Suncor 2020 capital program focused on free funds flow and sustainability targets
Suncor's 2020 corporate guidance, released December 2, focuses on driving its $2 billion of incremental free funds flow target by 2023, achieving its 2030 sustainability targets, and reflects the company's recent 800 MW cogeneration investment announcement.
The capital program is expected to be between $5.4 and $6.0 billion with flat investment in oil related projects year over year. Upstream production is expected to be between 800,000 to 840,000 barrels of oil equivalent per day (boe/d), an approximately 5% production increase compared to 2019 midpoint guidance.
"During 2019, we've demonstrated the value of our asset integration and flexibility through our focus on value over volumes, optimizing our product mix and transferring production quotas among our assets. This unique competitive advantage means we're able to realize the highest value possible for our produced barrels, even during a period of production curtailment," said Mark Little, president and chief executive officer. "Looking forward to 2020, we will continue to focus on value over volume, investing in high-return projects that are largely independent of pipeline constraints and commodity price volatility, to deliver on our $2 billion incremental free funds flow target by 2023. These initiatives continue to position our company as financially and environmentally sustainable by driving long-term value creation, increasing shareholder returns, and lowering the carbon intensity of our production."
The impact of the Government of Alberta's mandatory production curtailment is factored into Suncor's 2020 guidance which incorporates the utilization of crude by rail special production allowances. Although there continues to be considerable uncertainty on the impact and duration of the curtailment, the lower end of Suncor's production guidance assumes curtailment remains in place at current levels for the full 2020 calendar year, while the upper end reflects an uncurtailed environment. Fort Hills and Syncrude remain adversely impacted due to the continued, disproportionate effect of curtailment as it is applied on a 2018 production basis when neither asset was operating at nameplate capacity.
Cash operating costs per barrel is impacted by the Government of Alberta's continued mandatory production curtailments and the associated optimization of production quotas, which focuses on higher value but higher cost production. Suncor's expected Oil Sands operations cash operating costs per barrel are $24.00 - $26.50 (US $18.25 - $20.15) reflecting lower 2020 planned maintenance. Fort Hills cash operating costs per barrel are expected to be $23.00 - $27.00 (US $17.50 - $20.50). Syncrude cash operating costs per barrel are expected to be $35.00 - $38.00 (US $26.60 - $28.90).
Oil related capital is flat year over year, while oil production is expected to increase by 5% over 2019 midpoint guidance. Capital for previously sanctioned E&P step-out developments will increase by approximately $100 million over 2019 to $1.1 billion, and is inclusive of the Terra Nova asset life extension. The capital increase in 2020 is predominantly associated with projects driving the $2 billion of incremental free funds flow target by 2023 - the anticipated incremental capital spend on such projects in 2020 include $300 million for the newly sanctioned cogeneration facility, $150 million for additional investment in digital technology initiatives, and $50 million in connection with the completion of the Syncrude bi-directional pipelines.
Suncor has sanctioned the Forty Mile Wind Power Project in southern Alberta. This 200 MW renewable power project has an estimated total capital spend of $300 million, with 25% of the capital spent in 2019 and the remainder to be spent over the next two years. This unique investment approach in renewable energy is expected to generate double-digit, sustainable economic returns through power generation and retaining the generated carbon credits for utilization in the core business. This project is part of Suncor's sustainability strategy, making meaningful progress toward the greenhouse gas intensity reduction target of 30% by 2030.
The capital program is approximately 50% allocated to planned asset sustainment and maintenance activities to ensure continued safe, reliable and efficient operations. The remaining 2020 capital program has a continued focus on low capital intensity, value-creating projects including the cogeneration facility; continued implementation of autonomous haul trucks; completion of the Syncrude bi-directional pipelines; investment in renewable wind power development; and digital technology adoption.
Suncor's corporate guidance provides management's outlook for 2020 in certain key areas of the company's business. Users of this forward-looking information are cautioned that actual results may vary materially from the targets disclosed. Readers are cautioned against placing undue reliance on this guidance.
- At the time of publication, production in Libya continues to be affected by political unrest and therefore no forward looking production for Libya is factored into the Exploration and Production and Suncor Total Production guidance. Production ranges for Oil Sands operations, Fort Hills, Syncrude and Exploration and Production are not intended to add to equal Suncor Total Production.
- Oil Sands operations production includes synthetic crude oil, diesel, and bitumen and excludes Fort Hills PFT bitumen and Syncrude synthetic crude oil production. These ranges reflect the integrated upgrading and bitumen production performance risk.
- Refinery utilization is based on the following crude processing capacities: Montreal - 137,000 bbls/d; Sarnia - 85,000 bbls/d; Edmonton - 142,000 bbls/d; and Commerce City - 98,000 bbls/d.