Good day, and thank you for standing by. Welcome to the Suncor Energy Third Quarter 2026 Financial Results Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Suncor Energy's Director of Investor Relations, Mr. David Johnson.
Thank you, operator, and good morning. Welcome to Suncor Energy's third quarter earnings call. Please note that today's comments contain forward-looking information. Actual results may differ materially from expected results because of various risk factors and assumptions that are described in our third quarter earnings release, as well as our current 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. For a description of these financial measures, please see our third quarter earnings release. We will start with comments from Rich Kruger, Chief Executive Officer, followed by Peter Zebedee, President and Chief Financial Officer. Also on the call are Adam Albeldawi, Executive Vice President, Upstream, Dave Oldreive, Executive Vice President, Downstream, and Shelley Powell, Executive Vice President, Development and Projects.
Following the formal remarks, we will open the call up to questions. Now I will hand it over to Rich to share his comments.
Thanks, David. Our third quarter involved completing major maintenance for the year, positioning for a strong finish, and maximizing value in today's business environment. We accomplished all three. We also announced the sale of non-core offshore East Coast assets and a series of senior leadership transitions, actions that will position us well for the future. I will discuss operational highlights, and Peter will follow with financial. Starting with safety. The third quarter was our safest quarter of the year for both personnel and process safety. But rather than recite data, I want to recognize an employee, Emma Todd, Projects Manager and EHS Leader. Emma was recently awarded the Alberta Mine Safety Association's 2026 Trailblazer Safety Leader Award, recognizing her passion and commitment in leading people to work safely. Emma first came to my attention a few years ago on a project that was struggling.
She rolled up her sleeves, put her boots on the ground, and got things back on track. Most impressive was that Emma knew by name every contractor on site. She epitomizes safety leadership at today's Suncor, and we are extremely proud of her. Upstream production, 853,000 bbl a day in the quarter, a rebound of 92,000 bbl a day from a very wet second quarter, and our second-highest third quarter ever, only behind last year's record, achieved despite Syncrude's 47-day coker turnaround, which was successfully completed in the first half of October. Upgrader utilization, a very strong 98% in the quarter and 96% year to date. Base Plant in Q3 achieved an exceptional 107% of nameplate capacity. Syncrude was 88%, given the coker turnaround. Performance, which is extremely valuable given today's synthetic price premiums.
Refining throughput, 488,000 bbl a day in the quarter, on par with last year's best ever. Here again, performance delivering tremendous value in today's business environment. 95% utilization in 3Q, throughput 28,000 bbl a day higher than our internal business plan and consensus, achieved despite a 37-day turnaround at Edmonton and a 31-day event at Montreal, and despite temporary curtailment at Sarnia due to Line 5's unplanned outage. With all this activity, how did we achieve this exceptionally tight throughput? Story time. Historically, a turnaround of the Edmonton refinery's fluid cat cracking unit would require reduced crude throughput, equal to about 30% of the refinery's capacity, or 45,000- 50,000 bbl a day. Because when this unit is offline, there's no ability to process the heavier gas oil stream coming off the larger crude distillation unit. This is where the story gets interesting.
Joel Allum, Downstream Production Coordinator, came up with the idea to temporarily store gas oil and to blend it with production streams from our oil sand upgraders 400 km away in Fort Mac, creating a new marketable sweet synthetic crude. This innovative idea enabled full crude throughput during the entire turnaround, preserving 46,000 bbl a day of throughput that historically would have been curtailed, adding 3% to Edmonton's annual average utilization rate and 1% to Suncor's overall utilization rate. The best part, it generated in excess of CAD 50 million in incremental free funds. CAD 50 million. One idea by one person, Joel, embraced and implemented by our team, leveraging Suncor's fundamental competitive advantage, our unparalleled physical integration. This idea wasn't in our annual business plan, and it wasn't in our March investor deck. It illustrates our culture to continually add value and compete.
My thanks to Joel and his upstream and downstream colleagues. You guys rocked it. Product sales, 677,000 bbl a day in the quarter, a record by a whopping 30,000 bbl a day and nearly tied with our highest quarter ever, continuing a string that every month in 2026 has achieved a new sales record. Now the ninth quarter in a row above 600,000 bbl a day after never reaching 600,000 bbl a day in any previous quarter. Retail, our highest value channel with number one market share, year-to-date volumes are up 4.3% year on year. Jet sales at 38,000 bbl a day are up 65% year on year, and exports at 75,000 bbl a day are up 80% year on year. We continue to operate at industry-leading refining utilization to meet our customers' needs, achieving both value and record sales in Canada as well as in thirsty global markets.
The third quarter was a big turnaround quarter for us. You'll recall historically, we spent CAD 1.25 billion per year on turnarounds. In 2024, on our I-Day, we committed to reduce turnaround costs by CAD 250 million a year over three years. We achieved that commitment in two years. In mid-2025, we increased our ambition by another CAD 100 million- CAD 350 million a year in reductions. We achieved that this year, 2026 being a big year with the third quarter being a big turnaround quarter. Edmonton and Montreal, the largest events in the downstream, and Syncrude in the upstream. Results, Montreal, best ever cost and duration. Edmonton, best ever cost and duration. Syncrude, best ever cost and duration. Three for three, a Suncor hat trick. 2026 is now the third consecutive year with turnaround costs below CAD 1 billion.
