Earnings Call: Q1 2015

Apr 30, 2015

Good morning, ladies and gentlemen. Welcome to Suncor's First Quarter 2015 Financial Results Call and Webcast. I would like to turn the meeting over to Mr. Steve Douglas, Vice President, Investor Relations. Mr. Douglas, please go ahead, sir. Well, thank you, operator, and good morning, everyone. Welcome to the Suncor Energy Q1 earnings call for 2015. With me here in Calgary are Steve Williams, our President and Chief Executive Officer along with Alistair Cowen, Executive Vice President and Chief Financial Officer. I need to remind you that we will have some forward looking statements this morning. Please note that our comments contain forward looking information and actual results may differ materially from expected results because of various factors and assumptions that are described in our Q1 earnings release as well as our current AIF and these are of course available on our website. Certain financial measures referred to in our comments are not prescribed by Canadian Generally Accepted Accounting Principles. And for a description of these, please see again our Q1 earnings release. After our formal remarks, we'll open the call to questions first from members of the investment community and then time permitting to members of the media. I'll now hand over to Steve Williams. Good morning and thank you for joining us. These are certainly interesting times in our industry. Oil sands in the Q1 were down about 50% year over year, forcing many companies in our sector to take drastic action to weather the storm. We've seen budgets slashed, growth deferred and debt and equity issued in response to the low oil price environment. Here at Suncor, we've taken decisive steps to sustainably reduce our costs in response to the fall in crude prices. But our balance sheet remains very healthy. And our fundamental strategy remains very much intact. We're continuing on our operational excellence journey, which means steadily improving reliability, reducing cost and profitably growing our production. It also means an unwavering focus on safe, reliable and environmentally responsible operations. I'm very pleased with the progress we've made in the 1st few months of 2015. During the Q1, strong reliability and a very light maintenance schedule contributed to company wide production of over 602,000 barrels per day, a 10% increase versus the Q1 of last year. Demonstrated the financial and operational discipline necessary to generate free cash flow yet again, even as benchmark crude prices dipped to 6 year lows. We've had a strong start to the year despite the very challenging market. And here are some of the highlights. With a relatively mild winter in Northern Alberta, our oil sands operations ran almost flawlessly. The firebag in situ plant continued to exceed expectations, averaging almost 189,000 barrels per day and reducing steam oil ratios to 2.6. In the mine, we took advantage of improved ore grade and strong reliability to produce over 318,000 barrels per day. So all added up to new quarterly records for both total and upgraded production, which increased year over year by 13% and 11% respectively. We also continued to drive down the costs of our oil sands operations. Our cash operating costs dropped by more than 20% quarter over quarter to CAD 28.4 per barrel. That included a record low of CAD 14 per barrel for in situ production. And it's not just unit costs that are falling. Our absolute oil sands cash costs for the quarter were down by almost $125,000,000 even as we grew production. So we certainly benefited from a 50% drop in natural gas prices. But more importantly, our controllable costs were down by over 5% on an absolute basis. And of course, our costs are denominated in Canadian dollars. At prevailing exchange rates, our first quarter cash costs came in below AUD 23 per barrel. Let me just say that again. Our Oil Sands cash costs were below USD 23 per barrel. In E and P, the operation story was also positive. The ramp up of Golden Eagle and stronger reliability from all of our producing assets allowed us to increase offshore production by 2.5%, while maintaining operating costs of well under $10 per barrel. We did see some modest production from our Libyan assets, but no liftings were recorded in the Q1. And we continue to exclude Libya from our guidance in light of the ongoing uncertainty in the region. Turning to the Downstream. Our refineries operated very reliably once again during the Q1. Utilization rates exceeded 95%, which supported a modest increase to refined product sales. And I'm pleased to say that our cost reduction efforts were not confined to the upstream. In the downstream, we took advantage of lower gas prices and also realized a number of efficiencies that allowed us to lower our operating, selling and general expense by 8% quarter over quarter. So all in all, it was a strong operational quarter as demonstrated by improving reliability, growing production and declining costs. Our long term focus on operational excellence is clearly delivering