Earnings Call: Q2 2017

Jul 27, 2017

Good morning, ladies and gentlemen, and welcome to the Suncor Energy Second Quarter 2017 Financial Results Call and Webcast. 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. As a reminder, this conference is being recorded. I would now like to turn the call over to Mr. Steve Douglas, Vice President, Investor Relations. Douglas, please go ahead. Thank you, Michelle, and good morning to everyone. Welcome to the Suncor Energy 2nd quarter earnings call. With me here in Calgary this morning are Steve Williams, our President and CEO along with Alistair Cowen, our EVP and Chief Financial Officer. I'd ask you to note that today's comments contain forward looking information that our actual results may differ materially from expected results because of various risk factors and assumptions described in our Q2 earnings release as well as our current AIF, and both of these are available on SEDAR, EDGAR and our website, suncor.com. Certain financial measures that we refer to in these comments are not prescribed by Canadian GAAP. For a description of these financial measures, again, see our Q2 earnings release. Following our formal remarks, we'll open the call to questions first from members of the investment community and then if time permits, members of the media. With that, I'll ask Steve Williams for his comments. Thanks, Steve, and good morning and thank you to everyone on the line for joining us. I think it's important right upfront to acknowledge that our second quarter results were somewhat mixed both from an operational and a business environment perspective. The past few months have brought us the combination of a falling crude price and a strengthening Canadian dollar. And these trends and continued volatility, I think simply underline the importance of concentrating our efforts on those things which we can control. In some course, that means a continued focus on disciplined cost management and of course capital allocation. And those 2 add up to equal we call operational excellence. On the positive side, I'm very pleased with our continued success in taking costs out of the business. We're steadily moving the entire company towards a sustainably lower cost base that's positioning us to be globally competitive. At the same time, we continue to exercise capital discipline while executing on our growth programs, buying back shares and maintaining a strong balance sheet. Our downstream and offshore business delivered strong operational and financial results. However, as I said, I'm not satisfied with the operational performance of our oil sands assets in the Q2. The first major maintenance turnaround at Firebag Units 34 after 5 years of operations encountered a number of challenges resulting in a significantly slower restart and ramp up than expected. And at Syncrude, the planned April turnaround was advanced due to a fire and a pipe rack in March and then had to be extended as a result of repairs associated with the fire as well as several other more minor operational issues. Syncrude also advanced coker maintenance originally planned for the fall in order to take advantage of the downtime. So the end result was lower oil sands production than we had planned for in the quarter. However, it's worth saying that I am confident that the learnings from these events will assist us in better understanding these assets going forward and we are planning for a return to strong, reliable production throughout the second half of the year. It's important to note that even in the quarter where our oil sands production fell short of plan and average oil prices were below expectations, Suncor still generated funds from operations of over $1,600,000,000 And this just demonstrates once again what a powerful cash generation chain the Suncor integrated model is. So let's get into the details of our Q2. At Oil Sands, we produced a total of just over 350,000 barrels a day, including 290,000 barrels a day of upgraded product. We completed major plant maintenance activities at Firebag and the Unit 2 upgrader and held our cash costs to just $27.80 per barrel. And that's the lowest second quarter oil sands cash costs in over a decade. With the bulk of our oil sands maintenance for the year now complete, our oil sands operations have been running at full rates in July. We expect our production guidance for the we expect to meet our production guidance for the year and have actually lowered our cash cost guidance to $23 to $26 per barrel, thanks to our strong year take performance. At Syncrude, planned and unplanned outages reduced some core share of production by over 100,000 barrels a day in the quarter. And once again, this performance is not acceptable. I remain confident that we can achieve the long term operational goals we have set. We always knew that the road to operational excellence would not be a straight line and that there would be some setbacks like what we experienced in the quarter. However, we will continue to work closely with Syncrude and other owners to execute on a plan that we expect will drive utilization rates above 90% and cash costs below 30% below $30 per barrel by 2020. So those original commitments we're confident in. In E and P, we continue to see excellent performance in the Q2. Our total offshore production year to date is tracking 4% ahead of last year. At the same time, cash operating