Our schedule performance has improved from third and fourth quartile to first and second quartile in North America. Cost has similarly improved with further improvement planned. Specifically, we have an additional CAD 150 million reduction included in our 2028 targets. on October 4th, we announced an agreement to sell our interests in Terra Nova, White Rose, and West White Rose to Ithaca Energy PLC for CAD 1.2 billion in upfront cash and potential additional payments of up to CAD 350 million based on future oil prices over a 27-month period. With the transaction, Ithaca assumes all future obligations associated with the assets, including a CAD 500 million regulatory well compliance program starting in 2027 at Terra Nova, and estimated abandonment liabilities which total CAD 1.4 billion. Through the first half of 2026, these assets contributed about 18,000 bbl a day or 2% of our upstream production.
But most importantly, this transaction is consistent with our strategy and our value proposition. We create value through our unparalleled physically integrated upstream and downstream asset base, underpinned by large, long-life oil sands resources. These assets, certainly of value, frankly, were not in that family photo. In Ithaca, we found a buyer whose strategy and core competency is aligned with these assets, and consequently, was willing to pay us accordingly. Win-win for both parties. As stated in our press release, our 2026 I-Day commitments to grow free funds flow by an additional CAD 2 billion a year and reduce our WTI break-even by a further $5 per barrel through 2028 remain unchanged, reflecting our confidence in continuing to deliver exceptional shareholder value. A quick wrap-up.
Suncor remains focused to excel, to compete, to win, with best-in-class operating performance ambitions, definitive value-based priorities and plans, organizational alignment top to bottom, and a team-based, results-oriented culture, delivering reliable and ratable high performance literally built to win in any and all business environments. With that, I'll turn it to Peter.
Well, thanks a lot, Rich, and wow, what a quarter for me to begin my role as CFO. As I reflect on the quarter, I am incredibly proud of the progress we have made over the past four years. That hard work has fundamentally strengthened the business and positioned us to maximize value in today's commodity environment. Not only have we improved our resilience in lower price environments by reducing our WTI corporate break-even by more than $10 a barrel, we have expanded our earnings power at higher prices even more significantly. The third quarter of 2026 was proof of that. We delivered a record $6.7 billion in adjusted funds from operations and a record $5.2 billion in free funds flow. Those exceptional results, however, only tell part of the story.
To fully appreciate how much this business has changed, let's compare where we are today versus 2022, when we also had record high AFFO and free funds flow. Let's start with oil sands. Through the first nine months of 2026, the benchmark crude prices for WTI, SYN, and WCS averaged roughly 15% below 2022 levels. On price alone, that would have reduced oil sands AFFO by $1.5 billion. And yet today, our oil sands AFFO increased by $160 million- $11.1 billion. How did we do this? Higher production, higher margin, share performance. The improvement in the downstream was even more remarkable. Through the first nine months of 2026, New York Harbor 2-1-1 crack spread, net of RVO, averaged 16% higher than in 2022. Yet downstream AFFO grew by over 60% to an astounding $7.9 billion. How did we do this?
Record throughput and a much stronger margin capture in a business that many had thought was already at the top of its game. The value we have created is clear. Q3 year-to-date AFFO, 15% higher than 2022. Free funds flow, 18% higher. On a per-share basis, both were roughly 40% higher. We are generating more cash flow and significantly more value per share, and it is not simply the result of commodity prices. This is the result of a fundamentally stronger business. The value we create extends well beyond our shareholders. When Suncor succeeds, Canadian governments share in that success. Q3 year-to-date, our operations have paid nearly $8 billion in income taxes and royalties to Canadian governments, reaching record high levels. This equates to about 40% of our free funds flow, pre-royalty and pre-tax.
This performance reflects years of improving reliability, strengthening integration across the value chain, and capturing higher margins from every barrel we produce and refine. We are not done yet. There is no finish line when it comes to improving this business. Every improvement creates the opportunity for the next one. This is precisely why we did not change our normalized free funds flow growth or WTI break-even reduction targets, even with the sale of Terra Nova, White Rose, and West White Rose. We have a clear line of sight to delivering those targets. Let me highlight a couple of examples on how the team keeps finding new ways to raise the bar. At our Canadian West Coast Burrard Terminal, we have more than doubled our export capacity, helping Canada supply much-needed energy to global trading partners and giving our teams greater flexibility to capture value.
Between Burrard and Montreal, we exported 92 cargoes over nine months. That is nearly 60% higher than in all of 2025, and at much lower contracted costs than the freight rates we saw in the market. At our refineries, we continue to find and capture improvements across the business. in July, the Commerce City team identified and addressed the constraint to Plant 3 furnaces. After never having run above 38,000 bbl a day, the unit is now operating at 43,000 bbl a day, a full 5,000 bbl a day increase to throughput. That improvement alone is expected to generate roughly CAD 50 million of value in the second half of this year. We have built a business that is consistently finding and capturing opportunities beyond what was visible only a few short years ago. That same discipline extends to how we manage the balance sheet and allocate capital.
We ended the quarter with CAD 1.8 billion in net debt, and I know many on the call today are forecasting a net cash position by the end of the year. This is an exceptionally strong balance sheet. During the quarter, we returned over CAD 2 billion to shareholders, including CAD 1.4 billion of share buybacks and CAD 700 million in dividends. Beginning in October, we increased our monthly buybacks from CAD 500 million a month to CAD 750 million a month, reflecting our ability to sustain that level for an extended period of time. On the dividend, our philosophy remains unchanged. That is to sustain our integrated asset base, deliver a reliable and growing base dividend, return capital through consistent and ratable buybacks, and invest in high-growth opportunities. We look to give long-term investors a predictable framework that they can count on through the cycle.
