Suncor Energy announces 2021 production outlook and capital allocation
Suncor is projecting an average upstream production of 740,000 to 780,000 barrels of oil equivalent per day (boe/d) in its 2021 corporate guidance, along with a significant capital plan for the upcoming year.
In the guidance, Suncor projects an expected debt repayment of between $500 million and $1 billion, a capital program of between $3.8 and $4.5 billion (sustaining capital of $2.9-3.4 billion which includes in situ well pads) and $500 million share repurchase program through the 2021 fiscal year.
"The decisions we made this year give us the ability to strengthen the balance sheet, increase shareholder returns, and invest in our business to grow future free funds flow," said Mark Little, president and chief executive officer. "As we look to 2021, with a focus on the safe and reliable operation of our assets and disciplined cost management, we're well-positioned to make significant progress in all of these important areas."
Suncor's debt levels remain reasonable at current strip pricing given the progress we have made to date in resetting the cost and capital structure of the business. However, Suncor remains firmly committed to reducing absolute debt levels consistent with its capital allocation framework as consumer demand, refining margins, and commodity prices improve. As these are expected to continue to recover in 2021, increased funds from operation and the reversal of the 2020 working capital build from the expected receipt of the cash tax recovery in late 2021 will allow the repayment of between $500 million and $1.0 billion of debt in 2021.
Suncor's 2021 capital program is largely focused on sustaining capital ($2.9 - $3.4 billion which includes In Situ well pads) given the major planned maintenance programs in Oil Sands upgrading operations, Syncrude and Downstream refineries. These investments are critical to ensure continued safe, reliable and efficient operations. Despite the increased level of maintenance across the asset base in 2021, including the five-year planned maintenance turnaround at Base Plant Upgrader 2 and planned maintenance at the largest Syncrude coker, our sustaining capital is below the midpoint of $2.75 to $3.75 billion targeted sustaining capital range. This reflects the cost reduction actions taken in 2020.
Approximately $250 million of the 2021 capital program is allocated towards free funds flow growth projects across the business excluding the Cogeneration Facility at Base Plant (Cogen) to replace the existing coke fired boilers. A final decision on re-starting the construction of the Cogen will be made in 2021. As demonstrated in 2020, Suncor's 2021 capital guidance range will remain flexible and agile depending on commodity prices and accommodates the potential restart of the Cogeneration Facility.
PRODUCTION & OPERATING COST GUIDANCE
Suncor's average expected upstream production of 740,000 to 780,000 boe/d represents a year over year production increase of approximately 10% compared to the midpoint guidance range of 2020.
Suncor's Oil Sands operations cash operating costs(1) per barrel are expected to reduce by 8% to $26.00 - $28.50 when compared to the 2020 guidance midpoint. These costs include the impact of the five-year major planned maintenance turnaround at Base Plant Upgrader 2. The turnaround activities will begin in the second quarter of 2021. A portion of the reduced synthetic crude oil volumes will be offset by increasing bitumen sales and optimizing the value of the interconnecting pipelines between our Base Plant and Syncrude.
The Fort Hills expected production of 65,000 to 85,000 barrels per day (bbls/d), net to Suncor, represents a 20% increase when compared to the midpoint guidance range in 2020. The increased Fort Hills production is grounded in long-term value creation ensuring a disciplined focus on costs by maintaining the operating and capital costs savings achieved in 2020. Suncor will operate Fort Hills with structurally lower costs and continue to work with the joint venture partners on a plan to operate the asset at nameplate post 2021. Through the emphasis on cost reduction and maximizing cash flow of each barrel, Fort Hills cash operating costs(1) per barrel are anticipated to be reduced by approximately 20% to $25.00 - $29.00 when compared to the 2020 guidance midpoint.
As announced on Nov. 23, the Syncrude joint venture owners have reached an agreement in principle for Suncor to take over operatorship of the Syncrude asset by the end of 2021. The commissioning of the interconnecting pipelines between our Base Plant and Syncrude is near completion. The pipelines are expected to enter into operation in December. These important milestones are expected to enable further improved operational performance and drive down the overall joint venture cost structure. Syncrude expected production includes the impact of planned maintenance of the largest coker unit (150,000 bbls/d) which is expected to begin in the second quarter of 2021. Syncrude cash operating costs(1) per barrel are expected to reduce by 6% to $32.00 - $35.00 when compared to the 2020 guidance midpoint.
No production volumes or capital commitments associated with Terra Nova or West White Rose are currently forecast for 2021. Suncor and its partners have deferred these projects until an economically viable way forward can be agreed upon with all stakeholders.
The downstream utilization guidance is expected to improve by approximately 6% in 2021 to 93% at the midpoint, consistent with historic levels. Consumer demand in 2021 is expected to continue to increase from the lows reached in the second quarter of 2020 as a result of COVID 19 restrictions.