just get offset with restructuring charges and such that we would expect to show up. Right. Okay. And with respect to the comments you made about the turnaround schedule, the every 5 year turnaround schedule for next year, How do we think with the 10% increase in the production that's coming, how do we think about the mix of that in terms of where the turnarounds are and how much is upgraded production growth versus non upgraded? Well, when we go down because we're taking our big up grader at Oil Sands offline for its 1 5 year turnaround. And when we go down with that, a bunch of the mine production will go down at the same time. So I think you'll see stronger relative upgrading performance next year versus this year just because of this incident that we've had. And it's one of the reasons that our production is only up 10% because if it wasn't for the turnaround, we'd be up further. Right, right. Okay. And then just one last question on the balance sheet. I mean, how do you how are you thinking today about the longer term target leverage level, whether it's the debt to cap commentary initially or debt to EBITDA? Just what do you think is the right level to be at if oil is in the 40s? Yes, Amit, it's Phil. It's Alistair. I would say that we're getting very close to the level at which we are able to move forward and start to increase both shareholder returns and capital investment. I'm very comfortable with where we are today, particularly if we're in the sort of low $40 oil price level. There's lots of noise going on around the debt to cap metric, particularly when you started some of the impairments we've taken some of the accounting issues. I really I think a cash flow or EBITDA metric is the one that's always pretty critical here. But as I said, I'm pretty comfortable with where we are today around low $40 oil prices. And I think we have a great capacity to be able to start to look at what we want to do in shareholder returns as we move into 2021. Great. Thanks, Alistair. Thanks for the color. Your next question comes from the line of Prashant Rao with Citigroup. Hi, good morning. Thanks for taking the question. I wanted to touch back on the downstream. I know it's been asked about already a couple of times on the call, but your margin capture has been quite strong, particularly versus your sort of suggested indicator all year, even stronger than it was sort of in 2018 2019. And I think we have some of the pieces in the answers that you've given here, but I sort of just wanted to ask it another way. If we were to bridge the moving parts, how would you think about the how much is sort of, let's say, at the refinery itself in terms of how you're operating the assets versus the midstream and logistics and the retail pieces that are also part of that segment. I think we all maybe don't have struggled to appreciate the contributions from the different components there. So any color would be helpful, particularly with reference to sort of this quarter and this year, really. Yes. Thanks for the question. It's interesting because we tend to look at the integrated margin. We will pull it apart to look at the performance of each segment of that, but not necessarily on a quarterly basis associated with it. One thing I would tell you though is, if you look at refining as an example, it's a very substantial fixed cost business. And so part of the issue with it is, if you can't get your utilization to like notionally 80%, although we were below that and generated cash in the Q2. But it's very difficult to get these machines to actually make any money. So utilization is super important. So the integration with the retail consumer and our ability to get our utilization rates up above the market is super important for us to be able to generate cash flow. So I don't have a great answer for you, but the focus is really around that entire system operating at higher utilization rates is one of the key reasons why this set of assets is generating cash. Okay. Thanks. I appreciate that, Mark. And then just a follow-up on the upstream. Just looking at the Q on Q movement in oil sands, volumes are down 6%, obviously, you had some operational issues that you've come out of now. But you managed to keep your cost per barrel fairly controlled. I sort of wanted to dig down a little bit into just broadly speaking across the Oil Sands asset base. Could you give us more color on what drove this? And specifically, if we should be thinking about elements here to keep in mind as we think about Q4 and going forward, maybe upgrading costs were less or if there's other things that you were able to levers you were able to pull that maybe are ratable as we go forward here? I'll take that one, Mark. I think it's a general focus across all parts of our business, not just oil sands, but then in the downstream and then the cargo functions around making sure that we only spend what we need to spend, looking hard at everything that is going out of the door and a real focus on reducing that as we go forward. And we've talked about that really as part of that $1,000,000,000 OpEx reduction that we announced in March. And we're making great progress on that. So that's really my overall answer. As we look forward into 2021, we've announced some additional structural reductions. But as Mark said, some of that benefit will be offset by restructuring charges. But we are taking the underlying cost