Earnings Call: Q1 2019

May 2, 2019

Good morning, ladies and gentlemen, and welcome to the Suncor Energy First Quarter 2019 Financial Results Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. I would now like to turn the conference over to your host, Mr. Trevor Bell, Vice President, Investor Relations. Sir, you may begin. Thank you, operator, and good morning. Welcome to Suncor's Q1 earnings call. With me this morning are Steve Williams, our outgoing Chief Executive Officer Mark Little, President and Incoming Chief Executive Officer and Alistair Cowen, our Chief Financial Officer. 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 Q1 earnings release as well as our current annual information form, and both of those are available on 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 Q1 earnings release. Information on the impact of foreign exchange, FIFO accounting and share based compensation on our results can be found in our Q1 report to shareholders. Following formal remarks, we'll open the call to questions first from members of the investment community and then time permitting to members of the media. I'll now hand it over to Steve Williams for his comments. Good morning, and thank you for joining us. We announced last November that I would be retiring at today's AGM, at which I'm Mark Little will become Suncor's new CEO. Since that announcement, we focused on ensuring a smooth transition. Mark and the Suncor team have continued to drive tremendous results as is reflected again in this quarter. In just a few minutes, I'll hand over to Mark and Alastair to talk about the very strong start to 2019. You've heard me say many times that you should judge us on what we do, not just what we say. During my time, we've increased the reliability of assets and reduced Oil Sands operating costs per barrel by 1 third, and we did that through disciplined operational excellence. At the same time, we've maintained our commitments to leadership in sustainability. We set ambitious greenhouse gas and social goals and continue to make great progress. We focused on strong capital discipline. We completed many countercyclical acquisitions, including increasing our interest in Syncrude. Maintaining a strong balance sheet also allowed us to complete organic growth at Hebron, while successfully executing, commissioning And ramping up the world class mining asset Fort Hills. Over the past 7 years, all of this was We accomplished while increasing our dividend by approximately 20% per year and buying back nearly $10,000,000,000 worth of our stock. I think we're among a handful of companies in industry able to generate reliable free cash flow through a wide range Business environment while consistently increasing shareholder returns. We've clearly demonstrated the resilience of our integrated business model as well as that commitment to returning value to our shareholders. Looking forward, Suncor has a very compelling investor proposition. I'm excited about what's in store for Suncor and our stake And I truly believe the best is yet to come, especially now I'm such a large shareholder. I will now turn it over to Mark. Thanks, Steve. And I appreciate you doubling down at this time. That's awesome. But I wanted to thank you for your strong leadership over the last 7 years. It's interesting. The support you've provided to me and the leadership team has been outstanding. Steve brought operational excellence and capital And that's just been huge for the company. I think all our shareholders understand that and it's allowed us to thrive Over a significant period of time. And so today, we're in a great and enviable position within the industry and you've been a fabulous representative of the company, both to our stakeholders, but to our governments and beyond. So thanks so much for your service and leadership. I'll now turn over to our and turn my attention to the Q1 results. We generated $2,600,000,000 of funds from operations. This reinforces the value of our integrated model, as Steve just mentioned. And in fact, in the last two quarters, we've demonstrated the strength and resilience Through a range of markets and commodity cycles, in the Q4 of 2018, There were low benchmark prices with wide, heavy and light crude oil differentials, whereas in the first Quarter of 2019, there were higher benchmark prices and narrow differentials. Both quarters were able we were able to generate significant Funds from operations. And this substantial change in market conditions was primarily driven by the Alberta government's actions to curtail production. The net financial impact of this has been slightly positive to Suncor. However, we believe that for investment to return to the province, We must find a path forward for Albertans to get fair value for all of the production in the province. And to that end, we'll be working with the new Alberta government and the industry to achieve this goal of getting 100% of Alberta's crude oil Production to market so that we can receive a fair global price. Our results demonstrate the value Suncor will gain from rising benchmark oil price given that all 765,000 barrels a day of Q1 oil is oil production. We expect our production to grow 10% this year versus 2018, even with the Alberta mandatory production curtailments. However, the production caps did significantly impact our production volumes and unit operating costs in the quarter. But given this unusual environment in the Q1, we Our overall focus was on maintaining the safe operation of our assets for our employees and to sustain asset integrity, especially during such a cold and difficult winter. Secondly, we maximized production to our highest value oil sands products, namely synthetic crude oil and diesel. Even though the upgrading yield loss resulted in fewer barrels, Our entire focus was on value and not on production. 