results. At the same time, we're making excellent progress on future growth projects. At Fort Hills, all critical milestones continue to be met. Engineering has surpassed 75% and construction is more than 25% complete and both continue to track to schedule and budget. The current oil price environment presents a number of key opportunities, including lower costs, increased productivity, better resource availability and improved work quality. And we can capitalize on those through disciplined project execution. So this will enhance our ability to deliver the project as per the plan. Meanwhile, construction continued in the Q1 on the gravity based platform at the Hebron project off the East Coast of Canada. Both Fort Hills and Hebron are on target to produce first oil in late 2017. Together, these two projects will contribute over 100,000 barrels per day of new volumes once they ramp up to full production. These projects are an excellent fit with Suncor's strategy to profitably and responsibly develop long life assets that will generate cash flow across multiple price cycles. Now speaking of price cycles, I'd be remiss if I failed to comment on the current pricing environment. On last quarter's call, I promised not to get into forecasting oil prices. Is. Nevertheless, I am asked my view on oil price in just about every meeting I have with investors and analysts. And to be honest, I'm not overly concerned with crude prices, at least not short term spot prices. Suncor has no impact on global pricing and I'd rather concentrate my efforts on the things which we can control. We're focused on continually improving the reliability of our operations, taking unnecessary cost out of the business and profitably growing our production. If we're operationally excellent and capital disciplined, our business will be profitable through all phases of the price cycle. When oil prices are high as they were the past few years, we'll build cash on the balance sheet as a hedge against low oil prices. When oil prices are low as they currently are, we'll draw down some of that cash and continue to execute on our strategy. And we'll take advantage of soft market conditions to achieve cost efficiencies in both our base business and our growth projects. Most importantly, we'll live within our means, grow production and return cash to shareholders throughout the price cycle. We've had a very strong start to 2015 and we're tracking very well against our various guidance metrics. I've summarized our strong operational performance in the quarter. I'm now going to ask Alastair Cowen to take a closer look at some of the financial details. Thanks, Steve. As everyone knows, the Q1 featured the lowest benchmark crude prices in 6 years. As we said before, Suncor was prepared for the downturn in prices and their integrated business model has proven very resilient. We generated almost $1,500,000,000 in cash flow from operations. This number was virtually identical to last quarter, even though the average Brent crude price fell by well over $20 per barrel to average just over $55 this quarter. This underlines the strength of Suncor's integrated business model that captures profitability across the entire value chain. Despite a negative $170,000,000 FIFO accounting impact as a result of the fall in oil prices, the refining and marketing group posted operating earnings of $492,000,000 and cash flow from operations of $678,000,000 Earlier on the call, Steve made reference to the cost reductions achieved at oil sands and in R and D. These are just two examples of the cost efficiencies being realized right across the company. In January, as you know, we announced cost to our operating budget in the range of $600,000,000 to $800,000,000 including a reduction in our workforce of 1,000 positions. At that time, we anticipated phasing in the budget cuts over a 2 year period. With our Q1 results, you can see we've already made substantial progress. Our operating, selling and general expenses were down by over $160,000,000 or about 7% versus the same quarter last year. And we achieved these reductions while growing production by over 50,000 barrels per day. We've been focused on streamlining our business processes and permanently removing structural costs. Now this is part of a comprehensive exercise that began well before the drop in oil prices, and I'm confident that we will continue to achieve and potentially exceed our cost reduction targets in the quarters to come. We're also targeting capital cost efficiencies. As part of our January announcement, we committed to reducing our 2015 capital expenditure by $1,000,000,000 bringing our capital guidance for the year to a range of $6,200,000,000 to $6,800,000,000 For the Q1 capital spend of just over $300,000,000 and keeping in mind the seasonality of our spending, we're on track to meet the target. Significantly, we were able to fund our Q1 capital spending entirely from cash flow from operations and produce almost 150,000,000 in free cash flow. So even in a quarter where the Brent average price was