costs have come down 22% with average operating costs year to date on the East Coast below $10 per barrel and in the North Sea well below $5 per barrel. And remember, of course, those are Canadian dollars. So as a result of this strong performance, we've raised our 20 17 production guidance for E&P twice this year by a total of 20,000 barrels per day. In the downstream, our refining and marketing business turned in another excellent quarter. Utilization rates, our refineries rose to 94%, which drove a 10% increase in production and a 6% drop in unit operating expense versus Q2 of last year. The increased production supported strong retail sales and set a Suncor record for the first half of the year. So despite market concerns around gasoline demand, our downstream business is squarely on track to deliver another year of strong earnings and cash flows. Turning to our growth projects, it's an exciting time at Fort Hills and Hebron as they rapidly approach first oil. Our focus is increasingly on commissioning, start up and operations as we move into the last few months of construction. At Fort Hills, we've been tracking to previously announced budget and schedule. The mining, or operation, major site infrastructure and primary extraction assets have all been handed over to operations and the turnover of utilities is now in progress. Just 2 weeks ago, the East Tank Farm which will support the Fort Hills operation was commissioned and declared ready for service. That just leaves secondary extraction, the paraffinic froth treatment as the final area where construction activities are currently concentrated. We recently identified some opportunities to accelerate the construction schedule in order to take best advantage of productivity and further de risk the full plant startup. This would result in some capital spending originally scheduled for 2018 bring bought into 2017. And accordingly, you'll have noted we have adjusted our guidance and Alastair will go into the details a bit later on the call. Now remember that we're proceeding with phased commissioning and start up plan that will see the front end of the plant, including the water assets fully tested prior to the onset of cold winter weather. This allows for early identification and resolution of any issues that may arise. And as a result, we expect to significantly de risk the production of first oil late in 2017. Approximately 85% of personnel have been hired of operating personnel have been hired including all critical frontline positions. Training activities are well advanced and we have greatly benefited from attracting experienced staff in the PFT process. There has been one recent development on the Fort Hills project that is a little disappointing. Our partner Total has chosen not to approve or provide additional project sanctioned funding for the Fort Hills project. And as a result, we are now in the early stages of a commercial dispute with Total. Given the fact that construction is now 92% as of the end of July, We're not anticipating that this issue will impact the plan to achieve first oil by the end of the year. Our major growth our other major growth project is of course Hebron off the East Coast of Canada. During the Q2, the Hebron platform was successfully towed back to its offshore location and sea floor. Drilling operations commenced just last week and the project remains well on track to produce first oil by the end of this year as planned. So with all operations back up and running and our major growth project expected to deliver 1st oil by year end, we're well set for a strong second half to twenty seventeen. Perhaps the one other thing that seems most top of mind to investors is the M and A climate in light of recent transactions in the sector and the much lower for much longer oil environment. What I would say is that beginning over 5 years ago, Suncor has maintained a strong balance sheet. And as you've seen, we treat this as a strategic asset. We generate discretionary free cash flow that is after sustaining capital and dividend above a $40 US WTI price. And we allocate that cash in a disciplined manner with a focus on returns between organic growth, M and A and share buybacks. So as you look to the future, judge us by what we've done in the past. We will continue to make disciplined choices, always targeting the best returns for shareholders. So with that, I'll hand over to our Chief Financial Officer, Alastair Cowen to go into some more detail on our financial performance. Thanks Steve. As Steve mentioned earlier in the call, in the Q2 we saw average benchmark crude prices fall by about US3.50 dollars and towards the end of the quarter, we saw the Canadian dollar strengthened sharply against US dollar. Nevertheless, we did produce solid financial results once again. We generated, as Steve said, over $1,600,000,000 in funds from operations and approximately $200,000,000 in operating earnings. Notably, our E and P business produced well above expectations and generated approximately $440,000,000 in funds flow. And our refining and marketing delivered over $500,000,000 in funds flow despite a negative FIFO impact as a result of falling crude prices. This was very consistent with last year's strong Q2 in R and M after adjusting for FIFO impacts and the lubricant sale, which was completed in the Q1 of this year. Our funds from operations for the