3rd, On several occasions in the quarter, we transferred production quotas between our oil sands assets to ensure safe operations and to further maximize value. And finally, we redeployed resources to advance pre stripping activities in the mines. Progressing this work at this time of the year is very efficient because the ground is frozen and the trucks can roll well. And so we anticipate lower absolute operating costs later in the year to offset this. So moving to our Q1 operating results. Total oil sands production was 657,000 barrels per day, which represents a reduction of 84,000 barrels a day were approximately or just over 11% compared to Q4 2018. What's important to note is that 80% of our Q1 Oil Sands production was synthetic crude oil versus 65% in the Q4 of 2018. In fact, Our production of synthetic crude oil when you take Syncrude and combine it to base plant is an all time record for any quarter in the history of the company. The substantially lighter product mix in the Q1 reflects, as I discussed earlier, The strategic decision to keep upgraders running at full capacity during a period of extremely cold weather In order to operate safely and continue to focus on maximizing value, 1st quarter absolute cash Operating costs for all of our Oil Sands assets were in line or slightly higher than Q4 of 2018. This reflects the fixed cost nature of mining operations, higher commodity costs and the advancement of future mining activities as I just mentioned. On a unit basis then, all of our Oil Sands operating costs were on average $5 a barrel higher than Q4 2018, primarily as a result of lower production volumes combined with higher seasonal and commodity costs. Moving to our E and P business, total Q1 production was 107,000 barrels per day. These results reflect the ongoing ramp up of Hebron, which achieved production of 18,000 barrels per day net to Suncor during the quarter, as well as First Oil from the Oda project in offshore Norway. Operating costs were up Slightly due to maintenance deferred from Q4 2018 given the severe November storms off the East Coast of Canada. Our refineries operated reliably during the quarter, achieving utilization of 96%, which included planned maintenance at Commerce City. We Total refined product sales increased to 543,000 barrels per day, which reflects record Canadian wholesale volumes. Refining operating cost per barrel was $5.60 in the quarter as a result of higher commodity costs and the impact of planned maintenance Looking to the Q2, we have several routine planned maintenance events in both the upstream and downstream segments of the business. The anticipated impact of these planned maintenance events has already been reflected in our 2019 guidance. I also wanted to comment briefly on capital. And let me assure you that our strong focus on investing capital will not change. This year, we anticipate to spend $4,900,000,000 to $5,600,000,000 And in Q1, Our capital was down quite a bit and a lot of it is because of weather and so some of that will show up later in the year. Nevertheless, our focus remains on ensuring that every dollar spent is driving value for the organization. And some of the capital is expected to ramp up later in the year. And a lot of that is While remaining laser focused on our operational performance, we're also advancing our plans to grow our cash flow each Sustainable incremental annual cash flow. This will be achieved by enhancing margins and reducing both sustaining capital and operating costs of our existing assets as well as some selective debottlenecks. Today, we're moving forward with a number of opportunities, which will help us achieve approximately 75 percent of the $2,000,000,000 target. To help drive these initiatives, Just recently, we announced a change to establish a senior leadership team to ensure that this Focus gets the day to day support, focus and leadership that's required. This will also include work to further identify the remaining opportunities to close the gap. The team will be led by a senior leader from our operations that will also be part of the executive leadership team. So with that, I'll pass it along to Alastair to provide some color on the Q1 financial results. Thanks, Mark. So, Steve, I'd like to also Thank you. Firstly, for persuading me to join Suncor 5 years ago. That was an awesome decision and thank you for that. Your leadership across the company and all that you're doing for Suncor as well as being a champion for our industry on both the national and the global stage. Under your leadership, Suncor has certainly built a strong social and environmental track record of focus And the investments that we have made ensure that we will reliably and responsibly extract value from our world class Long life resource space for many decades to come. So let me start the review of our financial results by highlighting a Change in our Q1 reporting related to the new lease accounting rules under IFRS. The overall effect in our results is immaterial. However, will notice an increase in our debt of approximately $1,800,000,000 This change has a minimal impact on our net debt to Funds from operations ratio, the debt add approximately 2% to total debt to capital ratio. So this change now aligns with how the rating agencies have historically calculated our debt metrics, and we have adjusted our target debt to capital ratio accordingly. With both the light and heavy crude oil differentials narrowing significantly from Q4 2018, Our average oil sands operations price realization increased by $34 to $66 per barrel. The improvements in benchmark pricing and narrowing