just over $55 per barrel, We were able to maintain our operations at capacity, continue to invest in our key growth projects and pay a dividend that was 22% higher than Q1 of last year. And most importantly, we continue to maintain a rock solid balance sheet. Our net debt to cash flow was running at 1.2 times and our debt to capitalization is at 26%. We finished the quarter with over $4,800,000,000 in cash on the balance sheet and undrawn lines of credit of $6,700,000,000 and we continue to attract a strong investment grade credit rating. Looking forward, our capital allocation priorities remain unchanged. Fund the base business as it continues its operational excellence journey to lower costs and improve reliability, invest in long term profitable growth in our core business areas and return meaningful cash to our shareholders. We certainly don't anticipate a substantial oil price recovery in the short term, but we do anticipate higher prices down the road. In the meantime, we will continue to live within our means and take the necessary steps to preserve cash and maintain our balance sheet strength. As I said before, our financial strategy is designed to enable us to manage through the inevitable oil price cycle. We will remain committed to capital discipline, operational excellence and profitable growth. And I'm confident that we'll continue to produce strong results going forward. With that, I'm going to pass you back to Steve Douglas. Well, thank you, Alastair and Steve. Just a couple of highlights before we go over to Q and A. LIFO FIFO again was a factor as we had a falling Canadian dollar during the quarter and it was a net after tax negative impact of $170,000,000 in the Q1. Stock based compensation was an impact after tax of $93,000,000 in the quarter. And finally, as everyone is aware, the exchange rate was very significant in its impact with the falling Canadian dollar. There was an after tax negative impact of $940,000,000 to our net earnings based on our U. S. Denominated debt. With that, I should also reference our 2015 guidance. No changes to production or to our capital spending. It's a little early in the year with just 3 months under our belt to make any changes there. We did adjust some of the assumptions around international tax rates, current tax payable. All the details are available on our updated guidance on the website. With that, operator, I'll turn it back to you and we'll take questions. Thank you, sir. We'll now take questions from the telephone lines. First question is from Guy Baber from Simmons. Please go ahead. Good morning, everybody, and congratulations on the strong quarter. I wanted to start off on the theme of the operational excellence journey. But could you just comment on the exceptionally strong upgrader performance this quarter with the SCO output of 347,000 barrels a day? If you could just talk about that improvement and the uplift you gave to your bottom line versus more historical utilization efficiencies? And then if you could talk about how sustainable you believe that is and if you're continuing to run that well on a leading edge basis? And then I have a follow-up as well. Okay. Yes, let me answer that for you, Guy. So in some ways, there are no surprises for us. We've been working in a diligent way over multiple years to improve upgrader reliability. What we said was that we were expecting to move the whole complex up to above a 90% utilization over a number of years. And the full extent of that program was going to take us 2 turnaround cycles and Unit 2 where we're seeing the big difference was has its main turnaround next year. So some of the results, we've always been a little conservative in terms of what we've been guiding on. So some of the results are starting to come. So we haven't re guided because it's the first quarter and we do build into our guidance some unplanned work as well as planned work. But it is a trend. We've seen it over a number of years. It is a result of the ops excellence. We do expect to see that trend continue. In fact, we've seen it continue. Although we've got some minor turnarounds going on in the plant at the moment, we've seen it continue into April. So very much on target, very much part of the trend and we expect to see that trend continue through the next couple of years. Very helpful. And then also, obviously, great progress on the $600,000,000 to $800,000,000 of cost reduction initiatives. So first, congrats on that. Could you just talk a little bit about where perhaps you've been the most successful in reducing costs and what's sitting in the market? Sure. Yes, I mean, I'll give you some examples. I mean, I would say I'm really pleased with the excellent progress that has been made. I'm a little bit cautious sometimes about the words I use like successful because a big part of it was a significant reduction in workforce, which is a difficult thing to have to manage. We targeted 1,000. We've actually realized just over 1200 as we speak. We've a lot of what we've been doing has been looking at productivity, not