quarter more than covered our sustaining capital spending of $891,000,000 and our dividends of approximately $530,000,000 leaving almost $200,000,000 in discretionary free cash flow. Over the last 12 months, we've generated over $3,600,000,000 in discretionary free cash flow and as Steve said, that's after sustaining capital and the payment of the dividend. A key contributor to the free cash flow generation is our continued success in reducing costs across the business. Now everyone is aware of the steady reduction in our oil sands cash costs in the past few years and that's certainly a very considerable accomplishment. But I just wanted to emphasize it's not only in our oil sands operations that we're improving productivity and driving our costs. Right across the company, we've been steadily streamlining business processes, eliminating non value added work and increasing productivity. In the first half of twenty seventeen, our total operating, selling and general expenses were more than 10% lower than the first half of 2014. And at the same time, our total production increased by almost 19%. The result as you've seen is lower breakeven cost and increased cash flow. On the capital front, we've invested close to $1,700,000,000 in the second quarter bringing our year to date total growth in sustaining capital spend to almost $2,900,000,000 Progress on the Fort Hills project accelerated during the quarter and we now see the potential to advance work that was planned for early 2018 into this year. Accordingly, we've increased the capital spending guidance range for 2017 to $5,400,000,000 to 5,600,000,000 Now to be honest, we've had some concerns about this, but let me assure you that this is simply an adjustment in the timing of the spend. The 2018 capital budget will be reduced commensurate with the increase in this year's spend. Our balance sheet continues to be a key strength for Suncor. We finished the quarter with approximately $2,400,000,000 in cash and over $8,000,000,000 of liquidity. During the quarter, we repaid US1.25 billion of long term debt. Our net debt to cash flow decreased to less than 2 times and our debt to capitalization fell to approximately 27%, both within our target ranges. We expect debt levels to continue to decline organically as our production and cash flow increase moving forward. On our last call, we announced the initiation of a $2,000,000,000 1 year share buyback program which we commenced on May 1. We've been aggressively executing on the program for almost 3 months now. To give you a bit of an update, as of today, we have repurchased and canceled over $11,000,000 shares for approximately $450,000,000 So we've been quite aggressive in July on this program. The buyback program was premised in an oil price in the low $50 range with funds coming from our discretionary free cash flow. Now as everyone is aware, the oil prices fell during the quarter, While the short term trend in those oil prices has not influenced the share repurchases, we do believe it's prudent to flex the program based on the discretionary free cash flow in light of the current business environment. In respect of oil prices, you can expect Suncor to continue its focus on reducing costs, carefully allocating our capital and delivering competitive returns for our shareholders. And I'm going to pass it back to Steve Douglas. Well, thank you, Alistair and Steve. Just a few things to note before we go to the questions. There was a falling crude price, as Alistair noted. And so there was a FIFO expense of $38,000,000 after tax. And that brings year to date to very close to 0, a $5,000,000 positive year to date. Stock based compensation during the quarter was an after tax expense of $19,000,000 bringing the year to date total to $91,000,000 after tax. And the FX impact was actually a $278,000,000 gain in the second quarter, bringing us to a $381,000,000 gain year to date. There are, as Steve and Alistair mentioned, a number of changes to our guidance. The updated guidance is available on our website, suncor.com. But a few of the highlights. We did, as mentioned, increase the capital spending range to $5,400,000,000 to 5 point $6,000,000,000 for the year, and we will be reducing our 2018 budget accordingly. Due to strong performance and outlook, the E and P production range has been raised by a further five 1,000 barrels per day. And as a result of the extended outage at Syncrude, the production range there has been lowered by the same amount, 5,000 barrels per day. So the net impact is no change to our 2017 production range of 680,000 to 720,000 barrels per day. The Suncor Oil Sands cash cost cash cost range has been reduced by $1 to $0.23 to $26 per barrel as a result of strong year to date cost management and Syncrude cash costs have been increased to $42 to $45 per barrel, reflecting the impact of the extended outage. Cash taxes have been increased by $100,000,000 and that's primarily to reflect the higher cash taxes associated with increased North Sea production. And I should note that the range excludes the cash taxes associated with the lubricants and wind farm sales earlier this year. There's also a number of small changes made to the business environment assumptions and those are simply based on year to date actuals and expectations going forward. With that, I'll turn it back to Michelle to take questions. Thank you. Thank you. Our