Suncor Energy CEO Discusses Q3 2010 Results - Earnings Call Transcript
Suncor Energy Inc (
)
Q3 2010 Earnings Call
November 04, 2010 10:00 a.m. ET
Executives
Helen Kelly - Manager, IR
Rick George - President & CEO
Steve Williams - COO
Bart Demosky - CFO
Analysts
Andrew Fairbanks - Bank of America
Joe Citarella - Goldman Sachs
Andrew Potter - CIBC
Brian Dutton - Credit Suisse
Stephen Richardson - Morgan Stanley
Mark Polak - Scotia Capital
George Toriola - UBS
Mark Gilman - The Benchmark
Barbara Betanski - Addenda Capital
Paul Cheng - Barclays Capital
Presentation
Operator
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Good morning everyone. Thanks for listening in to our Third Quarter Conference Call. In the room with me this morning, I have Rick George, our President and CEO; Steve Williams, our Chief Operating Officer; Bart Demosky, our CFO; and from the controller’s department John McKenzie, Jolene Gillimo.
Rick, Steve and Bart will take turns to give us a perspective on the quarter and then we’ll open it up to questions. We’d ask that you keep your questions to Suncor results and strategy only. And with that Rick, please kick us out.
Rick George
Helen, thank you very much and I’m delighted to be here and good morning everyone. First of all, I’m delighted to report third quarter results obviously, very solid operating and a financial performance. It was one of our strongest quarters in terms of oil sands production and what makes that even more important is that we reached these volumes so while also completing major plan maintenance.
Again, I think it demonstrates a solid base for a reliable production on go-forward basis and when you think about that in terms of before we are the merger, which I’m going to talk more in the moment, you’ll see that Suncor is getting ready here in terms of a long-term basis on which you can depend.
Production in the natural gas and the international offshore were both exceeded plans, when you take into account the asset sales that we did out of both of those businesses. And in addition, we’re proud of our downstream assets which continues to show a very robust cash flow and earnings. So, we’re on target to meet our production operating cost guidance for the full-year. I’ll let Steve update you a little bit more on that in detail.
What I want to spend sometime this morning on was really kind of a progress we’ve had, ahead of the progress report on where we are on the merger. So the merger closed some 15 months ago and I want to kind of give you an update, kind of item by item in terms of where we are.
First of all, on the divestiture of assets and debt levels our sale of non-core assets is really nearly complete. The transaction matrix we realize were solid, was executed very well, ahead of schedule. And with that our goal to repair the balance sheet and pay down debt by the year-end will accomplish our goals.
We should be roughly at year-end debt levels of $11 billion. And so with that I would quickly say that our natural gas business continues to evaluate its long-term strategy and there may be some more asset sales. That was something that we can talk about later on. Although certainly our core program of what we planned to divest inside of the merger is behind us. On synergies, I’m pleased to announce our final number on this, and if you’ll remember at the time of the merger, we said on an operating basis, we had about $300 million worth of operating synergies.
We increased that about a year ago to 400 million and I’m pleased to tell you that our current estimate and what we expect here is 800 million of synergies, about two and a half times higher than our original forecasts. Almost all of that 800 million and savings has been triggered to date and you should start to see that in our results on a go forward basis, may be not all at once, but year-over-year period of time. The key initiatives we’ve undertaken include supply chain management optimization, improved inventory management, office and overhead rationalization, just what you would expect out of a merger of this size.
I want to congratulate my team that’s worked very hard to drive those efficiencies, and we will work hard on a go-forward basis as well. I think its driven real value for our shareholders and I want to give our team full credit for doing exactly that. If you think about our organization, I’ve been very proud about how it’s aligned, how we’ve gotten behind the Suncor values, our strategy and behind kind of where this team is going. We’re in the process of doing the final stage of closing down the London, England office at the end of this year. By the end of this year also, all of the Calgary-based employees will be in one building, here in Calgary. And importantly, and this has probably been the hardest part of the merger, has been the integration of our ERP systems.
So by the end of 2011, we’ll have the entire company on an SAP system, as Suncor was prior to the merger and that will be the solid platform for driving even more efficiencies and effectiveness on a go-forward basis. We’ve actually completed the roll-out of two out of four phases. The last two phases happen in August and October of next year. And I can tell you that so far so good with those roll-outs and we’re all looking forward to having that kind of solid foundation on a go-forward basis. Then the fourth coming out of the merger is the rich portfolio of growth opportunities.
This company has got growth opportunities that are unparalleled by many or any players in this industry. Looking ahead and I know everyone out here is still looking, when are they going to come out and talk about the exact sequence of these projects. It’s still our plan to come to the market before the end of the year with a strategic update. For now, I think it’s important to remember and recognize the value of some 27 billion barrels of resources. And oil sands in particular, beyond Firebag Stage 4, which is under construction. We have Firebag 5 and 6. The Fort Hills project, the McKay river expansion, Meadow creek and others that we haven’t actually even talked about and firstly all the ones I listed above there already have their key, regulatory environment approvals in place.
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