just numbers. So the sorts of things that are happening, we're flying less people in and out. We're using far more local labor, we're seeing better quality people come in, we've negotiated savings We've reduced over time by different scheduling. We've reprioritized things like IT spend. So to be honest, what we're doing is it's part of a process. We're going to overachieve versus the €800,000,000 we've talked about And we're going to reduce the time we did it in from 2 years to this year. So we will continue because it's part of the search of operational for perfection, but of course, you never quite get there. So very pleased with what we've done. The program is continuing. We will overachieve this year. Great. Thanks for the comments. Thank you. The following question is from Greg Pardy from RBC Capital Markets. Please go ahead. Yes, thanks. Good morning. The base oil sands OpEx number was quite impressive. When you look at the balance of this year and really going ahead, how much of that number do you think is going to be sustainable? In other words, volumes were higher, you're taking absolute cost out of the system. Eventually, we will go back into a higher oil price environment. But is this a trend you think we'll continue to see going to January, April, and those OpEx? I mean, two things I would say, Greg. I think it is a trend. And the best view of the trend you get is if you look at what's happened over the last 4 or 5 years. So we've come from approximately $40 down to this $28 number. Now we've had an exceptionally good quarter. So two things have helped us or 3 things if you like. The basic cost management has done very well and we're pleased with that. But we did have very low gas prices and we had exceptionally high reliability. So both of those things helped. So there's definitely a trend. We've not guided, re guided for this year because we do have 2 quarters with not major maintenance, but some maintenance in the upgraded region. So we will take a look at guidance towards the middle of the year Q3 to see if we should be reducing it. But you can definitely start to assume that we will be at the very low end of guidance if we continue this. Okay, great. And then just maybe staying on the cost front, the Syncrude numbers were also considerably lower. I mean, we haven't seen numbers like that for a very long time. Is there anything in the I mean Syncrude volumes were good in the quarter, but is there anything around things like deferred maintenance or preclamations that are taking a real bite out of the Syncrude numbers? Or was it strictly a volume gain in 1Q? Let me say a couple of things. I mean, of course, you should really address the questions to the operator, but I'll make a few comments. We've been working on operational excellence within Syncrude and the same components are there, better cost management and management of reliability. I'm on the record as having been disappointed with Syncrude's performance over the last 3 or 4 years, but also on the record that they have been diligently working on what I believe are the right issues. Your question gets right to the important bit. The most important thing we're looking for from Syncrude is costs coming down and reliability coming up. So it was a good quarter, but I'd like to see that improvement continue. Okay. Thanks for that, Steve. And then maybe just the last one. Spending wise, you guys have been last few years, call it, mid-6s in 1,000,000,000 per year. How should we be thinking about CapEx maybe into the end of 2017 with Hebron and Fort Hills finishing up for that year? I mean, I think the best indication of the discipline and the rigor we've had around our capital budget is to look it through what was a fairly big cycle over the last 4 years, we've kept to our $6,500,000,000 You're right. I mean the peak of spending on Fort Hills and on Hebron is next year. But broadly speaking, you will see us applying the same sort of capital discipline. So if I go back 3 or 4 years, we were talking about that. And I can remember you asking the question about will we be between $8,000,000,000 $9,000,000,000 You're going to see us much closer to the numbers historically we've been spending. Okay. That's great. Thanks very much. Thank you. The following question is from Phil Gresh from JPMorgan. Please go ahead. Hey, good morning. First question is just around the capital cost opportunities on Fort Hills and Hebron. Without making you commit to saying that the capital costs could be lower, maybe just talk about what you're seeing trend wise given what you've been seeing on the operating cost front? Okay. I mean, you'll recall that, Phil, when we said we were going ahead with particularly Fort Hills and the same logic goes across to Hebron. Part of the reason for wanting to go ahead at this time was our view not that we foresaw the significant down cycle in crude price, but we did see a drop off in activity in the Fort McMurray region. And so we anticipated the upward pressure on the cost of major projects would start to come down. So