To be very clear, every member of our board and our executive team treats our dividend as an unbreakable promise to our shareholders. The only way to grow it is by building a stronger and more resilient business, and that is exactly what we have been doing. The 10% dividend increase we announced is underpinned by structurally higher earnings power, a materially lower share count, and confidence in our Investor Day plan. The absolute dividend level will remain fully sustainable through the cycle. With sizable increases in both dividends and share buybacks, we are on track to deliver record annual shareholder returns in 2026. Today's Suncor is generating more cash, maintaining a stronger balance sheet, and returning more value to shareholders. With that, I will turn the call back over to David, and we can take some questions.
Thank you, Peter. I will turn the call back to the operator, and we can go to the questions.
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, press star one one again. Please stand by while we compile the Q&A roster. Our first question will come from the line of Greg Pardy with RBC Capital Markets. Your line is open.
Yeah, thanks. Good morning. Thanks for that rundown. Peter, there is a lot of energy in that voice this morning, so I am assuming you had your coffee this morning.
I brought my best today, Greg.
That was two cups of coffee, yeah.
All right. This has not been the first quarter where you have just talked about how much the Downstream business is delivering and so forth. I mean, it is such a bigger business than it was five years ago. Just curious in terms of thinking around projects, growth projects, aimed at either margin improvement or growth in the Downstream.
Greg, I will take a shot at it, and then I will ask Dave to comment. Again, what makes us different is this uniquely physically integrated Upstream and Downstream. Our Downstream is historically, Peter alluded to it, but thought to be among the best parts of our business. What we found is you can take something that is already good and make it better and better. With the re-rate in capacity last year, that was a big part of it. The further supporting of the growing refined product sales is another part of it. We have said over and over, we are not done yet. We do not see it necessarily as building a new refinery, anything like that. Generally, refineries are closer to the markets.
But the idea of continuing to incrementally expand capacity, continuing to create value not only in that headline throughput number, but in the secondary units that all make custom products to fit for the market. Part of our story this year has been our ability to dial up, dial down to meet market needs at home and abroad. We do not see any of that changing. Dave, I do not know if I left anything left for you, but if I did, man, go ahead.
I think you covered it well, Rich. Maybe I will share a couple examples of some of the things that we are doing to give some color to where we are finding value. Rich, you mentioned in your remarks the CAD 50 million benefit that Joel found on optimizing during the Edmonton refinery turnaround. But in Edmonton refinery, we are really focused on filling out our intermediate units, our conversion units with custom blends from our oil sands operations. We have done that over. We increased that by 8,000 bbl a day so far year to date, generating CAD 75 million of value. In addition to that, we are getting more diesel yields out of these units for a total of CAD 140 million of value at Edmonton so far year to date. I would say that is not done yet.
We continue to, as Peter mentioned, we've hit a constraint, we bust through the constraint, we hit the next constraint, we keep working on those opportunities. We haven't seen the end of that yet. That's all in addition to what Rich mentioned on the turnaround. Nick Raimondo and his team are doing an awesome job there at Edmonton. I'll give you an example in Sarnia. It's a small volume, but it pays off really well. This is a value opportunity in Sarnia. Kyle Hills and Arsalan Chahar in Sarnia found that we had this 800 bbl a day specialty stream, a solvent stream that we made off of our reformers in Sarnia that was causing us to have to run the reformers at higher severity.
They worked with our integrated team, found a different product that we could make that could allow our reformers to run at lower severity, and that reduces our downtime due to catalyst change-outs. It increases the yield on our reformers, which ultimately produces more high-octane gasoline and provides a total benefit of CAD 40 million a year. Peter mentioned Commerce City, lots of great work going on there. He mentioned Plant 3. We're doing similar things in Plant 2 with some new crudes that help fill out the bottom of our crude pipe stills. We've got some things going on in Montreal, which I'll plan to share on the next quarter, but we're not done yet.
I think, Greg, cutting through that is when you have technical and operational teams that are provided the right focus and leadership, they continue to find opportunities, and we're beyond scratching the surface, but we're far from done. I think you can continue to expect very strong results upstream, downstream as we go forward because of the culture that we continue to create here.
Yeah, very good. Very good. The downstream is just super impressive. The overall business is super impressive. I want to maybe just shift gears onto the, just to anything you want to say maybe about progress on the MOU. I know the negotiations are still pretty heavy duty there. But also related to that, back at your I-Day, you framed a very, very large resource base as well as upstream growth optionality. I'm just wondering, pretty open-ended question, but just wondering how those pieces fit together.
Sure. We do have a huge high-quality resource base, and in many, many instances, it has advantages, synergies because of our existing footprint, whether that's Lewis, expansions at Firebag, et cetera. If you talk about growth in general, we're less concerned about what today's oil price is and more concerned about what will the oil price be five years, 10 years, 15 years from now. In high prices, inevitably questions come up about growth and are you changing it? But the question we ask ourselves is, has the world fundamentally changed? We don't know if it has yet. There's a lot of theorists and so-called experts. I haven't met anyone in my career, Greg, who can accurately predict long-term oil prices. We look at generating attractive returns through mid-cycle prices when we can enjoy good business environments and we can withstand weak.
Now, as it relates to the MOU and the interactions between the industry and the government, I think it's important to step back. What's the goal? The goal is that Canada is globally competitive on a fiscal and regulatory risk framework so that we can attract and incent capital. That's the goal. The MOU has many components to it, the so-called three Ps, pipeline, production, pathways. We've seen some things occur, the new mega deduction. There seems to be some momentum on a West Coast pipeline. We're all anxiously waiting to hear more from the province on royalties and incentives there. The parties are all sleeves rolled up, meeting endlessly, working hard together, but that goal is the global competitiveness of the industry.
