Suncor Energy Inc (SU) 2007 Q3 法說會逐字稿

Good morning, ladies and gentlemen.

Thank you for standing by.

Welcome to the Suncor Energy, Inc., third-quarter results conference call.

At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session.

Instructions will be provided at that time for you to queue up for questions.

(OPERATOR INSTRUCTIONS) I would like to remind everyone that this conference call is being recorded on Thursday, October 25, 2007, at 8 AM Mountain Time.

I will now turn the conference over to Mr.

John Rogers, VP Investor Relations.

Please go ahead, sir.

Great, thanks, Melissa, and welcome, everyone.

Thanks for listening in to our third-quarter conference call.

I have with me this quarter Rick George, our President CEO; Ken Alley, our CFO; Brenda, our VP/Controller; and Greg [Kreeton] from our Controller's Department.

I did want to mention that we are going to be dealing with in some cases forward-looking information.

I would suggest that you look at our other disclosure to see all the parameters around them.

So I will follow the normal routine of having Rick give us an opening comment in terms of his view of the business and the quarter; Ken giving us a brief overview; I will talk a little bit about the outlook for the fourth quarter; and then we will open it up for Q&A.

So why don't I move it right over to Rick and we will start from there?

Okay, thank you, John.

I think where I would like to start this morning -- and welcome, everybody -- is with the Premier's State of the Province address last night on TV.

For those of you in the US who I know don't have access to the Canadian TV, our Premier gave an address last night, about 20 minutes.

He really didn't give any details at all around the royalties.

So one of the things I will say about his address is that we definitely support the Premier's positive vision for Alberta.

He tried to lay that vision out and did a great job of that.

So we are very supportive of that.

We will get the details later today.

Actually at 3 o'clock Mountain Time, the government is going to announce or release at least some of the details.

I don't know what that looks like and have no inside knowledge.

So kind of where I am today is it isn't really a terrific use of our time -- and I mean our joint time -- to speculate on what those details might be or their impacts on our business.

So where I think Suncor is and -- we are going to wait and see what comes out at 3 o'clock, and then we will be able to kind of, I think, advise you on what those impacts might be.

So let's go to the quarter, because I think that is the purpose of the phone call and I think where we want to really focus on.

First of all, I think on the positive side we have made real progress on a number of our construction projects.

Of course, those are the keys to our growth in the future.

Our Millennium coker unit -- and remember, this is the project that gets us from our current rates of roughly 280,000 barrels a day to 350,000 barrels a day by the middle part of next year.

Those tie-ins were completed after a long turnaround that impacted the second- and the third-quarter results.

The commissioning started in August.

The capacity is coming online as we speak.

So the upgrade capacity is definitely there.

That is terrific news.

We are not at all concerned about the ultimate capacity of that upgrader reaching the 350,000 barrels a day capacity.

Should be in the middle part of next year in terms of our capacity to handle that kind of bitumen.

I will talk more later about feed into that bitumen.

That, by the way is a 35% increase over the next 12 to 18 months.

So it is a big increase for us, and obviously it will not come in a straight line.

There will be ups and downs as we get to that increase of capacity.

You would have seen that in the last two months in terms of seeing our numbers starting to ramp up.

Again, not every month is going to be an up month, but you'll see us start over time here to gradually move that up.

Our Sarnia project, we will be complete with the integration project there at Sarnia in this quarter.

We actually should be done by December.

If you will remember, that enables Sarnia to run then about 40,000 barrels a day of sour product.

That dramatically lowers the feedstock costs into that refinery.

You know, you won't really see a lot of that increased financial capacity or financial results until next year because, again, fourth quarter we had that refinery in turnaround doing the tie-in work.

But what you will see over time is Sarnia move from one of the highest feedstock refineries in that Ontario market to one of the lower ones.

So you should see the profitability of that business move up.

The Voyageur project, and I know that is the big project on the horizon, has continued along in very good shape.

We continue to work on engineering.

We are a little bit behind where we thought we would be at this particular point.

We are continuing to place equipment orders and continuing to work on contracts in terms of contracts with the actual contractors who will be doing the actual construction in the field.

We have started to do piling in the field, although on a fairly slow rate.

You will remember, Firebag Stage 3 is a part of that.

Of course, construction of Firebag Stage 3 I think is about 20% complete at this point, and that is all part of that Voyageur project.

So continuing on a good path.

We will probably delay going into the field for a few months here.

Part of that dealing with the uncertainties that have come along in the last little bit.

But it also gives us a chance to finish the engineering and also a chance to do a lot more planning on the front end of that project.