part of the reason we went ahead in this time frame was to be able to spend the majority of the money on the project at a very low cost time in that particular business and region. That's proving to be the case. So you heard me say the project is going very well. Construction is 25% complete. It will be 50% by year end. Engineering is 75% complete. What we're seeing, if you think about how we set up, the reason for setting up the joint venture was to derisk our exposure. So we had 40%. There's definitely a derisking going on, on that project. So the risks the upside risks are improving relative to the downside risks, which is very, very encouraging. So as we continue to hit the milestones, that continues to be the case. And of course, we've used virtually none of the contingency, which is in excess of $1,500,000,000 on that project. So all of the signs are the execution of the project is going very well and we're seeing real trends up there. So the quality of the work, quality of the labor, the commitment of the contractors has been exceptional. And if you run the current strip kind of through your model in Fort Hills, I mean, would you be comfortable that it's still low double digit IRR type of profile? Sure. I mean, if you I mean, there are lots of puts and takes on the economics, but there are some mitigating factors that you have to look at. You run the strip. And of course, that's the important point. You don't put we put the long term price and this is a 52 year project. Short term spot prices through construction are not that relevant to the IR calculation. So we redo and it hasn't moved much from our original numbers when we put current exchange rates in crude prices. Yes. Okay. So things are looking pretty good. Yes. Okay. Fair enough. And just my follow-up question is, how do you think about the long term growth of the company today? Has anything changed materially? Are you still thinking kind of through the cycle of mid single digit growth? Just kind of coming back to the question about CapEx post Fort Hills, just how are you thinking about things for that? I mean, the simple answer is yes. I mean what we're looking at is the major growth projects are going ahead. They're about 100,000 barrels a day building up in that 2018 time frame, so considerable growth. The other piece of growth is the continued reliability improvements that I think there was a bit of skepticism about initially, but they're clearly manifesting themselves now. That's what the upgraded production is around. That's what the fire bag improvements have been around. So you see that. And then we have a long list of growth projects behind that. So we owe the market a clearer view of our replication strategy. It's coming along very nicely. So we have a complete in situ replication strategy, which will take us through 10 years through to 2030 sort of time frame. And then we have some great conventional E and P projects as well. So within our ownership, we have lots of opportunity for growth. Of course, one of the benefits of the relatively good performance of our equity is we also have some opportunities in the market. So there's nothing we've much liked at the moment. Our view is there still is a bit of a gap between buyers and sellers, but the best position to be in is to have a good balance sheet and be disciplined. Sure. Absolutely. Thanks a lot. The next question is from Sameer Abhilanchwar from GMP Securities. Quick question on like dividend growth. I'm trying to understand and this is on the prior question. Once Hebron and Fort Hills spending starts coming down starting 2017, how are you thinking about dividend growth and share buybacks because capital spending seems to be kind of tapering off. So just trying to understand long term, how are you thinking about that? I mean, I don't think our I mean, I don't think our strategy has changed in a sense. I mean, we look at the opportunities we have to deploy the funds and we compare them rigorously. So we look at the returns we get on our projects, the dividend, we've always said we will keep our dividend meaningful, sustainable, growing in proportion to our production. So we plan that, that would continue as the company continues to grow. And then opportunistically, we will buy stock back. So we bought for the with the exception of this year for 4 years, we bought back 10% of the company. Our average share price buyback has been in the sort of mid-30s, dollars 34 a share rate. So we think that was very successful. And you'll see us using those same tools with the same discipline. Perfect. And last question, like you just mentioned on A and D front. If I have to think about it from that perspective, are you looking at assets within Alberta? Or is this going to be international? Like how should I think about that when you look at these projects? I mean, to be honest, if you look at our record, our record has been one of disciplined divestment rather than acquisition. So we did do the Petro Canada deal. We did do the purchase of the Denver refinery, both very much at the