structure of this business down and that will be consistent with our $35 breakeven cost. And maybe the one thing I would add to that is, it's interesting because we've been talking about this now for, I don't know, a couple of years where we've been talking about generating this incremental $2,000,000,000 and such. And I think to some degree, that conversation has been relatively abstract. Now we're seeing the implications of it as we start to restructure the company. We're reducing our headcounts and such. And so these are real structural changes that are fully driven by our journey around Suncor 4 point zero and such. Some of the timing is just getting adjusted based on COVID. And but we're very excited about the change going forward despite the fact that we know how challenging this is on our people. Alastair and Mark, thank you very much for the time. Appreciate it. Thanks. Your next question comes from the line of Asit Sen with Bank of America. Thanks. Good morning. Mark, thank you for the little bit of a peek into 2021 capital spending scenarios. Just about sustaining capital, I think in the past you have highlighted a number between $2,750,000,000 $3,750,000,000 each year. How should we think about that number in 2021 given Fort Hills, some of the other changes that's taking place in the portfolio as well as cost cuts? Well, we fully expect it to be in that range. It's going to be higher in that range. This year in 20 20 with the cuts that we did, we went below that range. I think we're sitting somewhere between $2,200,000,000 $2,400,000,000 this year. Next year, I think it's going to be in the mid-3s. We have not only do we have our largest upgrade turnaround, Syncrude has their big coker offline next year as well. So there's a lot going on next year. But so our capital mix is actually changing quite a bit as we go into next year, but it will be in that range. Got it. Thanks. And then, Mark, Suncor has a significant offshore asset base. Is there a scope to rationalize some of these portfolio, whether it's in North Sea or East Coast of Canada? Well, it's interesting because I guess the question is, is the asset base getting rationalized right now? Like you heard Husky talk a little bit about through this merger and such talk about the plans for West White Rose. We really have no money in there associated with it. But at all points in times, we're looking at our asset base and trying to figure out, can we get more out of it than we would if we just carried on the current course and path. So we're always asking ourselves those questions. But we like the offshore base because it actually generates we're so physically concentrated in a very small geographic area that it gives us some really good diversification to our cash flow resilience, which has been important during the forest fires. It was important during COVID, quite frankly. And so we like the asset base and we think it's a real good complement to the company. Thanks, Marsh. If I can squeeze one in, on consumer channels, you were very clear on when you talked about ethanol and retail. How about EV charging station initiative? You've talked about that in the past. Could you elaborate what's going on, on that strategy? Yes. Right now, we don't have any specific plans to be able to increase that, although we're looking at it and spending quite a bit of time just trying to understand how all these assets are performing. So this we're actually just coming up to a session to talk about all these investments that we've made and how they're performing. So I actually don't have the specific information for you, but we're not planning to invest more until we understand how it's performing in some detail. Your next question is from the line of Mike Dunn with Stifel First Energy. Thank you. Good morning, everyone. I guess maybe 2 or 3 questions if I could. First, probably for Mark. Forgive me if I missed it, but did you or can you address, I guess, the root cause of the incident there in August? And maybe talk about if you have implemented any changes since then? And I've got a couple of follow ups. Yes. I mean, part of the issue with it is we had some vapor exit a tank that ignited and that was the cause of the incident. It should not have happened with all the standards and such that are in place. And so for sure, every single time we have an incident, we go through and try and understand how could this happen with all the controls and processes we have in place. We then try and understand, okay, well, what happened? Then we go and look at, well, where are we doing this across the rest of the company? And do we have the proper standards in place to ensure that what we learned from this incident is factored in so it doesn't happen again? And so we're going through that process now. And like I said, every single time, there we don't use the word or try not to use the word accident because we know that with proper controls, all of this can be done and done safely. So that's the process we're into now. Okay. And then I do recall, I guess, earlier this year when you and all your other peers kind of changed the had to modify your I guess your workplaces for COVID and whatnot. And there were questions that came up about whether that not any of that would lead to operational interruptions or mistakes. Do you think that had anything to do with this incident? No, not at all. It's interesting because