differentials were partially offset by reduced production volumes due to curtailment and higher seasonal mining and commodity costs as Mark discussed. This resulted in Oil Sands segment funds from operations of $1,200,000,000 and operating earnings of $189,000,000 We also saw a partial recovery of Brent prices during the Q1. Our offshore assets were able to capture 100% of this improvement with an average price realization of $86 per barrel. The E and P segment also benefited from the receipt of after tax cash proceeds of $264,000,000 related to insurance for our Libya assets, resulting in funds from operations of $702,000,000 and operating earnings of $492,000,000 in that segment. Downstream generated record funds from operations and operating earnings during the Q1 of $1,300,000,000 $1,000,000,000 respectively, benefiting from a partial reversal of the FIFO loss recorded in Q4 as a result of the improving business environment. A net company wide after tax Gain of $288,000,000 associated with FIFO accounting and related inventory valuation adjustments was recorded in the Q1. Funds from operations were impacted as usual in the quarter from a seasonal perspective by the after tax payment of approximately $200,000,000 related to our long term employee incentive program, and I'll just remind you that that occurs in the Q1 of every year. Together, all this resulted in consolidated funds from operations of $2,600,000,000 and operating earnings of $1,200,000,000 As we said, these results once again demonstrate the strength and resilience of our integrated business and its ability to generate Significant cash flow and earnings in any market environment. So with the cash we generated in the Q1, We paid $662,000,000 in dividends and that reflected the 17% increase announced last quarter. We repurchased approximately 12,000,000 shares for $514,000,000 and we spent $875,000,000 As Mark said, we expect to be within our existing capital guidance range for 2019 for capital. However, to invest in profitable projects, we still require clarity on government policy and regulatory matters for some of these prior to sanctioning. With our balance sheet already strong, we have no requirement to direct cash flow to debt repayment in preference to shareholder returns or growth. Our track record demonstrates that we will continue to target sustainably increasing shareholder returns in the current medium and long term. So before I pass it back to Trevor or Mark, we'd like to make a brief comment. Thanks, Alistair. Just before we jump into the Q and A, I just wanted to extend our deep and heartfelt condolences to the family of the young man, The Ledcor employee that was fatally injured in a light vehicle accident on our Fort Hills site on Monday afternoon. Our value is that safety is above all else. And this is a tragedy and clearly a failure from a variety of different parts. And we just wanted to ensure that we extended our thoughts and prayers to the family, friends and coworkers at this time. So Trevor, over to you. Thank you, Mark, Alister and Steve. Our first question comes from the line of Jon Morrison with CIBC Capital Markets. Can you provide any more color on your comments about developing step one opportunities within the offshore business? And Specifically, I'm really focused on, 1, is this taking on incremental projects like Oda that came online? Or are you looking at perhaps taking Smaller positions in some of the larger offshore projects that are out there. And secondarily, does the term step would imply a new geographic footing in any way? Gee, I'm glad you asked that question. It's really intended around and in fact, I think if you look across the portfolio of all of our assets, One of the key focuses and one of the ways to drive huge value is to continue to get resource and put it behind existing And continue to drive value. So I would say in the vast majority of our assets, our focus is around Where is the resource to keep sustaining or in some cases even growing production within the existing asset. And so you see that in the White Rose Extension project, you see that with how we're optimizing Terra Nova. It was not intended to talk at all or reference any other Geographical areas that we'd be entering, we did do Oda and Fenja. The big opportunity we still have sitting in the is Rosebank. And I think everybody realizes that that's been pushed out with Equinor's entry into that ownership pool. And the focus that we have in working with Equinor is to figure out how to extract even more value. This is about value. It's not about time or production or reserves. So That's our singular focus on it. That's helpful. Maybe if I could ask one more. There's obviously a lot of conversations Around Amity and the oil sands right now given some of the things that are in the market. And you've always said that acquisitions kind of have to have that trifecta of 1, Being strategic, 2, providing cost synergy opportunities and 3, coming at the right price. If something is in the market that doesn't check the first two boxes, Does price ever become enough of a reconciling item that you would ultimately look at proceeding because the accretion is that high or if it isn't strategic, it just really is on the table for you? I think it would really we would have to factor in all of the implications and risks associated with the infrastructure issues and lack of market access all those sorts of things into it. So maybe it would, but I think the question you're asking is, one of the things that's become very prevalent in the last couple of days is With Devin's comments, are we the ones that they're talking to? And I guess I would just assure you that we're not. Okay. That's very helpful. I appreciate