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Suncor Lowers Costs Faster Than Projected

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   |    Monday,May 04,2015

• Strong reliability contributed to record Oil Sands operations production of 440,400 barrels per day (bbls/d) and record synthetic crude oil (SCO) production of 346,500 bbls/d.
• Achieved a 20% reduction to cash operating costs per barrel in Oil Sands operations to $28.40 for the quarter, versus the prior year quarter, due to increased production and lower costs, driven by declining natural gas prices, the company's cost reduction initiatives announced in early 2015 and minimal maintenance activities.
• Suncor expects that the previously announced $600 million to $800 million in operating budget reductions will be substantially realized in 2015, ahead of the projected two-year period.
• Fort Hills and Hebron growth projects on schedule to commence production in late 2017.

Operating Results

• Suncor's total upstream production was 602,400 barrels of oil equivalent per day (boe/d) in the first quarter of 2015, compared with 545,300 boe/d in the prior year quarter, due to minimal planned maintenance activities and strong reliability in both Oil Sands operations and E&P.
• Oil Sands operations production was 440,400 bbls/d in the first quarter of 2015, compared to 389,300 bbls/d in the prior year quarter, primarily due to minimal maintenance activities in the first quarter of 2015. Production highlights included 346,500 bbls/d of SCO due to strong upgrader reliability, and record production of 188,700 bbls/d at Firebag. Oil Sands operations production in the second quarter of 2015 is expected to decrease slightly as a result of planned coker maintenance.
• Cash operating costs per barrel for Oil Sands operations decreased in the first quarter of 2015 to an average of $28.40 per barrel (bbl), compared to $35.60/bbl in the prior year quarter, due to increased production and lower costs as a result of lower natural gas prices, the company's cost reduction initiatives and minimal maintenance activities.
• strong>Williams said: "Our cost reduction initiatives have taken hold across the company.  These initiatives, combined with record Oil Sands production, have contributed to a 20% reduction in cash operating costs per barrel at Oil Sands operations."
• Suncor's share of Syncrude production of 35,200 bbls/d in the first quarter of 2015 remained comparable to the prior year quarter production of 35,100 bbls/d.
• Production volumes in E&P increased to 126,800 boe/d in the first quarter of 2015, compared to 120,900 boe/d in the prior year quarter, primarily due to the ramp up of production from Golden Eagle and higher production at Terra Nova. Production in Libya continues to be substantially shut-in due to continued political unrest, with the timing of a return to normal operations remaining uncertain.
• During the first quarter of 2015, Refining and Marketing completed planned maintenance at the Commerce City refinery. Average refinery utilization remained strong at 95% in the first quarter, compared to 96% in the prior year quarter.

Strategy Update

• The company has made significant progress on the cost reduction initiatives announced earlier this year. Suncor expects that the $600 million to $800 million in planned operating budget reductions will be substantially realized in 2015, ahead of the previously projected two-year period. Suncor is also on track to achieve the $1 billion reduction to its 2015 capital budget while maintaining steady progress on the key growth projects already under construction, including Fort Hills and Hebron. The cost reductions have not impacted the company's continued safety, reliability and environmental performance.
• Williams said: "The Fort Hills project remains on schedule and on budget. We are starting to see an increase in the labour supply and productivity in the Fort McMurray region."
• Suncor continued to deliver cash returns to shareholders in the first quarter of 2015 through $405 million in dividends ($0.28 per common share).

Oil Sands Operations

• The 2015 capital budget in Oil Sands operations will continue to be directed to projects that enhance safety, reliability and environmental performance. Spending in the first quarter was directed towards ongoing well pad development that is expected to maintain existing production levels at Firebag and MacKay River.

Oil Sands Ventures

• The Fort Hills mining project is on schedule with construction activities ramping up and detailed engineering moving towards completion. Detailed engineering activities were approximately 75% complete by the end of the first quarter, while construction activities progressed to approximately 25% completion. Key activities during the quarter included procurement of equipment for secondary extraction as well as construction across all areas with administration, maintenance and lodging facilities near completion. The project is expected to deliver approximately 73,000 bbls/d of bitumen to Suncor's operations, with first oil expected in the fourth quarter of 2017 and 90% of its planned capacity being reached within twelve months thereafter.

Exploration and Production

• Golden Eagle production surpassed 11,000 boe/d (net) at the end of the first quarter of 2015. Production will continue to ramp up to its peak production rate of 18,000 boe/d (net) as development drilling progresses in 2015. Construction of the gravity-based structure and topsides at the Hebron project continued in the first quarter of 2015 with first oil expected in late 2017.
• Growth capital in East Coast Canada included spending for the advancement of multiple field extension projects that leverage existing facilities and infrastructure to provide incremental production and extend the productive life of existing fields. Drilling activities continued on the South White Rose Extension project with first oil expected in the second quarter of 2015. Growth capital also included spending related to appraisal drilling on the operated Beta prospect in the North Sea.

Corporate Guidance

• Suncor has updated assumptions provided for in its 2015 corporate guidance, previously issued on January 13, 2015. The following 2015 full year outlook assumptions have been adjusted: Brent at Sullom Voe to US$60/bbl from US$65/bbl, WTI at Cushing to US$54/bbl from US$59/bbl, WCS at Hardisty to US$40/bbl from US$42/bbl, AECO- C Spot to $2.75/GJ from $3.00/GJ, the US$/Cdn$ exchange rate to 0.80 from 0.85, the international tax rate to 45%-50% from 55%-60%, and current income taxes to $700-$1,000 million from $400-$800 million. For further details and advisories regarding Suncor's 2015 revised corporate guidance, see suncor.com/guidance.