From a Suncor standpoint, we would far rather have a good deal when we're ready versus a bad or an incomplete deal at an artificial date or deadline. We're working hard, and the days on the calendar are just other days to me. November 15th is coming up. Whether we have something on November 15th or not, I don't know, but I know we're all working hard, and I believe we're sharing federal, provincial, and industry the same objective of a globally competitive Canada.
Excellent. Thanks so much.
One moment for our next question. That will come from the line of Dennis Fong with CIBC. Your line is open.
Hi. Good morning, everyone, and congratulations on a solid quarter. My first question here follows along the lines of, I guess, Greg's first question, but it kind of expands on some of the prepared remarks there. When we think about what we will call the interconnection between Syncrude Base Plant, Firebag, and Fort Hills, this was frankly critical in terms of maintaining upgrader utilization and throughput through the year, and obviously through very challenging conditions. Further, I think in Q3, you were able to showcase how that interconnection was helpful with respect to, obviously, your refining turnarounds and so forth. My question here is, what are you looking to do to bolster that physical interconnectivity beyond what has already been outlined, like ore sharing at Fort Hills or the interconnect pipeline and/or obviously the physical connection between your Fort McMurray oil sands and Edmonton and your eastern refineries?
Adam, you want to At the end, you linked into the refining, but Adam, why don't you start out in terms of kind of the vision and our priorities in the upstream overall?
Yeah, happy to do that. Dennis, you actually captured one of the main things that makes us quite unique in the upstream, and that is the ability to have physical integration across all of our assets in the upstream. So whether that is Firebag bitumen going to the Base Plant upgrader, whether that's Firebag bitumen going to Syncrude, whether it's Fort Hills bitumen going to the Base Plant upgrader, or sours in between Syncrude and Base Plant. When you take a step back and take a look at what makes us unique, that is one of the main things that makes us incredibly unique in the upstream business. So how do we leverage that? There's a couple ways we leverage that.
The first way is when you look at the performance in our upgraders over the last several years, one of the main focus areas for us has been increasing the utilization. As we increase the utilization, clearly that increases the bitumen feed that we need from our mines and from our in situ assets. The physical integration that we have across the assets enable us to actually continue to increase upgrading rates, and that's where you see some of the higher price realizations that you saw in Q3. The second main way we take advantage of this is during maintenance events. When there's maintenance events at our mine production assets, we now have the ability to move bitumen from different in situ assets to the upgraders to keep the upgraders full, again, ensuring we maximize value from those big, big money makers.
There's a couple of examples of how we leverage integration that we have. As we look forward, we are always looking to see how we can maximize that even further. For example, the record transfers that you're seeing from Fort Hills to the Base Plant upgrader is a result of the continued debottlenecking activities our team has done to maximize PFT bitumen to the Base Plant, and we are continuing to find opportunities to do that even further.
I think a key part of all this is, as we have improved underlying asset performance, now we can continue to optimize and create incremental value. But when you have assets where you have too much variability in their performance, you can't optimize. I'll take just the tail end of your question and extend that to the Downstream. I would bet a week's pay that I think the Edmonton refinery is the only refinery in North America that runs 100% on feedstock from the refinery's owner. I would guess, if not it's probably a Dave Oldreive will kick in part of that week's pay. What we were able to do is Edmonton, with its pots and pans, primary units, secondary units, we can literally moderate what Edmonton can maximize value on from our Upstream operations.
Sarnia, far further away, runs with well over half of its feedstock with Suncor crudes. As you get further away to Montreal, the percentage goes down, but that interconnectedness is still a key differentiator with us, and that allows our Upstream and Downstream teams to work hand in hand, maximizing every dollar and every barrel. At the core, that is what makes us different and unique relative to a broader peer set.
Great. Thanks for that color there. My second question, if we go back in time, Rich, you've made past comments on Suncor Energy's ability to provide, quote-unquote, "craft cocktails" to refineries, whether it be your own or third party, with what they need for, frankly, feedstocks to optimize, frankly, your own upstream and downstream realizations. Can you talk towards maybe from taking a step back and thinking about this strategically, how a combination of logistics, global marketing, obviously the tanker capacity that you have time contracted, as well as your ability to expand your network to market globally, how that's really improved, we'll call it market intelligence, your ability to act more opportunistically, especially given the volatility of the market, and what that maybe means for kind of value generation for both upstream and downstream?
This has been a really fun area, and of course, it gets back to that, again, the predictability, stability of the underlying assets. Sometimes, Dennis, we'd rather be lucky than good. In this case, a few years ago, we started to look at the opportunities beyond our core domestic markets. You've heard the story about how Dave came in and we philosophically changed our strategy on sales and said, "Run our facilities full out. We will find profitable homes for that." That extended beyond Canada, whereas in the 2024 I-Day, we said we could market in 21 countries. This year, we said 45 countries. Did we have a vision that we would necessarily do that? No, not necessarily.
But with events in the world, started by Russia-Ukraine, now in the Middle East, as we've had those opportunities and as we've locked in logistical capabilities, not only pipeline access to the coast, but you mentioned time charters. We've got, what now, nine time charters that can be in crude or product service off of the coast. I mentioned how export volumes are up 80% year-on-year. Where typically an export market is a market of last resort, you kind of get your barrel there because you don't have a better home for it, those markets now have been particularly valuable because of acute shortages. So that this full holistic, integrated model extends well beyond upstream and downstream. It is logistics, it is markets, it's customers abroad, and that is an area we have changed materially. But here again, our rallying cry is, we're not done yet.