the color. I'll turn it back. Thanks. And our next question comes from the line of Neil Mehta with Goldman Sachs. And Steve, thanks for the partnership, your leadership and congratulations on your retirement here. And Mark, congrats to you as well. I just wanted to get your thoughts, Mark, in terms of any early views in terms of your strategic vision and then you see Early observations, shall we expect more of the same or any radical change? Thanks, Neil, for your question. It's interesting that if you go back, I've actually been on this journey with Rick and Steve for the last 10 years. And I've been on the executive leadership that entire time. And I think the one thing that's Very clear, Steve and I, we even have a similar background, but we're very, very aligned on how we drive value and move And so the whole focus around operational excellence is huge. And we've been on this journey And I viewed that the merger gave us an opportunity to accelerate the pace of that journey. One of the things we've literally just completed In the last month is we've just pulled together our top 1,000 operational leaders across the company, Offshore, onshore, refining, oil sands, infrastructure brought them all together to talk about the importance of operational excellence and how we want to ensure that through this transition, there's absolutely no confusion That we remain on the journey, that we stay focused and we really need to continue the journey of continuing to strengthen because this is a journey that never ends. And although we've come a long ways, we're far from perfect and we need to keep that journey moving forward. The one The second thing is probably really around capital discipline. And that's been a key factor because I think we recognize That nobody wants to wait 50 years to find out how this story unfolds with all that's going on. And so we've created and shifted the company over the last many years as everybody realizes to a company of much more modest growth and higher returns to the shareholders. And so we're now into our 17th year of consecutive dividend increases. We've repositioned the company that way and our focus is ensuring that we're very diligent on the projects that we're taking on And how we spend the capital for the organization. And then maybe the 3rd piece is, And this really isn't a difference between Steve and I. This is more of an evolution of the company. I think relative to technology, I kind of view we're in The cool initiative phase and we're working very hard to try and understand how do we Leverage technology to accelerate our pace on operational excellence and to go after the $2,000,000,000 that we've committed To our shareholders to deliver by the time we get to 2023. So we're talking about relative to last year, we're talking about a 20% increase in our cash flow Without significant nature new projects coming on, yes, we have some debottlenecks, yes, we have some things happening, but the focus is to drive that Cash flow. And so we've just assembled the senior leadership team and we're working to turn the leveraging of technology to empower the organization into a strategy for the organization and to continue to strengthen our performance and return Generate more cash and return more cash to our shareholders. Thanks, Mark. And that actually ties into the follow-up question, which is what's the confidence Level about the achievability of that $2,000,000,000 of incremental cash flow by 2023. In the context for that question, as we talk to some investors who say that Suncor has gone through a period of rapid growth, but as some of these Projects ultimately come online, the growth flattens out and so how can cash flow grow, which goes back to your point about Ultimately driving margin expansion, and cost savings and capital savings to get that $2,000,000,000 but it's just harder to model and get visibility over. So anything you can do to help the market get confidence around that $2,000,000,000 I we've gone a long way. Yes, that's a great question, Neil, and I can appreciate the challenge with it. My personal confidence in it is 100%. And so hopefully that position is clear. And the joy of it, I think for us is and it's exactly what you said. When you go through rapid growth, It's like, are you maximizing value? Like one of the reasons we entered Syncrude was because we felt like there's an enormous amount of value there that needs And so as we put the interconnecting pipeline and just as one example between Suncor and Syncrude, We have an opportunity to actually strengthen the performance of both of the assets, drive down our operating costs and generate additional cash. So the faster you grow, actually the more opportunity there is to be able to optimize and drive additional cash flow. Fort Hills is a great example. We just massive amount of capital that we put on to the ground. We've done a bunch of Testing associated, we think there's a debottleneck of 20,000 to 40000 barrels a day. The curtailments are making it a little More challenging to sort out the debottlenecks and such associated with it because we can't run the asset at full utilization. But there's no question that as we deepen our understanding of the assets and continue to work with it, We think we can unlock a lot of value there. The issue with it is we don't want to go it's not all about time because if we rush into it, we could Ritter away a bunch of cash and we're just not willing to do it. If I could yes, that's great. If I could sneak in one last question. And Mark, what's the update up in Alberta now around curtailments? And how do you think this plays out from here? Well, it's a great question. With the new premier taking office and the change in government, We're