first question comes from the line of Greg Pardy with RBS Capital. Your line is open. Please go ahead. Thanks. Good morning. Steve, really just want to dig into a couple of areas, not surprisingly, probably the Syncrude and Fort Hills. But maybe just before that, in terms of the capital increase that you've got this year, how much of that is related to call it the Syncrude repair work? And it sounds as though you'll be able to recover a bunch of that through insurance. Is that right? Yes. I mean, we haven't been explicit about the breakdown, but yes, in excess of $100,000,000 has to do with the work at Syncrude of which a large proportion of that is CapEx. And we would expect to get a recovery. We can't be absolutely sure of the timing of the recovery, so we've been prudent in the allowance. So the 500 is the balance of Fort Hills and Syncrude. As Alastair said, the Fort Hills piece is really just timing. We're still anticipating on Fort Hills that we will come in towards the top end of the range we guided on earlier in the year. Okay, great. And just with Syncrude, can you touch maybe on just what's going right, what's going wrong and just how you're thinking about the ramp up coming into August? Yes, I mean, first of all, perhaps it's worth just giving a snapshot of where we are operationally today. And I'll do it a little bit broader than just Syncrude. I mean Syncrude is already up at between 70% 80% of its nameplate capacity this morning. So we're already exporting well in excess of 250,000 barrels a day and then there's another move planned later today. So it's already in that 70% to 80% range. Worth having, whilst I'm talking current operations, the base plant Fireback, Mackay River are up at full throughputs and have been for most of July. So although I find the results unacceptable to me through the Q2, they're very much back on target already in the Q3. But to get back to your comments, Greg, overall, I'm not completely surprised by the Syncrude performance. We did talk about it not being a straight line. There would be we had very good operation and even when we had the good operation last year, I said we didn't build that in to expectations every day just yet. We are absolutely confident in the 90% utilization and sub-thirty dollars a barrel in that 20.20 time range. We are working those programs in detail, great work going on between ourselves, Imperial Exxon and Syncrude itself. And we will bring that and take you during the year, we'll bring that out and show you that in a lot more detail. It's also quite clear to us that the synergies are higher than we've anticipated both in the day to day operation of the plant and the way we believe we will manage it going forward. But also in terms of those other synergies I talked about, how we connect the plant, how we can get some when we increase the utilization of the Suncor based facilities, it was how we got security of bitumen supply from 3 or 4 sources rather than 1. We can do some of that with Syncrude by cross connecting some of the bitumen slot supplies. We can keep the upgraders and export to market going longer by having connections on the product side between the plants. So those projects are moving ahead with some pace now. So I'm very comfortable in the long term. This point, but not completely surprised in the short term. Thanks for that. And maybe just the last one is, you touched on the just the commercial disagreement with Fort Hills. Can you elaborate on that at all? I mean it's a little bit early. It's literally we're only a few days into the discussion. So it's too early for me to comment in detail on the dispute itself. What I would say is the plant is 92% complete as of today. So we're really on the final stretches. Suncor and Tech remain completely aligned in our approach to the project and I am not anticipating any impact on cost and schedule. So if anything, the result of what we discussed today about the because we're getting progress, very good progress on the project. So what we're planning to do is to finish off the bulk of it this year. What that means is it positions us much better than for no water introduction through the wind, what we've done all pre freezing season and we'll be able to move into the startup with a higher degree of confidence. So the project itself, the brick and mortar piece of it is in really good shape. We're still talking about the possibility of the first intermediate product sometime in September or October and we're still talking about the first train up at the end of the year and then progressively starting the other two trains up in the early part of next year. So bodes very well for the ramp up next year. Thanks, Steve. Thank you. And our next question comes from the line of Neil Mehta with Goldman Sachs. Your line is open. Please go ahead. Good morning, guys. First question is related to the FX strength of CAD USD and recognize that you lowered the cost guidance here today as part of the release. Could you just talk about how that exchange rate change makes you think about the cost structure going forward? And I have a follow-up. Yes, Neil, the change in the operating cost guidance we gave on the oil sands operations is really just it's got nothing to do with the FX. It is all to do with us driving costs out of the business in a sustainable manner. I mean, on the FX, we with the pluses and minuses, we take some negative impacts on the oil prices, we translated back into Canadian dollars, but you saw a big FX gain offsetting that as we translate our U. S. Dollar debt. So on a net net basis, we manage it through the balance sheet and so we don't typically go forward and look at how we hedge it and we don't really see big of an impact on the operating cost structure of business. That's great. 