bottom of the cycles they were in. So we're not adverse to doing deals, but we've been more recently we've been more into how it fits with our business. Our first the first area we've been at how it fits with our business. Our first the first area we look at and I think of 3 broad areas we look at. The first one is oil sands, very difficult for acquisitions to work in oil sands because we have the highest quality resource. So we have organic projects which those things have to work against. So it's very difficult. It's very tough for us to make those work. We look at the downstream because we believe in this integrated model adding value and I think it's doing that. So we look at all the assets on this continent to see if they fit with our integrated model. And then we do look around our conventional E and P and our strategy has been around approximately the percentage of E and P we have. So we are part of the joint ventures with Exxon and Shell off of the East Coast of Canada, 2 great opportunities in the midterm there. And we do look at other assets. But overall, our view has been there's still a gap between buyers and sellers expectations. Thank you. Thank you. The following question is from Mike Dunn from FirstEnergy. Please go ahead. Yes, good morning everyone. A couple of questions on your upgraded output for the quarter. Your sour SCO sales were about 15% of the total synthetic sales. Is that a I guess upgrade or output similar to what you achieved. Is that reasonably good to use going forward? It was I think it's fair to say that's what I said almost flawless, Mike, when I talked about operations. We didn't have a perfect quarter on the hydro treaters. It wasn't bad. We did well, but we did have one unplanned shutdown there. So I don't know, Steve, if you would want to say particular numbers there. We probably lost something in the area of 25,000 to 30,000 barrels a day of sweet production over to sour, Mike. And so that does have an impact. But when you're running at close to 100%, you can't expect the entire complex to be at that level. So I think as we get to that top end, you're likely to see that sweet sour mix weaken somewhat. Okay. And it's my understanding folks that I mean, you did have a strong quarter in terms of mined bitumen output due to partially due to the ore grade. But even if that was more of a normalized throughput from the mine, would you have still been able to make that up from Firebag bitumen through the upgrader? I mean we expected to do over 300 and we did. We run Firebag and Mackay River run full to the limit of the assets all of the time. So we take them to a limit. If we are working on a steam generator then it's impacted, but our normal strategy is we run those we run all of the bitumen sources full. Okay. And then over to your I guess your E and P division. Your press release mentioned, are you drilling the beta around beta right now off Norway? And then as well, maybe just shed some color on that non commercial well off Newfoundland that you had the exploration expense for whether that was something this quarter or from prior quarters? I mean the answer to your first question is yes, we are in the process of drilling that well. And over the next few months, we would expect to start to see the results. And yes, we wrote down the Astor well. That's part of our normal E and P. And of course, you have to drill a number of those to hit a good one. So very much part of the E and P program. Okay. Thanks, Steve. That's all for me. Thank you. The following question is from Arthur Graeber from CIBC. Please go ahead. Good morning. Just a few questions. The first one is on the cost side. Can you elaborate a little bit about that $600,000,000 to $800,000,000 And what I'm looking for is how much of those cost savings are really a reflection of the current price environment or the current deflationary cost environment? And so really what I'm wondering is, can we potentially see more cost savings just due to a cost deflationary environment? Like are all these really just structural changes that we don't expect to come back over time? Yes, Arthur, it's Alcy. Yes, I mean, I would say that Steve gave some great examples of how we're achieving those cost savings. We did take 1200 people out of the organization, but Steve gave some other examples. And they're more very much structural changes in the way we're doing our business rather than sort of taking one time price reductions that ultimately do come back. So our view is the majority of those cost reductions will be permanent structural changes in our cost base. Okay. Looking at the CapEx numbers. So as you said Alistair that CapEx is $1,300,000,000 And taking into consideration that Suncor has a history of putting out CapEx guidance and then coming underneath that, is there a reason why I shouldn't take that $1,300,000,000 and times it by 4 and assume that's what the CapEx will actually turn out to be this year? That was music to my ears. So I'll hand it over to Alastair, so he can answer the question. I wish you could see