looking to try and figure out, okay, so how does this story end and how does curtailment end? Because one thing that's pretty clear and it's certainly true on our side and I would expect it's true from other organizations as well is There's no sense spending money to generate additional production and drive further throughput if you can't produce the oil. The economics of that are 0. So the only way that we're going to be able to get people back to work and the electricians and the project folks and the engineers Is to get 100% of our production flowing to market. So one of the consequences is curtailment. There's been pros and cons to it and I think you've heard them all. Yes, prices are up. Yes, royalties are up. But we've also reduced takeaway capacity. And so now we're moving less Oil out of the province than we were before. And so now the focus is, is how do we figure out how to increase Takeaway capacity, get all of our production online and then we can continue to start pursuing now the new opportunities to keep Investing in the province and growing the value of this resource, not just for Alberta, but for Canadians as well. All right. Thanks and congrats again. Thanks so much. Thank you. Our next question is from Phil Gresh with JPMorgan. Your line is open. Hi, good morning and congratulations Steve and Mark. First question just, Mark, your latest Update on the Interconnect pipeline and just in general where you're at with it and when you'd expect that to be a contributor To your $2,000,000,000 of CFO improvement? Yes. Thanks, Phil. The interconnecting pipeline is progressing as expected. We are expecting that By the time you get to the end of 2020, that project will be in service and then we'll have an opportunity to use it to Optimize both of these assets. For our base plant, it's much less of a change because we have the flexibility to take all the different bitumens that we produce Into base plans and optimize our assets and blend production into the upgrader. For Syncrude, this is a huge change because they've had Very little operating flexibility. That's why this is such a great opportunity. So that along with their journey around operational excellence, we think we can generate a lot of value with it, but it's on track and looking good. And I think you mentioned you've identified 75% of The potential CFO improvement. How much of that would be in your mind this project and ultimately what it would Yes, it's interesting. I think we have about $200,000,000 of the $2,000,000,000 tagged to incremental cash flow associated with this particular project. So it's about 10% of the portfolio. And There's a number of things happening at Syncrude. 1, as I think everybody realizes, we're on the same operational Grading the oil sands material. That's one of the reasons we bought in because we thought we have a lot of expertise that can So that journey is going well. In fact, in the Q1, although this was record SEO production for the Corporation, Syncrude was constrained because of the curtailments despite some of the allocations they received. So Our production could have been higher and Syncrude could have performed even better. That's encouraging. It's a little frustrating that with That curtailments come in at a time they're firing on all cylinders, but the team is actually on quite a journey and we're optimistic about the progress they're making. This line that we're talking about will just make it better. Sure. And if I could just maybe follow-up on some of your OpEx commentary, the fact that it was higher in the Q1 and that you expect it to get better. Did you expect or did your guidance For the year factor in the curtailments and some of these, I guess, investments That you're making, it does imply a really significant improvement in the back half of the year. So I just wanted to make sure I understood that. Yes. It's yes, we're a little bit below. I think we're just we're around 15,000 barrels a day below the bottom end of our Guidance in the Q1. So we did factor the curtailment in. We That the curtailment would be 325,000 barrels a day for the Q1 and then 30% of that amount for the remaining portion of the year. A few months back, we tried to gain some clarity with the current situation And just trying to understand, well, how come we're not down to like 90,000 barrels a day in April? And the Alberta government clarified that The focus was to average $90,000,000 for the rest of the year, which is okay for us. We are doing maintenance in Q2, so Has a little less of an impact. And we also have that in Q3. So we actually felt like, Okay. We're in pretty good shape there. Now these curtailment levels are higher than we expected and part of the reason is because takeaway capacity from the province have So the focus now is how do we figure out how to lift takeaway capacity and production So that we can generate even more value, not just for the companies, but for the province and the citizens of Alberta. So that's really the Focus, I think our sense is, is okay. We believe that we will make some progress on that. In the last several months, the province in April, May June, they've Adjusted the various numbers a little bit. So they are on a slow progress of reducing curtailment. Our hope is as we can accelerate that. We're still sitting here with what we know today. We think our guidance is good and we'll continue to stick with it. And we're working towards in that focus is to get this oil back on. Sure. Okay. Thank you. And then my last question just on M and A. It's a bit of a follow-up here. Obviously, south of the border, there's been a lot of Activity going on recently and with respect to the activity, there's been a lot of discussion as to What metrics