So we are still sticking with the fact that that project should be complete in 2012.

So you will start to see those kind of volumes coming on in that kind of time frame.

Again, Voyageur brings our production from the 350,000 barrels a day of capacity we have in the middle of next year to 550,000 barrels a day roughly.

So, we certainly have been very pleased with that progress.

We certainly had our operational challenges, although I would say the third quarter is kind of on track with what our expectations were.

You saw some very good volumes, particularly in the months of August and September.

You would have seen that, from our release here, that we are expecting cash costs in the fourth quarter in the $23.50 to $24.50 range.

So I think that kind of gives you a good marker here, with good steady production kind of where we are currently.

Now what I would say about that is it is volume dependent.

So if you see volumes up or down off that number, it will have a big impact.

But that is kind of the range in terms of [save].

We had always talked this year through the other quarter calls about the fourth quarter would be the real marker when we finally got through the turnaround work and got this thing steadied out.

We do have a few challenges.

Obviously on the Natural Gas side of our business, which of course isn't a big part of Suncor, we obviously have been disappointed with the returns generated year-to-date in that business.

Certainly as an industry issue, you have seen very low gas prices.

We still have reserves behind pipe; and for Suncor that is not a huge issue because, again, this is about long-term reserves and not necessarily this quarter's results.

So I am not particular worried about the exploration success rate.

Our kind of pace of bringing reserves on is probably not as strong as we would have hoped.

But what I would say about that is that, again, given these prices, I don't know if we are in a big hurry to bring some of those reserves on that are behind pipe.

Steve Williams and that group will be going through a strategy review in 2008, as we kind of go back and take another look at that business.

So later in 2008, Steve will kind of be ready to talk about that business and where we are taking it.

So on Firebag, the other challenge that we have currently, we were surprised to receive an environmental control order.

It did take us by surprise.

By the way, this is not a safety issue and it is not an emergency type issue.

What we do have is odors there.

Basically what happened is that when we did all of our samples and all of our core hole drilling, we did not see very much sulfur coming out of this reservoir.

What we have actually experienced is more sulfur than we expected.

We had taken the risk not to install the sulfur handling and vapor handling systems on Firebag Stages 1 and 2.

And to be honest with you, that was the wrong decision.

We are now installing that equipment.

We expect to have it installed by late 2008, and then you will see the continual ramp up of that, of Firebag.

So Firebag today is producing roughly 42,000 barrels a day.

We would have expected it to be closer to 50,000 at this particular point in the year.

What I would say is, again, the reservoir's performance is actually right on plan.

I think that is the critical thing.

Virtually all of our problems over the last two years -- and if you talk to most SAGD operators, they will tell you virtually most of their problems -- have been on the surface, not on the below-ground part of this.

So you know, a little bit of a setback; but again, I am not overly concerned about the fact that Firebag will deliver in terms of volumes on a go-forward basis once we get through these current challenges.

On the volume side, the mine is filling that gap.

You're always going to have periods with this business where you're either going to have excess bitumen -- which, for example, last year we did sell I think it was 5,000 or 6,000 barrels a day of bitumen.

We're going to have periods where we don't have enough bitumen to fill the upgrader.

I think that is a natural part of this business.

One of the things to remember is that the Petro-Canada contract will kick in, in very late 2008.

We do expect to take Petro-Canada volumes across our upgrader.

We will take other third-party bitumen as well.

We are talking to a number of people about longer-term arrangements.

So what I kind of see into this large upgrading complex we're building is a multiple supply strategy.

So in the long haul not worried; short haul you will always have your challenges on an adjustment basis, on a plus and minus basis.

So John with that, I think we are actually going to turn it over to Ken Alley, who will talk about the financial part of the quarter.

Great, thanks, Rick, and good morning, everyone.

We are pleased this morning to announce strong financial results for the quarter, with earnings before currency gains and project start-up costs of C$588 million and cash flow from operations of about C$1 billion for the quarter.

Capital spending for the quarter is very much in line with expectations.

We continue to target total spending this year in the C$5.3 billion range.

With that level of spending, net debt ended the quarter at about C$2.8 billion.

Once again, very much in line with our expectations for the balance sheet as we advance the strategic plans that Rick talked about earlier.

So overall, a strong quarter and a balance sheet very much in line with what we would have expected with the growth plans that we're implementing.

There was no change in our hedge positions during the quarter, so no new hedges were entered during the period.

So John, that is really all I was going to cover.

I will pass it over to you for the outlook.

Great.

Thanks, Ken.

The outlook, which is on page 3 of the release, does -- you will note we made some modifications to the year-to-date numbers.