in so many aspects of our operations, you're seeing the operating discipline strengthening through this period of time, which is very interesting. As I mentioned in my text, this will be the best safety performance in the history of the company, at least that's where it's at today. So the diligence we're seeing in the operating organization is excellent. Understood. If I can move on to the downstream, certainly appreciating your clearly explained views on the strategic importance of your retail network. I just wanted to clarify on comments to you and your colleagues have made about the real time data feedback, I guess, you're getting that's helping you plan your refinery utilization. Am I to understand that if you didn't own half of your retail stations that would be diminished? Is that a fair way to think about it? We think that if we didn't own the stations, the cash generation capability would be impaired beyond what you would just think of a retail station, yes. Okay. Okay, that's all for me. I appreciate that. Thanks, Mark. Thanks. Your next question comes from the line of Chris Tillett with Barclays. Hi, guys. Good morning. Just one question for me, if you don't mind. If I look at your cash flow on the quarter, net of CapEx and dividends, it was effectively 0. And you guys reported average WTI during the period of just north of $40 So I was just wondering if you could help us bridge the gap between kind of that breakeven that you reported this quarter at roughly $40 versus the typical $35 level that you talk about. Was that due to some of the outages and incidents in the period? Or are there other factors we should be considering? Yes. Chris, I'll take that one. Effectively, I would say there are 3 things. Clearly, our production was down in the quarter than what we would have assumed in the $35 rate. The cracks were lower, as you would have seen. And I think we were assuming $12 cracks in our $35 And then the exchange rate was significantly higher. The Canadian dollar has obviously strengthened quite a bit in the last few months. So those would be the 3 key things that are why it's higher than the $35 And also I would say, Chris, you're assuming you're taking into all the capital that we spend. That $35 is just on sustaining capital and the dividend, not every dollar. We're spending significant dollars on growth capital related to driving cash flow growth going forward. Okay, understood. That's fair. That's all for me then. Thank you. Your next question comes from the line of Mino Holshof with TD Securities. Good morning, everyone. I just have one point of clarification. You talked about a 10% bump on production into 2021 despite the 5 year U2 turnaround. So my question is, are there any other turnarounds embedded in that 10% year over year increase? And then as a follow-up to that, maybe you can just remind us of the scope and duration of the 5 year turnaround itself? Thanks. Yes. I mean, we're just trying to get this all finalized. So that it wasn't intended as a guidance comment. It's just directionally correct. If you look at it, we'll provide some of this when we get into guidance, Menno, as we go forward here. But when you look at it, yes, like Syncrude is offline with their big coker next year. So that's actually the biggest event that they have is when the big coker goes off. And U2, like I said, is the biggest event that we have in oil sands when we go through this. So those are the 2 big ones. And then you have to remember that like we have Terra Nova, our assumption next year is at this stage of the game is that it doesn't return to service. So we're not showing any production from there. So there's a few other contributing factors to that. Perfect. Thanks, Mark. Thank you. Your next question is from William Lacey with ATB Capital. I just want to step back for a second. You talked about how you like the diversification of the international and the offshore assets in terms of your cash flow. And generally diversification is a good thing. You guys are a very material consumer of natural gas. And obviously, we've seen that market shift pretty materially to the upside. What are your views in terms of having potentially a bit more of a balanced to your overall production profile in terms of inputs for the oil sands operations? Well, at this stage of the game, you're right, natural gas prices have strengthened through this period of time. We think this is somewhat temporary that over the next 18 months or so as we go through COVID and such because essentially all shale and associated gas associated with the incremental drilling has been shut down. So we think this is a bit of a temporary phenomena. We understand the risk management associated with it. A $1 change in the natural gas price is about $230,000,000 of cash flow. But at this stage of the game, we don't see ourselves changing the products that we mix or getting into a different line of business. Okay. Fair enough. Thanks. There are no further questions in queue. Mr. Bill, I would like to turn the call back over to you for any closing remarks. Great. Thank you, operator, and thanks, everyone, for attending the call. I know it's a busy earnings day today, so we appreciate it. And I and our team will be around all day. If you have further questions, please reach out. Thank you again for attending. Ladies and gentlemen, this does conclude today's call. You may now disconnect.