2nd is the strength in E and P surprised us over the course of the year. Can you just talk about where you're seeing that strength? Is it at Buzzard, Hibernia, elsewhere? And how sustainable is that going forward? Hi. Yes, I mean we are very pleased with both the production and operating costs in that offshore business and as you know, it is a highly cash generative business. We have been investing albeit not in a very material levels to Suncor, but we have been investing in a very selective targeted way and we're starting to see the strong returns from those investments. So you'll see us continue to do that. It's all of those if you like. So it is broadly across the operations. They've done exceedingly well and as we move towards the end of this year, you're going to see the ramp up of Hebron as well. So although it's not it's a very important part of our business. We've always I often get questions about the divestment of that business and I said, we do see it as part of our integrated business. It gives us some diversity. So when we see some trends in other parts, it's a very robust cash generator for us. So I'm pleased that strategy has been working and when we plan to continue it. Great. Last question for me is just around share repurchases. Going back to your comments, Alastair, it sounds like if I'm interpreting what you're saying is if oil stays around $50 a barrel, we should assume that you continue to execute the program. If it falls to the lower end of a range, let's call it 45, you take your foot off the pedal a little bit. If it goes above 50, you get a little bit more aggressive. I might be putting words in your mouth and I'm trying to create a formula where there might not be one, but any comments there would be great. I mean, let me just do it from if you like. You've heard Alastair speak, but let me just give you a slightly different cut. I think you've nailed it in a sense. I mean the flex we have in our capital allocation is we are committed to our dividend. We have capital expenditure on organic stuff which is starting to come to an end, but those programs are disciplined and executed over a period and we tend not to slow down or speed those up. So the piece of flexibility in our capital allocation is share buybacks and we've never given specific targets per se, but I think we were quite clear. We talked about $2,000,000,000 in the range we were looking at, which was in that 50, mid-50s type range. So you'll see us just be prudent and flex share buybacks up and down. I would just add to that, Neil. We have bought just under $500,000,000 of stock in the last 3 months. When our prices were in the sort of certainly the lower end of the range. But the flex is there and we will utilize it when we need to. Perfect. Thank you. Thank you. And our next question comes from the line of Roger Read with Wells Fargo. Your line is open. Please go ahead. Yes, thanks. Good morning. Hopefully, you can hear me? Okay, yes, good. Yes, I just wanted to kind of come back on some of the OpEx questions, but maybe starting with Syncrude as you had the downtime planned, you had the fire. As you've gone through the restart process and the work, is this something we can identify as an equipment issue? Is it a process issue within Syncrude? Or are we talking about too few or maybe not quite the right people in place? No, this is a specific equipment issue which is unlikely to be repeated. So it's not something that's why I'm confident about the longer term. This was what we in the industry call a process dead leg. So because there's a valve in a line, there's a line that has no flow in it. So we specifically understand the issue, not likely to be repeated and we've worked across the plant to identify and remove them. So no, it's a once off, it's unfortunate, but not reflective of what you're going to see in terms of the improved utilization and the reduced costs. And as I say, not a complete surprise because you do get these things happen occasionally, but it's why I'm so confident we'll get to our 90% plus utilization in $30 because this shouldn't interrupt that program. Okay. And actually that kind of steps into my next question. As you think about the OpEx performance over the last year, I think in the press release, some of that is obviously due to lower natural gas prices. But where do you think you are in sort of the where you are today, where you want to be with OpEx as a sort of a percentile marker? And I'm thinking both the oil sands and the E and P side of business. Okay. I mean let me just give you some general comments. I mean clearly there's an industry we benefit from lower gas prices for a number of years now. But they haven't changed significantly through this period. So the costs you're seeing quarter on quarter year on year are not largely driven by reduced energy costs. They're primarily driven by a structured program of working hard to drive systematically costs out of the system. So both in oil sands and E and P and in the downstream