For the most part, this has more to do with the past than it does with the future in terms of where we are going with the business.

We do expect in Oil Sands that we will be producing in the range of 275,000 to 285,000.

That will actually build through the fourth quarter.

If you remember, we had a bit of an (inaudible) in October, which will bring the October production number below the range that I noted, 275,000 to 285,000.

But we would expect that in December we would be more in the 290,000 to 300,000 range, and that is where we are looking to go.

So that should send us up pretty nicely for the 2008 year.

Minor changes in terms of the mix.

You will note that, but they are quite minor.

There is (technical difficulty) not too much of a change in terms of WTI and what we would expect to (technical difficulty).

In the cash operating (technical difficulty) $23.50 to $24.50.

As Rick mentioned earlier in his comments, that has a lot to do with volume driven and where we are in terms of that.

Natural Gas year-to-date is in the range of 210.

We are expecting still we could be in the range of 215 to 220, so we are expecting some volumes during the fourth quarter to fill in that gap.

So that is basically the outlook.

It is pretty clean, pretty straightforward.

So maybe we will (technical difficulty) Melissa, we will open it up for questions.

I will remind you that Brenda and Greg and I will be around after the call to answer all of your detailed modeling questions and look forward to (technical difficulty) that after the call.

So for now, if we can open it up for questions of Rick and Ken.

(OPERATOR INSTRUCTIONS) Martin Molyneaux from FirstEnergy.

Gentlemen, with the kind of constraint you've got on Firebag for the near term here, what is the (inaudible) theoretical capacity of the mining operation?

How much can you actually out mine (inaudible) what you have done in the past to make up for some of the Firebag volumes?

Martin, it is John.

That is (technical difficulty) and the constraint is not always obvious.

A lot of the constraint on the mine tends to be where we are in terms of overburden.

We are bringing in contract miners during the fourth quarter to help in the overburden and make sure that we stay in front of that.

All things going well, we should be able to continue (technical difficulty) at the pace and build from the pace of where we are.

We (inaudible) still optimistic we will be able to move forward with Firebag and begin to enjoy the volumes out of there.

But for now we are pretty comfortable where we are with the mine and that being able to fill the gap for the most part.

Okay, thank you.

Mark Polak from RBC.

Thank you.

A couple questions for you.

First, just curious if there is any update in terms of your philosophy and what (technical difficulty) thoughts for future upgrading locations?

Okay.

That was a one-part question, I think, wasn't it?

It's Rick here.

So, you know, listen, we continue to look at all of our options.

I think, if you think about Suncor and you think about us going to 550,000 barrels a day of upgrading capacity in Fort McMurray, that is probably enough of a platform there, I think, if you think about it from an airshed, water usage, all kinds of things.

Now listen, I think it is a great asset to have because you're going to have really the largest upgrading complex in the first or second largest heavy oil base in the world.

Good strategy.

But I think in terms of airshed, congestion, pressure on the community, all kinds of things, I don't think you will see us build a fourth upgrader in Fort McMurray.

That is kind of where I am currently.

We as you well know have (technical difficulty) some land down in -- outside of Edmonton.

That is in the area of the other refineries in that region.

That is certainly a possibility.

But we will also look further south as well.

So, that is a ways out.

You know, what I often describe about Suncor, if I can divulge a minute, is we have three major pieces of work.

One is operational excellence, which is led by Steve Williams, our Chief Operating Officer.

The other is project execution, which is a huge deal for us because of the capital we spend, and we have to spend that the most efficient way.

That effort being led by Kevin Nabholz.

Then the growth strategy (technical difficulty) what do we look like post 2012?

That is what Mike Ashar is -- where he is spending the vast majority of his time on.

As (technical difficulty) how that strategy evolves is still under a lot of intense work.

We have a lot of options and looking at all those carefully.

So what I would say about that 2012 look -- this is kind of an extended answer to your question (technical difficulty) that we will kind of be laying that out to you over the next couple of years here.

Again, there are some competitive reasons why we don't necessarily lay out all of the details of that.

Just know it is a big piece of work that is going on around here.

Thanks.

Second question is relating to the royalty review.

Just curious, regardless of what changes get put in, what your legal view is, I guess, on your Crown agreement, and whether you expect no changes until 2015 when that expires.

Listen, what I really would like to do is to just hold that thought in terms of that.

You are right, we do have international agreements with the government.

They are under confidentiality agreements.

What I would say is that we want -- we really need to see the details of this, this afternoon; and then we will go from there.

So it is really difficult for me to speculate on where we are going to end up here until I see the details of that.