matter to companies, specifically what financial metrics matter to companies? And so I was just curious how you would frame that, Mark, in terms of is it an earnings accretion, a cash flow accretion? Is there Some other metrics that you care about most as you analyze opportunities? Thanks. Yes. Phil, I think in all of these, these are actually at least the ones we've done, a lot of these are complex transactions. And so we look at everything from what we think the actual asset value is, what kind of return we would get relative to the money and we invest, Would it be accretive on cash and earnings, all of these, but it's not a simple recipe. We would look at them. Every potential transaction seems to have different attributes. And but obviously, we're not going to do something unless we think that it's going to add real value to the shareholder. And I think that's really the biggest driver for us, although accretion is an important factor in all that as well. Okay. Thank you. Thank you. Our next question is from Roger Read with Wells Fargo. Your line is open. Yes. Good morning and congratulations to both of you on Steve, a Job very well done. And Mark, I know you're ready to roll with this. Digging in on the question front, I guess you mentioned CapEx for the full year, you're going to hit that, but you also said some there's some regulatory issues. I guess Thinking about the CapEx that is set and doesn't need anything but good weather versus maybe the CapEx that still needs A regulatory approval, give us an idea of what potentially might be an underspend it seems like you're setting up for in 2019? Yes. I mean, clearly, the way we've done this, Roger, is we've assumed that we will proceed with these projects once we get Clarity on it. So we pushed out the timing of our projects and factored that into our capital. And so When we go through it, I think our view is, is okay, we're definitely kind of mid to the lower end of our range at this stage of the game, wait and see how it Happens, but at this stage of the game, we're not expecting to underspend the range. Although, if we decide not to proceed with some of these projects, that's And I think we just need to wait and see how that plays out. What do you think the main factors are there? Is it Curtailment related or is it just something else that you'd be evaluating? Well, some of it would be curtailment, but like Just as an example, one of the projects that fits into this category is our cogen project at base plant. And so cogen, we're just trying to understand, okay, well, what happens The regular or what happens to the market and what direction are we going in, because the last thing we want to do is go out and invest all of this Capital and then find out the whole market concept gets changed. And so now very efficient, Very energy efficient, low greenhouse gas emission electricity isn't valued in the province. We fully believe With the platforms and our discussions with the Alberta government, we can quickly get alignment on this because they Certainly interested in seeing investment go and improving the environment. But so we're just Kind of waiting to sort that out, but the cogen is actually the biggest one in there. Okay, great. Thanks. And then, I know this would be a Tough question to answer here just because of all the moving parts. But what would your thoughts on incremental crude by rail Capacity for yourselves be or as something you want to do maybe as an opportunity in the market? And I'm just thinking back to your Comments to Phil's question about capacity, takeaway capacity has actually declined, which is further complicating the whole curtailment Volumes issue right now. Yes. It's interesting, Roger, is that when we've gone on this journey, I think when we peaked, we were moving about 350,000 barrels a day as an industry out of the province. That collapsed too, if I'm remembering the numbers right, about 120,000 barrels a day. We lost literally over 200,000 barrels a day of takeaway capacity. There are several opportunities now to increase rail capacity further. And I think a number of People including the Alberta government signed up for increased capacity. So I think that From our perspective, we've always said for all of our production, we have all of the takeaway capacity we need through the pipeline commitments we made and those sorts of things. So So now it's really an industry issue. And the issue is, although we had to take away capacity, we had to shut in and open up capacity for others. It's just the way the process works. So I think that on rail, rail capacity today is about 200,000 barrels a day out of the province. So we're quite confident there's 150 plus 1,000 barrels a day and I wouldn't be a bit surprised if there's not 250,000 barrels a day of takeaway capacity That we could put together to get all this oil back online. Well, I'm sure we could find a use for it south of the border. Thanks. That's for certain. Our next question is from Dennis Fong with Canaccord Genuity. Your line is open. Hi, good morning and thanks for taking my questions. Again, just reiterating congratulations to Steve as well as to yourself and Mark as well. The first question here is just talking towards your view of accelerating kind of value back to shareholders. Given your Free cash flow profile this year, how are you looking at uses of that excess free cash flow beyond the outlined base CapEx Dividend and the current share buyback program? Okay, Dennis, I'm going to answer that one. And so I mean, Essentially, we've very clearly laid out what we're going to do with our cash flow. A substantial dividend increase 17% for the year. We announced a $2,000,000,000 extension to our stock buyback and you've seen us