the smile on my face. We've been working for a number of years, particularly in oil sands, against a reputation of project overruns, not being able to do things within our CapEx limits. So it was a specific objective of ours to become much more disciplined about capital and to give prudent but realistic estimates. So I'm pleased that there is a general realization now that we manage that in a disciplined way. Go on, Alastair, you can Thanks, Steve. As I said in my comments, our CapEx is seasonal. So the CAD 1,300,000,000 was actually in line with what we expected as part of that overall CAD 6,200,000,000 to CAD 6,800,000,000 So don't just multiply by 4, there's going to be some seasonality. We've got some turnarounds coming, obviously, as we ramp up in the summer work and some of the especially Fort Hills, you'll see that go up in the next couple of quarters. We're still going to hit in that range of $6,200,000 to $6,800,000 Okay. And the last question for me is, you talked about some planned maintenance in Q2 and Q3. In terms of context of the guidance of the 4.10 to 4.40, Talk a little bit about where change? Sorry, you cut out there for just a terms of guidance, 10% to 4% here, In terms of guidance, 10% to 4% here, volumes like to shake out items? Yes. Okay. We got it. You are cutting out, but I think we have the gist of it. We it's true we are right across the up stream producing at or above the high end of guidance. But we do have maintenance planned rate across the upstream in the second and third quarters. I would say that we certainly expect to be midpoint or above in our guidance production. But you have to have quarters like Q1 in order to hit guidance because we do take that maintenance into account. Thank you very much. Thank you. Next question is from Ashok Dutta from Platts. Please go ahead. Hey, Shahagutai, your line is now open. Please proceed. Hi. Just a very few quick questions. Line 9 and Montreal coker, just wanted to find out what's the latest with that please? Okay. Line 9, much as we anticipated, we still anticipate it coming on in the Q2 this year. So in the May, June timeframe, It is dependent on a final leave permission to start up from the NEB and that being given to Enbridge. But we're working with both of those to try and secure the 2nd quarter start up. So I'm waiting to see it actually happen, but it does still look as though signs are encouraging. And of course, the actual regulatory approval for Line 9 reversal was given last year. So still on schedule. Montreal, let me just say that the combination of the rail connection we put into Montreal and the modifications we made to the ISO MAX, Montreal had one of its best quarters ever in the Q1. And of course, as Line 9 gets reversed, then that trend will continue. The yields that we've got, particularly for distillates around the ISO MAX have been above our expectations, which is good news. The coker is a refinery margin project that we will look at the right time. We're still investing in the development of that project this year. And towards the end of this year, beginning of next year, it will come across my desk to take a look at whether we approve it. So still being developed, but not imminent. Okay. And just a very quick follow-up. With Line 9 reversal, would you still be looking at getting crude from the U. S. Gulf Coast? One of the strengths of Suncor is what I call our logistics and our intermediates. We run our trading organization to take advantage of the difference in prices. So yes, all is possible. We run that model every day and look at where the best trades can be made. So we move material up from the Gulf Coast into Montreal. Of course, Line 9 will give us great access to inland crude both from the western side of Canada here in Alberta, but also for inland crudes in the U. S. So it just gives us extra flexibility and we will take advantage of all of that. Okay. Thank you very much. Thank you. The following question is from Chester Dawson from The Wall Street Journal. Please go ahead. Yes. Thank you for taking my question. Two main points. First, I was wondering if you could tell me what your average realized price for oil sands crude was in the first quarter? And secondly, well, actually, I'll ask you to answer that first. Steve is just looking up a number for you. Well, while he's doing that maybe I'll ask my second question, which is you mentioned that you don't have any particular interest in oil sands M and A. But I'm wondering if you have any insight into whether others might be interested in Syncrude, for example. There's been some talk that or speculation that Imperial might want to increase at stake. Are you aware of that? Have they had any discussions with you about that as a major shareholder? No, I wouldn't have any comment. I'm not I can't comment on theoretical competition type issues. I mean, I think the fundamentals are still the same for all of us. But one of the challenges around acquisitions is if you hold excellent resource, you have to benchmark other assets against them. And I think