We keep seeing opportunities. Our traders, both particularly in Calgary and Houston, we got some folks in London as well, they're extremely sophisticated on the markets we compete in. We're not trying to be a global trader, but the markets we compete in, they're extremely knowledgeable, seeing opportunities, and it's one of the reasons you see, if you start doing realizations per barrel, this and that, because those profits we put back into the business that generated them, you have seen and you will continue to see premium prices for Suncor Energy production and products because of that level of sophistication. We have a lot of fun with it, candidly, and we believe we'll continue to create more value that our peers are unable to replicate.
Thank you so much. I'll turn it back.
One moment for our next question, and that will come from the line of Arun Jayaram with JP Morgan. Your line is open.
Yeah, good morning, Rich and Peter. I was wondering if you could give us an update on your in situ growth plan and the 400 KBD opportunity. I know that you guys are focused on selecting an EPC under the design one, build many concept, and I was wondering if you could maybe provide a little bit of update on that as you look to scale Lewis and Firebag over the next decade.
Sure. One of our announcements here recently was the shift of Shelley Powell to her broader portfolio to the EVP of the, in particular, the in situ growth plan to create that level of senior executive focus and time on that. So Shelley, why don't you tell Arun what the heck you've been working on?
Great opportunity. All of the projects that we talked about in our I-Day plan are actually progressing quite well. They are exactly where we would expect them to be. I was actually in the field last week and toured quite a few of them. All of them are fully staffed. We have materials on the ground. Things are progressing in a way that we would absolutely expect on these shorter-term ones. I think to your broader question on engineering and the larger projects, you are right. We are right in the middle of evaluating who we want to partner with long term, not only on the engineering side, but also on the field construction side. We are setting ourselves up to enter longer-term type relationships with these organizations, really thinking about what we have been talking about as a portfolio rather than individual suites of projects.
We think that gives us the opportunity really to utilize the economies of scale, to look at optimization, to ensure we have construction workforce security over the longer term, and we think we have a really attractive portfolio that we can deliver over the long term. We are really excited about where we are at, and things are off to a very strong start.
In anticipation of a question, I will answer it ahead of time. We are also looking at right now relative to that March I-Day plan- doing the what if. What if we wanted further growth? What if we wanted to go a bit faster? What would be the incremental investments we would make? Where, the timing? That is one thing. The second part of it is also looking at the progress we have made over the last few years on de-bottlenecking our facilities and getting the incremental 5,000-10,000 bbl a day. What further opportunities remain on that? We have a plan we laid out. It is in situ growth. It is fundamentally six phases of in situ projects over a decade. That is the base case, but we are asking ourself and doing some preliminary work saying, "Well, what if? What if we wanted to do more?
What if we wanted to go faster?" We have not landed on that yet, but it ties with this conversation about the fiscal and regulatory environment in Canada, the MOU. If all that turns out to create that globally competitive business environment, that may be something we do. We are able to look at all these because we are underpinned by a tremendously large, long-life, high-quality resource base. Without that, these would be academic exercises. For us, they are not academic exercises. They are real-life opportunities.
Great. My follow-up is, you made the decision, obviously, to monetize some of your non-core offshore assets in Eastern Canada, yet you are maintaining your 2028 Investor Day objectives, the CAD 2 billion of free funds of flow growth at 65. Can you just talk about what's outperforming in the portfolio for you to maintain those targets, and is the 100 KBD growth target still intact?
Yeah. I will take it in reverse order. The 100 KBD does not We do not add up to that right now. If you take 2028, the assets that we are looking to sell will be about 40,000 bbl a day of the grand total, and then the 100 becomes a 60. At the end of the day, production throughput, those are drivers, but our fundamental objectives are free funds flow per share. That is the growth we are after. Our confidence in either the break-even or the free funds growth remained because on March 31st, folks saw a snapshot in time, but this organization continues to work and make things better. I think that little example I shared with Edmonton, CAD 50 million during the turnaround, Peter shared an example or two.
These illustrate that we keep coming up with new ideas to add value. When the executive team sat back, looked at that, we did the adjustments for the asset sale, which would have said, "Well, production is going to be lower. The free funds flow would have been lower. The break-even would not have been as high." We sat there and looked at each other, all held hands, and said, "No, we are still going to deliver on these commitments that we made because we have confidence in this organization, the people, and the ideas, with the momentum we have established." We said, "We are still going to achieve those, if not exceed those." So, it is not really any one or two things, or three or four. It is just the cross-organization alignment, commitment, and momentum we have that gives us confidence we will achieve those.
Great. Thank you very much.
Thanks, Arun.
One moment for our next question. That will come from the line of Doug Leggate with Wolfe Research. Your line is open.
Oh, thanks. Good morning, everyone. Thanks for having me on. I wonder, Rich, we have heard a lot about incredible reliability, utilization rates, and so on. I wonder, in the context of your dividend break-even trajectory, are we seeing a reset in the underlying production capacity? I do not want to say you are understating what you have achieved, because it looks like is it utilization that is getting better, or is it the de-bottlenecking and the capacity that has actually increased? In which case, what does that imply for your dividend break-even trajectory? That is two.
You know, Doug.
Or three questions, I guess.