execute I'm not. And you'll see you've seen us do the renewal at the beginning of May for that as well. Beyond that, Mark outlined where we're Spending on capital, I think what you'll see is really focus more on probably putting the extra cash that we generate depending on what the oil prices are Back on the balance sheet as we go forward into next year. Okay, perfect. And is there a scenario where Potentially later in this year, if free cash flow either holds or increases that we could see maybe potential changes to the share buyback program as well? Or is that just The thought process is to remain relatively conservative and keep that towards the balance sheet. I think we've always said we're quite flexible. Mean, it really depends on what the cash flow is. If we see a run up in oil prices and the corresponding increase given our exposure to those And our cash flow, I think we would certainly be looking at whether we increased our stock buyback. Okay, perfect. And then just the second question here. Just in terms of some of your past presentations, you've indicated that there could be about $1,000,000,000 to $1,500,000,000 of incremental positive cash flow Between higher sales and lower prevail OpEx with getting Syncrude to about a 90% consistent run time, how much of that is incorporated into your $2,000,000,000 plan of free cash flow growth into 2023 or is this kind of incremental to your expectations or does that fall outside of your expectations of that free cash flow growth? So Dennis, yes, just to be clear, getting to 90% and $30 OpEx Syncrude is not in the $2,000,000,000 target, but having access to the hydro treating capacity Some flexibility around maintenance turnarounds between base plant and Syncrude, they are in the $2,000,000,000 So I just want to make this a clear distinction there. Okay, perfect. Thank you very much. Thank you. Our next question comes from the line of Greg Pardy with RBC Capital Markets. Your line is open. Thanks. Good morning. Maybe just to add to the others, Steve, thanks all. Thanks very much for all your service and all the very best in your retirement and indeed congratulations to Mark. Just a couple of quick ones for me and I guess part of it is just coming back to that margin Enhancement equation. Just curious as to how you're thinking about potential coker expansions at both Edmonton and Montreal? Yes. Thanks, Greg. It's interesting. We do have a number of opportunities around how we would integrate Additional bitumen barrels into the platform. And so, we're looking at the coker project in Montreal, And we're also looking at opportunities in Edmonton. It's interesting in this environment that the question is, should we be 1, can we get good returns for the shareholder? 2, should we be in the coke removal process or should we be in the hydrogen addition process? And we're working through that all right now across all of our refining circuits to try and understand where are the best opportunities in the entire portfolio. And I guess in some ways that could actually even push up into the upgrading side as well that we have up north. Although right now we're expecting Likely in Edmonton and Montreal are probably the highest probability opportunities. Okay. And It sounds like that's progressing, but you're nowhere near a decision. Well, I would say we're probably at least 6 months to a year away from making a decision on it. And a lot of it's our long term view between sweet and heavy prices. It's not so much about The immediate term. It's more about just the fundamentals of the markets going forward. Okay, perfect. Thanks And then the last one is just related to the replication strategy. I mean, we've obviously, we're in a very different market environment now, but How should we think about replication just in terms of the gating factors that would then lead to that decision? Yes. We continue to work that diligently. I think part of the issue with it is, will we get pipeline and market access? Our whole focus and we've said it on numerous occasions that we don't plan on proceeding with the project unless we have much greater certainty on market access and what we have Today, we do not and will not spend the money on this to put it on to rail and ship it to market. We just don't think inefficient logistics Are going to erode the economics. So that's one key thing. And then if we go for it, the way we look at it right now is Yes. One project in replication would include 3 phases. So on a gross basis, it would be like 120,000 barrels a day Of capacity, but we have joint venture partners in the first one. So that's about 90,000 barrels a day to us. And so that would be the first decision. And our expectation is we would come to that again. It's probably 6 months To a year at the earliest that we would make a decision to proceed. And now we would say, 1st oil is shows up kind of in the Well, in 2024 is when you start to see the impact of First Solar for the first phase. Okay, terrific. Thanks very much. Thank you. Our next question is from Manav Gupta with Credit Suisse. Your line is open. Thank you. My question is a little bit more macro and IMO related. I look at your Slide 17 of the corporate presentation and I understand it's not a new slide, but there are some very interesting facts over there where you indicate That the synthetic gives you about 40% distillate yield, WTI only gives you about 30% distillate yield and I'm assuming a Permian or Eagle Ford will be much lower. So I'm just trying to understand when you say synthetic, is it synthetic light or is it synthetic heavy? And if it is synthetic heavy also, which is giving you a little bit more of distillate yield, Doesn't that mean that even in the IMO world, people will think