BMO target $58.00 total return 30% SU-TSX Rating Price: Nov-28 Outperform $46.20
2023 Guidance and Retail Decision
Bottom Line:
Target Total Rtn
$58.00 30%
Suncor released 2023 guidance with capital spending in line with consensus on lower production, while operating costs were higher than expected. The company announced that it will not sell its retail business and will focus on optimizing it. We believe that the update could be somewhat negative for near-term share performance given higher operating costs and the decision to not sell the retail business. Suncor will provide more details at its investor presentation today.
Key Points
2023 capital budget. Suncor’s 2023 capital budget forecasts spending of $5.4-5.8 billion, which is relatively in line with consensus of $5.5 billion. Suncor plans to allocate $4.35-4.65 billion to upstream (45% economic), $1,025-1,100 million to downstream (25% economic), and $25-50 million to corporate expenditures.
2023 operational guidance. Suncor expects upstream production to average 740,000-770,000 boe/d for 2023 assuming the company’s Fort Hills acquisition and
UK divestiture are effective as of April 1 and June 30, respectively. Adding back the UK divestiture volumes, implied guidance would be ~750,000-780,000 boe/d, which is below consensus of 794,300 boe/d. We anticipate that softer production guidance was driven by lower-than-expected volumes at Suncor's Oil Sands Operations and Fort Hills. The company's refinery throughput estimate for 2023 is 430,000-445,000 b/d (92-96% utilization), which is in line with consensus of 437,500 b/d. The company anticipates refined product sales of 550,000-580,000 b/d.
Increasing operating costs. Suncor expects cash operating costs in its Oil Sands Operations to increase to $30-33/bbl from $27-30/bbl in 2022. Fort Hills operating costs are expected to average $33-36/bbl, more than 2022 expected costs of $27-30/bbl as the company starts its multi-year performance improvement initiative at the asset. Syncrude operating costs are anticipated to average $39-43/bbl, up from $33-36/bbl this year.
Keeping the retail business. Suncor’s board unanimously decided to retain and continue to improve and optimize the Petro-Canada retail business. This will include continued optimization of the Petro-Canada retail sites across the network as well as continued expansion of strategic partnerships in non-fuel related businesses such as quick service restaurants, convenience stores, loyalty partnerships, and energy transition offerings.
Investor presentation at 11:00 a.m. MT; via webcast link.
This report was prepared by an analyst(s) employed by BMO Nesbitt Burns Inc., an