Thanks, Doug. You know, every time I go out there and make a commitment, these son of a guns that I'm sitting around the table with prove me wrong because they do better. We re-rated our Downstream from 466,000 bbl a day to 511, the full capacity, and this guy sitting to me to the left, he's been telling me that lately we've had days north of 520. It's like, I thought capacity was 511. Things keep getting better, but you're exactly right. As that continues, that break-even, which for us, of course, includes our full dividend, we continue to drive it down. The Downstream kind of subsidizes or enhances that break-even. As we said, the new year, new plan this year was going to be going from around 43 to a 38.
This year, in part because of some special circumstances, we're going to achieve more than we thought we would have achieved this year. We're not necessarily sure if that will endure over time, but these fundamental improvements, whether it's de-bottlenecking those incremental bbl, they greatly add to our ability to drive down that break-even. I think the 10% dividend increase is illustrative of the confidence that we have going forward. We've been kind of 5% year after year, roughly equal to the fraction of shares we've been buying back. Peter ramped up the buybacks to 750 here. The dividend's going up by 10%. The 10% probably is a pretty good indication that with the amount of shares we think we'll be buying back and our confidence in the underlying business, you can continue to expect further shareholder returns, whether via dividend and/or buybacks.
I guess we'll wait for the update. Rich, my follow-up, I'll try and ask this as succinctly as I can, but years ago, we all used to think about pre-royalty and post-royalty payouts and how they were ring-fenced and so on. With the tax change in September, clearly you're getting accelerated, I don't want to call it a tax shield, but depreciation that maybe makes the previous discussion somewhat less relevant. I guess where I'm going with this is when you laid out your strategy through 2028, you didn't have that tax treatment in your capital plan. I'm wondering, in the context of what you just answered before about maybe you want to look at growth options, has the tax treatment changed your thoughts on whether you decide to go after more growth?
What the tax treatment fundamentally does, under current rules, we are able to ultimately depreciate our investments. It is just the time at which we can depreciate them. So, if you do that over a 10-year period or a three, I am making this up, or a two or three-year period, it enhances the calculation of a rate of return, and it can accelerate a payout of an investment. Fundamentally, these accelerated depreciation rules help de-risk long-term capital-intensive investments. Are they game changers in terms of do you do something or not do something?
Maybe, but I do not think it fundamentally changes the long-term investment profile to say, "Wow, we will now do a whole bunch more." But if you couple accelerated depreciation with an incentivized royalty system that starts to do some of the same things, if you clear up some of the regulatory complexities that would extend approval timeframes up front, you start coupling several of these things together, which are all part of the component parts of the MOU, now you are changing the fundamental underlying fiscal and regulatory regime. And yes, that, in aggregate, can lead us to be more ambitious, more aggressive on long-term capital investments. Any one item is nice, but probably on its own not sufficient to materially alter the capital allocation framework.
Great stuff. Thanks so much for answering the questions, Rich.
Thank you. One moment for our next question, and that will come from the line of Menno Hulshof with TD Securities. Your line is open.
Thanks, and good morning, everyone. I'll start with a question on your global markets push. It didn't look like you were impacted in any significant way by the spike in freight rates in the quarter. You did touch on some of this, but can you just elaborate on how the freight rate risk is currently being hedged out through contracting and how that challenge is generally being managed? While we're at it, could you maybe put the bookends on the number of cargoes that potentially get shipped in Q4 and Q1, and anything else within your global marketing push that you would want to flag? Thank you.
Dave, why don't you take that? You and your team manage those for us.
Yeah, sure. Thanks, Menno, and good morning. Rich mentioned our nine time-chartered vessels, which we fortuitously locked in before the rates went up dramatically. We're able to use those vessels for crude, particularly off the West Coast, so that goes to typically China or into any of the California markets. We're seeing massive savings relative to current spot freight rates, and we take that back as our netback. We also have four MR vessels. Those are 300 KBD product vessels, mostly working off the West Coast to move diesel to markets. Same thing, we're seeing much lower freight rates, which helps us with our netbacks. Combine that with our advantaged logistics, we get really good value for our diesel sales. If you think about export cargoes, we exported 92 cargoes year to date. That's about 60% more than we did in 2025 as a whole.
What we do is we optimize based on our product netbacks, our alternatives domestically, and we balance between diesel and jet, mostly. There's very little gasoline that we export. We will optimize that based on price, based on market conditions, and hard to say what Q4 and Q1 will bring, but we will make sure we optimize that to maximize value to Suncor in the current market.
Without saying, it's been a huge part of our performance this year.
Absolutely.
Having that level of flexibility. Although the terms on those time charters are proprietary just for competitive purposes, they don't go forever, but we have that well into next year. We'll still have those before any of those will be looked at being renewing and things. That gets back to that comment I made earlier. Sometimes we'd rather be lucky than good, and we took a lot of these actions not anticipating the unique benefits we'll see now, but they have been extremely valuable for us. I think in the quarters ahead, they're going to continue to be.
Okay. Thanks for that. The second question is for Peter on the balance sheet. You talked about net debt falling a lot in the quarter. Like a lot of everybody else, we have clear line of sight to a net cash build. Given I've chatted with you about this in the past, it seems like that is more of an output rather than something that the company wants to get to. How are you thinking about free cash allocation to the extent that oil prices and crack spreads remain elevated? I think there's probably limits to how much you want to grow. You recently increased the monthly buyback to CAD 750 million. How should we be thinking about that into 2027?