you're seeing, in fact in the corporate center as well. We have a program in each of those areas. In terms of the cost reductions and we could be more specific off of the call if you like, but just generally, something like approximately 70% of those costs we think are systematic and irreversible. So those have come out and will stay out. We haven't finished yet. It's a continuous program. We've made some good sites, particularly in the oil sands business again in this last quarter. So you're going to start to see that in future quarters as we go forward. In terms of long term objectives and I'll just talk about our base oil sands operation, I still have set an ambitious target for the guys to get us at some stage below $20 operating costs. So it's a mid to longer term project. We're still working towards it, But I can see us getting there. I mean we're making the strides we're making are fantastic. I think the next set of progress we'll make, some of it will be further refining our people systems, our processes, the way our supply chain works, but we've also got some technology things we've been working on. So if you think of all the work we've been doing on autonomous trucks, if you think of all the work we've been doing on different in situ techniques, they come with commensurate reductions in operating costs as well. So we still got the program. We're working really hard at it and there's more to come. Okay, great. Appreciate it. Thank you. Thank you. And our next question comes from the line of Phil Gresh with JPMorgan. Your line is open. Please go ahead. Hi, good morning. This is John Royal sitting in for Phil. On the CapEx rates, could you tell us how much has already occurred in 2Q versus to come for the rest of the year? Sorry, John, could you repeat the question? I didn't quite catch that. Yes. The CapEx raise, just wanted to know how much has how much of it is related to things that have occurred in 2Q versus raises for the second half? Yes. We're pretty much on budget as of today or year to date. Most of that will be an acceleration in the second half of the year. Okay, great. And then I think you talked about driving towards a longer term $5,000,000,000 all in CapEx number. Is that still a good number to think about, particularly in light of everything that's going on with Syncrude? And would it be as early as 2018 that you would think about that number? No, we're talking broadly $5,000,000,000 and we've talked about it. That's a good number to put in your model. We talked about that for 2018 2019, so they're good numbers. Of course, what Alastair said this morning and obviously approximate numbers, but you can expect the money we brought forward to come out of the 2018 budget. So you will see a decrease from that $5,000,000,000 Okay, great. And I know you've touched on it a little, but could you go into some more detail on the nature and the scope of exactly what you're doing on in Fort Hills for the related to the CapEx rates? Sorry, John, your line just broke up slightly at the end. Could you repeat your question? Yes. If you could just give a little more detail on the scope of the what you're doing at Fort Hills with the CapEx raise. I know you mentioned it a little in the remarks. It's simply we've got the opportunity. What finding is the progress we're making on secondary extraction is above the targets we have in. So we've been able to see the opportunity by retaining the workforce more this year to be able to get the major pieces of that project complete and all of the hydro testing complete this year. We'd always plan that for the first train. There are 2 other trains. It looks as though we're going to be able to do that with the productivity we have this year. So it's simply bringing that back from 2018 into 2017. Great. Thank you. Thank you. Our next question comes from the line of Frank McGann with Bank of America Merrill Lynch. Your line is open. Please go ahead. Yes. Thank you very much. Yes, if I could go back to the Total dispute, just to get a little bit more clarity on, is this primarily commercial, strategic, technical? Is it primarily related to the CapEx increase? What is actually driving that? And assuming that they were not to go along with all of the spending, would that change the eventual ownership percentages as a result of a carry that you might undertake for them? Yes. I mean as I said, it's too early for all of that. We're a few days into it. I mean as I said, we're 92% complete. So this is largely they're not very material conversations in terms of the context of the project. It is a commercial discussion, not a technical discussion. And I think I got asked several times last time on the call, our hotel looking to sell parts of their project. We know that they have been looking at various strategies, but in this case, this is a commercial discussion between our sales and Total, too early to talk about the detail. The reassuring message I would like investors to take away is we're 92% complete. We're not anticipating this affecting either the cost or the schedule of the remainder of the project. So frustrating at this stage, but not that significant. Okay, thanks. And if I could just follow-up, just in terms of overall cost trends, are you seeing any signs of pressure in any parts of your business? No, not particularly I mean we're seeing particularly operating costs and cost and