there still is generally a disconnect between buyers and sellers. But other than that, I would ask other Syncrude owners directly. Okay. Chester, it's Alastair. The average realized price for the oil sands in the quarter was CAD 47.67. Okay, great. Thank you. And lastly, could you give me any update on your crude by rail shipments in the Q1 and where you expect them Q2 and beyond? It's Steve here Steve Douglas here. We continue to ship significant volumes to Montreal, 30,000 to 40,000 barrels per day of rail. Other than that, we really do it, as Steve Williams mentioned on an opportunistic basis. So when there is an arbitrage opportunity, we can actually move anywhere in North America with our rail shipment and we'll continue to do that. We have a large fleet of railcars and it's really about taking advantage of arbitrage opportunities. We don't move our own equity crude by rail. We have sufficient pipeline access to move it all by pipe. Okay. And just to follow-up and clarify, I think last quarter you said it was not efficient to rail it to the Gulf of Mexico. Is that still the case? It really comes and goes because of course we've seen a lot of volatility in crude pricing. And so it's really a day to day optimization exercise. Great. Thank you. Thank you. The following question is from Jeff Lewis from The Globe and Mail. Please go ahead. Hi, thanks for taking my question. I was wondering about the 200 additional layoffs. Can you clarify from what area of the business those cuts were made? I mean, I would just comment generally. The majority of these costs have been around what I would call our head office and overhead. So we've been working for a number of years on streamlining our work processes in the company and that's where these have come from. So although we set targets, it was very much about how can we still do the critical important work for the company, but do it more productively and that's where they come from. So the majority are in Calgary and Toronto around our sort of head office functions. Okay. And just as a follow-up regarding the cost reductions. Alastair mentioned that a lot of them were from structural changes. Can you be more specific on some of the areas of the business where you've been able to bring costs? The release mentioned lower gas prices and higher volumes helped sort of drive the per barrel cost down. But what specifically have you been able to change in the business that you see sort of sticking around as the year goes on? Yes. I mean, those would be largely a repeat of what I said earlier. It's about productivity. It's about improved processes. So it's around better supply chain, IT, HR, finance. It's about how we work those processes better. So the changes we've made are permanent with different systems in place, which is why we think these things will largely be sustainable. So it's about how you I mean the phrase that used to be used was how you reengineer or redesign those work processes. So it's those types of things. But would you say the bulk of the savings are coming from things like that or from the higher volumes and lower gas prices? No, the bulk of the savings are coming from those. Those $600,000,000 to $800,000,000 has no those gas prices have no impact on that, not the volume. Okay, I see. Thank you. Thank you. The following question is from Scott Haggart from Reuters. Please go ahead. Yes. Just to get a little more mundane, can you tell us when you expect the current coker maintenance to wrap up? And when you'll begin the vacuum unit and other coker work? Yes. Just general comments. The I think you're talking about the Unit 1 upgrader annual inspection that's going on, on 2 of the coke drums. It's going very well. The work is on schedule. We'd expect it back online in the next few weeks. And then in terms of the planned Unit 2 vacuum tower work, we'll be executing that in the fall. Great. Thank you. Thank you. The following question is from Sean Poser from Merger Market. Please go ahead. Would you be interested in increasing your stake in Syncrude? I think what I would say is, I would just look back to our general position. I mean, we're not adverse to transactions. We have a long list of excellent organic projects. So anything we look at has to work very well relative to those. If we look at Suncor's track record on, I would call general M and A type activity, we tend to be more in the disposal of assets than in the buying of assets over the last few years. And that's been part of that disciplined strategy about getting to our core business. We do look at all potential opportunities out there, but generally our feeling is there's a big gap between buyers and sellers. Would you be interested in selling your share in Syncrude? Same answer. Okay. Thank you. Thank you. We have no further questions registered. I'd like to turn the meeting back over to Mr. Douglas. Please do answer. Okay. Thank you, operator, and thanks to all the Thank you. The conference has now ended. Please disconnect your lines at this time. Thank you for your participation.