Yeah. Thanks a lot, Menno. Obviously, the balance sheet is in exceptional shape right now. As we spoke about before, our philosophy on share buybacks has always been to buy back proportionate to our overall dividend. We're certainly doing that right now, so that philosophy remains unchanged. We believe in returning excess funds to shareholders. We're always going to maintain the flexibility to respond to any material changes that may happen in the market. This is the power of Suncor Energy. This is the power of the integration that we bring to the table, and that's to provide reliable and predictable and ratable shareholder returns through the cycle. You can count on us to continue that.
Menno, maybe if I just add one other point to that. If we choose to grow faster than we outlined in our I-Day plan, the incremental capital that we're looking at is not overwhelming in any regard. So, if the business environment stays strong and we would choose to invest more in the near term, the ability to return cash, the reliable and growing dividend, and material buybacks, we think we're going to be able to do all of that. We don't have any particular goal or driver to build up a war chest of cash for any particular reason. With a net debt at or near or below zero, we have a lot of flexibility for whatever we choose to do. You can interpret that as there will be continued material cash return to shareholders, in particular that incremental dollar via buybacks.
Thanks to the both of you. I'll turn it back.
Thank you. One moment for our next question. That will come from the line of Manav Gupta with UBS. Your line is open.
Good morning, Rich. You kind of talked about who made the family photo and who did not, but there were a couple of assets, I think Hebron and Hibernia, which did make the family photo, and I'm trying to understand what drove the decision to keep those members in the family photo. Thank you.
To keep?
Keep from them.
What did you say?
Keep Hebron.
Oh, yeah. The Hebron and Hibernia, of course, they are non-operated, and a big part of who is in the family photo and how close you snuggle up to me and my wife is, what do you bring to the party, and can we add value to what you do? Hebron and Hibernia bring a lot to the party. They are longer life, they are a stable operation, a rock-solid operator who knows how to operate in the offshore quite well, and fundamentally, we cash dividend checks each month from them, and they run it really well. They add material cash flow. It is not to say the other, the assets we are looking to sell do not, but they are not our core competency. I do not think people buy Suncor because we operate a single FPSO off of the East Coast.
There are some distinctions there, and we have always talked about the East Coast as really a tale of two cities. There are the platforms, the Hebron and Hibernia, and the floaters, and we look at them in different ways and make different decisions based on how we see them.
Thank you. My quick follow-up here is, we are seeing WCS differentials widen, but given your refining capacity integration and the diesel margin, the impact of those differentials will be minimal for you compared to your peers. Can you talk about that?
Yeah, you hit on it well. Our level of sensitivity or immunity to differential is uniquely low relative to a peer set. Everyone is talking about what is going on. It is not so much that there is, the pipes are overstuffed so you cannot get more out. It is some of this unique freight situation you are seeing in the Gulf Coast. There is Venezuelan crude. There are a number of other factors here. So yes, they have certainly widened. Although the underlying WCS price is still at a historic level, is quite high, we do not see this as kind of the new norm. We do not see these widening differentials as enduring. But while they do, we are less affected by them than the rest of our peer group. Again, we keep going back to that unique construct of our upstream and downstream asset base.
Thank you so much.
You are welcome.
One moment for our next question. That will come from the line of Patrick O'Rourke with ATB Cormark. Your line is open.
Hey, guys. Good morning, and thank you for taking my question. Obviously, you've covered a lot of ground throughout the entire business, particularly the downstream, so that's been terrific. Maybe I'll keep it brief here. When I look at year-to-date capital spend, and we think about the normal cadence for Q4, it seems like it puts you down one of two paths here. One path where you're at or below the low end of your full-year capex guide, or another path where maybe you start pre-investing in 2027 in some of the strategic initiatives you've spoken to. I guess, as of where we sit today, which path would you think you'd prefer to deviate down?
Yeah, fair question, Patrick. We are tracking toward the low end of guidance on the capital. In part, we didn't talk about it a lot in the second quarter, but these unique rain events also slowed some of our capital activity that involves moving dirt and things because of the weather conditions. We're tracking to the low end. Given where we are, we've been asking ourselves, some of the monies that we had planned on spending in 2027, does it make sense, given we have the capacity to move some of that to 2026? If it makes sense, we've been looking to do that. That's probably lost in the round off, though. It's not big, big numbers. But we have said that we're planning a future at or below CAD 6 billion in capital. That's still where we are.
We'll have guidance here in about a month for the next year. I think you can probably guesstimate what you might see on the capital side of it. We're just looking at, are there good, thoughtful, wise things to do versus macro changes? Part of that, make no mistake, part of that coming on the low end of guidance is continued good performance. We've talked about turnarounds. I just flagged three of them that were best ever. Our organization continues to do a good job of being very thoughtful, frugal, and wise with capital allocation, and that's part of the reason we're tracking to the low end.
Okay, great. Just thinking, you touched on it a little bit, but WCS differential here, you've touched on your time charters. I mean, typically, the locational discount has been sort of between Hardisty and the Gulf, but now it's between the Gulf and maybe other waterborne crude markets. Based on the assets you have to move bbl here, what sort of ability do you have to mitigate WCS differentials by, say, pushing those heavy bbl that are not upgraded further out the value chain here in the fourth quarter and into 2027?
Dave, you want to comment on that?
Yeah, sure. Patrick, as you know, we export off of the West Coast on our TMX volumes, and we get to capture full market value for those products. We have commitments on pipe into the Gulf for some of our volumes. At the end of the day, we will maximize into our refineries, but make no mistake, we are always maximizing heavies and sours into our refineries regardless of where the diff is. It is pretty much always economic for us. Really, we see ourselves continuing to do more of the same in that space. Like Rich said, we are pretty indifferent to the WCS diff overall. If the diff is wider, we make it up in the refining business, or we make it up in our upgraders. We see it as pretty indifferent to our operation through the fourth quarter.