Sure.

One more if I could.

Just curious about your investment in GreatPoint Energy and how you see that fitting into your strategy going forward, and what you think the potential is for (multiple speakers).

That is a great question.

That C$50 million investment is an investment in a company, for those of you that have not followed it.

It is a very small start-up company, an entrepreneurial company, who is working on new technology around gasification.

Though I still see gasification of pet coke as a key part of the energy supply to this upgrading complex that we are building here, it will be a post Voyageur issue, but very important.

You know what?

What I like about this is -- and I think we have talked about this on other calls -- the reason that we have been really moving quick is because we are not really comfortable with the state of the technology in this gasification field.

You know, you see that over and over again.

When people talk about clean burning coal technologies, it is all the same issue.

Well, we have done a lot of work on this and feel like this particular company has a bead on some new technology that looks robust to us.

It looks efficient.

It looks like it could be a lower maintenance kind of technology.

So listen, it is very early days.

It is like any of these investments, it is very uncertain.

But I will tell you this, it is kind of our support of trying to drive a new technology that could be very important to this Company.

So it is really in that framework.

So we don't take the $50 million lightly; but on the other hand, it is kind of one of the bets that we will make around technology that hopefully helps, if you will, both increase our efficiency in this business, i.e., energy supply; but also reduces our environmental footprint.

Those are the kinds of technologies we are looking for.

Great, thanks a lot.

Paul Cheng from Lehman Brothers.

Good morning, gentlemen.

Rick, (technical difficulty) obviously there is still a number of years before that complete.

But by the time that (technical difficulty) complete looking at your resource base and everything, (technical difficulty) that will be the time that you start to revisit the business model, instead of just focusing in Oil Sands?

And we will be looking at beyond Oil Sands into other areas, or do you think you have sufficient resources you will continue to just focus on and maintaining the current business model?

You know, that is a great question, Paul.

You know what?

It is one that is not necessarily resolved.

What I would say is I would expect the strategy to evolve.

Obviously we (technical difficulty) reserves.

We have reserves that we have not even made public, so this is not a reserve issue.

I still think the core and the heart of this business is going to be the Oil Sands.

But we will probably work harder on integrating both feed coming into our upgrading complex, but also on the downstream, midstream and downstream portions of that.

We see all kinds of opportunities.

In fact, what I would say about Suncor's choices here, we are long on opportunities and short on both people and the ability to invest capital wisely over this coming period of time.

I would just say that that is one (technical difficulty) Mike Ashar and the entire team, by the way, are working on here, is what that looks like; what our options are; and then make those choices.

I would say just continuing to build upgraders probably isn't it.

But you know, again, I don't want to preclude anything.

(technical difficulty) But will you see Suncor exploring in North Africa or West Africa?

Probably not on the list.

You know, I have done that in my career, and (inaudible) a lot of companies.

Our shareholders have a lot of options to invest in companies that do that.

What you're going to see us is this core business of ours will remain the core business.

I see.

Rick, I somehow I thought I heard somewhere that the 500,000 or 550,000 barrel per day (inaudible) production may be able to reach as early as by the 2010, 2011, 2012.

Is that (multiple speakers)?

Yes, Paul, that is a good question.

You know what I would do is stick with the 2012 date.

First of all, we are a little bit behind on engineering.

We are delaying going in the field.

One thing we do know about these projects is the front-end dedication that you put to planning, to getting your engineering far enough so that the guys in the field are not waiting on drawings or equipment, and that upfront planning is very important.

So if anything, we are delaying going to the field to get a lot of that work done.

2012 is a good number.

Okay.

In terms of the sulfur handling, you say that in the -- I think Firebag 2 you did not put it in.

But you assume that that is the same thing in the Firebag 3 and 4, in (inaudible).

So if that means that the increasing capital cost that will also be apply-able to the subsequent Firebag from the original expected capital cost?

Listen, we are installing the right sulfur handling equipment to handle this.

We will optimize it over a couple of units.

That, we will have that equipment in for all future stages of Firebag.

That is not an issue.

Okay.

It is too early then for you to give us a cost estimate of what is the additional cost?

Yes, that is too early.

But we will definitely have that to you.

I don't know if it is the end of the fourth quarter or the next quarter, we will definitely have that data for you.

I think the final one is for John.

John, you gave the fourth quarter and -- or the 2007 full-year guidance.

Is there anything that you can provide for 2008 at this point?

No, Paul.

There isn't.

There isn't at this point in time.

I would expect that we would have the guidance to you for 2008 somewhere near the end of November.

We will give you a better update in terms of where we are.