twice before switching from synthetic heavy to a Permian or Eagle Ford because So we don't like when we have our distillate barrels, part of the issue is just because of the way the process works. We don't classify it really into like a synthetic heavy and a synthetic light. So when we produce our synthetic crudes, There's a few we actually have a sour synthetic and such. So but just the nature of the crude that we have in Oil Sands is So that the distillate content in the barrel is actually 40%. And so what you're saying is exactly right is That we think that the synthetic barrel will become actually a premium crude because people will want the distillate cut in it Versus very light barrels that have lower distillate. So the way you characterize it is the way we view it. And so when you look at it under IMO, we believe that distillate cracks will strengthen. And as a result of that, people will be able Be willing to pay a little bit more for the synthetic barrel to be able to get those distillate molecules. Thanks, guys. And a very quick follow-up. There was a $1,000,000,000 in working capital build. I'm assuming it's because you're taking a heavier turnaround in 2Q and That should reverse very quickly as the year progresses? No, actually it's very simple. Crude prices went up substantially from the end of Q4. So applying that to our sales and receivables and inventory balances It's actually what drives the working capital increase. Thank you, guys. Our next question is from Benny Wong with Morgan Stanley. Your line is open. Yes. Thanks guys. Just want to echo the congrats to Steve and Mark. My first question is actually for Steve. Obviously, you've seen the Canadian oil and gas base go through many cycles. I'd love to get your perspective on where the industry is headed and what challenges it faces. It seems to me it's a little bit more than just pipeline capacity. And from your perspective, how prepared do you think the industry is geared to take on those? Yes. I mean, let me start at the I'll give you a very brief answer. Let me start at the Canadian level and then I'll move globally from there. I mean, I am very optimistic Around Canada, I think in a sense, we have reached a low point where a number of things have been put into But if I look at the world supply demand, if I look at the responsible and sustainable development within Canada, I'm very optimistic about the future. We're climate change believers. We believe that A transition to a more managed and lower carbon world is an important piece of that. But in every one of those scenarios, I see Demand for oil remaining very firm and probably going up, and I see the demand within that for Canadian oil going up even higher. Because when you look at the alternatives, whether it's South America, Russia, Middle East, So Africa, most customers want to be able to depend on a high quality reliable supply. So I think it takes a little bit of time for us to work out some of our issues. I think curtailment, I see it as a very short term thing and it coming to an end. I see the pipeline issues steadily being resolved with the nearest we've been to all three of these current pipelines going in. And I think That's a 2, 3 year issue, and then we will shift to the next generation of pipeline after that. So I'm fairly bullish. I think there's a great outlook for Canada. That's terrific. Thank you, Steve. My follow-up is Just a follow-up on IMO 2020 slide there showing the positive impact to Suncor. Just wondering if you guys are doing anything within your system, Making adjustments or maybe trying new fuel blends to maybe better capture that opportunity. One of the things we're always doing in this is just trying to understand how we can blend. And so in some cases, Flexibility we have in our Oil Sands business is we can actually custom blend for some of our customers, which We do. So we have some blends that only go and to specific customers and our custom blended to their requirements for volume and those sorts of things. We've also realized that this is an opportunity for our own refineries. So we've been doing that for a period of time. Clearly, as IMO comes in, We would expect that some of that custom blending will get modified and adjusted based on the needs of the customer, which will certainly change under IMO. So It's a dimension of what we're doing and we expect that to continue. Great. Thanks guys. Thank you. And our next question is from Joe Gemino with Morningstar. Your line is open. Thank you very much. Congrats on the great quarter and Steve, congrats on your future endeavors. The question I have is on Enbridge and its proposed priority access. Have you put any thought as to how something like this may benefit Suncor or could benefit any of your competitors? Yes, we have. This is an area that A lot of folks are working on trying to understand what's the right positioning. Clearly, we need feed for our Sarnia Refinery and for the Montreal Refinery and such and also look for access to the markets through the system. So It's an area that we're working on trying to understand not just our position, also the position of what our competitors might And also the implications on the Alberta industry. And just trying to make sure that we're well positioned as this Discussion begins. Great. I appreciate the insights. Thanks, Joe. Thank you. And I'm not showing any further questions. So I'll now turn the call back over to Trevor Bell for closing remarks. Great. Thank you, operator. Thanks, everyone, for joining us today. Our IR team will be around all day if you have any follow-up questions. Otherwise, I wish everyone a great day and thank you. Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone, have a great day.