Because of those time charters, when and how we contracted them, we do not have that same exposure to the differentials on the heavy crudes that are exported because of our freight rates. That will not last forever, but we also do not think the current world we are in will last forever either.
Okay. Thank you very much.
One moment for our next question. That will come from the line of Travis Wood with NBC Capital Market . Your line is open.
Yeah. Good morning, guys, and apologies if this was touched on. I logged in a bit late. I think in the opening remarks, and you've done this last quarter as well, just continue to talk about efforts to capture global pricing, largely through the refined product market, given where global cracks are. Could you walk through some of the detail and maybe some color around what that is exactly and what you're de-bottlenecking, whether it's kind of egress to tidewater to be able to export to those markets? Then, what type of volume would we be thinking about in the product sales for Q3, and what do you think that contributed on the margin for the quarter as well? Without giving away too many of the trade and marketing secrets, obviously.
Sure. Travis, we're going to cut you some slack for joining us late, as long as you go back and listen in to the earnings call song on your own time. You got to hear that. It's one for the ages. Dave, why don't you comment on that?
Yeah. Travis, we optimize our exports off both coasts, and we have some unique, efficient logistics with rail to the West Coast, and then ability to trade direct to customer through our own chartered, time-chartered vessels on the West Coast, as well as the same thing on the East Coast. We have niche markets that we deliver to who see a unique value for our products, which tend to be lower cloud into Alaska on the West Coast, and Scandinavia, Iceland, places like that on the East Coast. Then there's a big short in Central America that we have an established relationship with some counterparties there that is very profitable for us. We see our ability to grow that materially.
We've grown it already, particularly the West Coast volumes, and it has historically been a rail loading and unloading constraint, and we've been busting through that, and we think we have more room to go on that through the end of the first quarter.
Then the setup you have, Dave Oldreive, again, not to get into commercial terms, but that getting products railed to the West Coast, the way your team has set that up, that's quite competitive.
Very competitive.
With the pipe products to the West Coast.
Very much.
Okay. Are you able to share what type of volume we are thinking about versus kind of domestic consumption? Using the 677 of sales for this quarter, how much would reach the tidewater of that number approximately?
Yeah, Travis, we exported about 75,000 bbl a day year to date.
Out of the six +, so more than 10%.
We have an opportunity to do more if the market directs us in that direction. We have opportunity to do more, and we have the opportunity to flex between diesel and jet molecules as well, depending on where the market goes.
Dave, round numbers, we will give a little more round numbers of that. A little less than half of that export has been, if I remember right, has been crude, and a little bit more than half products. Is that about right?
That is the product volume.
That is just the product. Sorry. Yeah, yeah.
The crude volume is in addition to that.
Got you. Yeah.
Yeah.
Ships for the crude.
Yeah.
But that's just the product.
Yeah.
Yeah. Okay. That's perfect. Yeah, I was really just focused on the refined side, so that's great color. Appreciate it. I'll turn it back. Thanks, guys.
Thank you. One moment for our next question. That will come from the line of Lydia Gould with Goldman Sachs. Your line is open.
Thanks for taking my question. Could you talk more about costs and how you're driving improvements in your operating costs across assets or any other areas of the business where you see opportunities to take out costs or drive structural efficiencies?
Sure. I'll make a general comment, then I'm going to turn to Adam, particularly in the mining side of it. We recognize you have to identify who you are, what you are. We're a global commodity that is cyclical in nature. We generally can't control the prices of our products, so we have to just have an endless, ruthless, unwavering commitment to cost management. For us, our refineries are extremely competitive. Our upstream is two components. It's the large and growing in situ, and it's the large mining. The mining has a higher ongoing operating cost structure. So, Adam, why don't you share some of the things we're doing there to just contain, control, reduce cost in the upstream mining sector in particular?
Yeah, in the upstream, Rich spoke about this already. When you look at the two main businesses, the in situ and the mining pieces, the in situ assets are already at a very competitive top quartile cost perspective. There is always work we are doing to continue to drive that down. But the big opportunity for us in the upstream is in the mining business. When you look at the cost that we have in the mining business, there's a number of things we are doing to drive those costs down further. I could speak about a number of examples to increase our productivity, but perhaps the example I'll speak to is the work we're doing to scale our Autonomous Haulage System. You may recall that we have scaled and we've deployed AHS, Autonomous Haulage System, at our Base Plant operations.
We have around 140 trucks or so, ultra-class trucks, fully autonomous. In addition to the increased safety performance we get from that, we are seeing a reduction in our operating costs resulting from the deployment of AHS. The decision has been made to now deploy AHS and scale AHS at the Syncrude Mildred Lake facility. We currently have just under 30 trucks kitted with AHS at Mildred Lake, and by the end of this year, we will have close to 40 trucks kitted with AHS in operation. That is an example of the work we're doing in our mining business to continue to drive our productivity up and reduce our costs.
Yeah. Thanks, Adam. Just to add to that, really two big levers, productivity in mining, little things make big differences with a large fleet, and then technology. AHS is a technology on it. Those are the two big levers we're operating, and we know, and internally, our mining has to be cost-competitive to attract capital. The teams understand that and are working hard to do that.
That's great. Thanks so much.
Thank you. I am showing no further questions in the queue at this time. I would now like to turn the call over to Mr. David Johnson for any closing remarks.
Thank you, everyone, for joining the 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.
This concludes today's conference call. Thank you all for participating. You may now disconnect.