capital costs still continue to move in the right direction. Okay. Thank you very much. Thank you. And our next question comes from the line of Travis Wood with National Financial. Your line is open. Please go ahead. Yes. Good morning, guys. Just a question around the E and P business. It looks like results have been a bit better than expected. So can you help us understand as headron comes on and the ramp of that and what that could look like to the aggregate E and P production profile over that ramp period? Yes, Travis. I think we're being clear that it's a 3 year ramp up on Hebron. As we drill the additional wells, so the production wells over the next few years from the platform, that ramp up in 'eighteen from to about 10,000, 19, 20, and then about 30,000 a day in 2021. So obviously that will offset some of the declines that we're obviously going to see in the whole E and P portfolio, but that's the ramp up in Hebron. Okay. And do you think that more than offsets the other declining parts of the portfolio? Yes. To a certain extent, yes, we should see some increases in E and P production. But I would caution you it's not the whole thing. There is some declines coming in over the period as well. Okay, great. But yes, that business remaining where it is or maybe even slightly better through to the middle, maybe slightly beyond over the next decade. Okay. Thank you. Appreciate that. Thanks guys. Thank you. And our next question comes from the line of Dan Healing with the Canadian Press. Your line is open. Please go ahead. Good morning. Thanks for taking my question. I was just wondering if you can be a bit more specific on what the dispute with Total involves. You said it involves funding. Is that funding for the portion of the capital costs that have been moved forward? Or is that for funding farther down the line? I mean, we're at the very early stages of the dispute. It's inappropriate for me to talk in any more detail than I have done. Project is 92% complete. So we're very close to the end of the spend. It's a commercial discussion, which is not that unusual at this stage in a project of this size. And most of the spend is really set to the end of the project. We have 7,000 people on-site finishing it off and it's the three quarters of the plant is in the hands of the operators and is being started up. So it's not unusual to have these discussions at this time. Okay. If it's not unusual and these kinds of things happen all the time, I guess I'm wondering why you're bringing it up on a conference call, Steve? Because it's we're very transparent about where we are and we think it's important to keep our investors fully appraised of where the project is. Okay, thanks. Thank you. And our next question comes from the line of Jeff Lewis with The Global Mail. Your line is open. Please go ahead. Hi. I just had two quick questions. One about the share buyback. Can you just clarify, are you suspending the share buybacks now or just signaling that you have room to sort of tap the brakes on those? No, we're not suspending the share buyback. As Alastair said, we bought about $500,000,000 worth of our shares back over the last period. We're still buying as we speak today, but we buy our stock back with our free cash after all of our other commitments and as that cash flow fluctuates depending on our spend and the price of crude, we'll flex the buyback up and down. But no, we're still committed to the probe. So still the $2,000,000,000 I believe it was level for the year? That's our target, but it will depend on free cash flow. Okay. And then just quickly, TransCanada has launched another open season for Keystone XL. Do you see that project as still being necessary in today's market given some of the changes that we've seen? I mean, yes, we generally support all of the projects, which are currently seeking access to markets that we support Keystone, we support Trans Mountain, we support the Enbridge Line 3 project. All three of them seem to be making steady progress which I'm encouraged by And yes, I think we certainly need these projects and it depends on what time they come into service. But no, I think the projects are still needed in the industry and Suncor is supporting them. So are you a shipper on Keystone XL? Yes. And we're already a shipper on the lower half of Keystone, which is already operational. I think we can go to the next question, operator. Thank you. Our next question comes from the line of Mia Williams with Reuters. Your line is open. Please go ahead. Hi there. Can you give us a sense of what level WTI Suncor needs to breakeven in its oil sands operations? Know you've spoken about operating costs, but I'm just wondering once you put in G and A costs and transportation and blend in, what the breakeven number is? Okay. I think we'll be very clear on this. The breakeven cost for Suncor to cover its operating cost and sustaining capital is around $30 If you add in the dividend, it's $40 So for you, I would use $30 Thank you. And I'm not showing any further questions. And I'd like to turn the conference back over to Steve Luglis for any further remarks. Thank you, Michelle, and thanks everyone for joining us today. If you have further questions or detailed modeling questions, of course, we're available and welcome your call. So thanks again. We will sign off. Ladies and gentlemen, thank you for participating in today's