This morning's Q & A There were only 4 analysts that participated in the call and the session was very short. Mgmt thanked the analysts for participating and said they would keep it tight as it was a big earnings day.
Greg Pardy (RBC)
Q1) asked about clarification about the instability of the south slope at Fort Hill which caused lower production and higher costs than anticipated by guidance".
A1) SU is focused on operating 2 trains between SU and Syncrude and the south wall is a critical pillar. They don't expect any fundamental change to their guidance to 2022 as it is basically a timing issue
Q2) what milestones could we expect to see in regards to their net zero initiative
A2) SU talked about the unprecedented collaboration (90% of tarsands operators are participating) which will allow operators to progress faster and cheaper by sharing. They expect 50% of the solution to come from common use of Carbon Capture & Sequestration (CCS). They mentioned individual efforts like their Cogen projects as well as the sharing of Solvent Infrastructure and they said that they are in a 90 day consultation period with the FEDs and the province that is proceeding well.
Neil Mehta (Goldman Sachs)
Q1) wanted to know if SU was still expecting to achieve its annual guidance range for upstream production of 740,000 to 780,000 bpd and if so, was the number expected to be at the lower end
A1) they expect to be in the range, but not at the top end which implies middle to low end
Q2) asked about the Buy Back strategy and if they were targeting the high end of the 5%
A2) they expect to execute the full 5% if commodity prices remain high
Phil Gresh (JP Morgan)
Q1) why does SU think the South Slope issue at Fort Hills be a 1 time thing
A1) we are dealing with soft ground in the tar sands so we always have to deal with water management and we are. The implication is that it is just a normal event.
Q2) wanted to know why SU guided for $10.6 billion of OpEx but came in at $10.8 billion.
A2) SU had a 1 time restructuring fee of $250mm in Q1 for downsizing
Manan Gupta (Credit Suisse)
Q1) your guidance was for 2/3 debt reduction and 1/3 buyback but the numbers were different
A1) we knew we would have high Maintenance costs in Q2 so it affected our numbers but we expect the annual numbers to work out as they will be receiving a $1 billion tax credit in the second half of the year which will be used for debt reduction
Q2) I missed it
A2) all of our refineries had turnarounds in Q2 and now the environment (ie operations) is very positive. Cracking margins are robust and we are in very good shape for the rest of the year
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As I mentioned above, the Q&A was really short. The focus of the analysts was "what happened at Fort Hills and does it change anything other than timimg" and the answer was NO.
The share price is down this morning. I expect sophisticated investors will take advantage of the opportunity.