So no, I can't give you any guidance yet on 2008.

Okay, very good.

Thank you.

Andrew Fairbanks from Merrill Lynch.

Hey, good morning, everybody.

Rick, just a question looking post Voyageur.

I know in the as you have wanted to keep full control of the assets, 100% Suncor through most of the value chain.

Would you look post Voyageur at joint venture potentially as a possibility, when you look at the range of ways to move forward past 2010?

Yes, Andrew.

Thank you very much.

Absolutely, I would say all those options are available.

I do think there will be a role for an industry consolidator, there will be a role for joint ventures, there is going to be a role for driving efficiencies.

I have been a proponent -- although I haven't gotten this done -- about I think a lot of these upgraders up North should be tied together to share bitumen, diluent, hydrogen, everything.

I mean, if you look at the large upgrading refinery complexes on the Gulf Coast or Rotterdam, they are all tied together.

It just deals with the maturity or immaturity of this industry.

There's lots of opportunities for all of that.

So, basically, my view is yes, we are kind of control freaks in the sense that we do like own 100% of or assets.

But what I would say is we are open for business.

The Petro-Canada contract, which I think is very good for Petro-Canada and us, is a good example.

That is kind of our model.

If we can make the pipe bigger and then share that with partners, we are absolutely all over that.

What I probably do not want to get bogged down in is a lot of operating committee meetings.

One of our big kind of strategic things is we have a very small operating committee that makes these decisions.

And you know what?

I don't want to lose that.

I think that has been one of the things that has really helped Suncor in terms of being able to move forward, handle issues, and keep driving forward.

That's right, that's great.

Then just one other if I could ask, Ken, on hedging.

In the past, you have shown some inclination to hedge if you can do a cost-less collar or sort of [ninety fifty].

With oil prices near $90, just what are your thoughts there?

I mean obviously the great question mark going forward is royalties.

I mean you can always hedge your revenues and never your costs.

But any thoughts on that?

Sure, good morning, Andrew.

Yes, I think our view of hedging continues to be the same from a strategic perspective.

So I mean, if we can buy inexpensive insurance for the balance sheet, we will look at the markets, just to look at those opportunities.

I guess we would also say, though, as we look at the market today we see a lot of strengths in the crude oil prices.

You know, you can never forecast the future.

But that seems to be some strong support for strong pricing going forward.

So our view at current market levels is we probably wouldn't call that inexpensive insurance with the kind of collars we can see today.

So I guess, the strategy is the same.

We will continue to monitor it, but we are not in a hurry here to put more hedges on right now.

That's great.

Thanks, guys.

Brian Dutton from Credit Suisse.

Yes, good morning.

Just a question here on your sales in the third quarter.

I noticed that it looks like you have built some inventory position.

Was there something structural behind that?

Was that just a timing issue?

No.

Brian, it's John.

It was just a timing issue.

As you know, it is difficult to completely match up the production with the sales, and that is why we have tankage at Oil Sands.

So we are not expecting that we will carry a large level of inventory going forward, but that is just kind of where it has sorted itself out.

So there wasn't anything behind that at all.

Okay, and I know you don't what to get into a discussion on the royalty review.

But that may come into play here in terms of your costing for Voyageur.

Should we still be expecting an announcement from you in November on Voyageur costs?

Yes, Brian.

It's Rick here.

So listen, where I think we are is -- and again I will maybe have a better view of this at 3.30 this afternoon.

But you know, what I think we will do is postpone the actual announcement of that number into the first part of 2008.

Because I think it will take us a while.

I mean, I don't know actually what is going to come out this afternoon.

But it may take us a while here to kind of sort out the potential impact.

So in your thinking, I would start thinking about first-quarter 2008 or so before we kind of announce what that number is.

Okay, thank you.

Dave Parkinson from The Globe and Mail.

Hi, guys.

Just wanted to clarify, going back to a question that Mark at RBC was asking earlier with regard to future upgraders.

Rick, I believe you said you might consider looking further south.

You had sort of drawn a line roughly around Edmonton.

I am wondering, are we talking about south of the 49th parallel as a possibility?

You know, I think it is way too early to speculate that.

I mean, you have got other options, as well.

You always have Hardisty, you've got -- there's a lot of locations here.

So, again for competitive and other reasons, I wouldn't get overly definitive on that at all at this particular point.

Okay, thanks.

Andrew Potter from UBS Securities.

Hey, Rick.

Just a question on the Canadian dollar.

With the Canadian dollar so strong, how does that impact your long-term planning?

Again, coming back to post Voyageur.

I mean, is it --?

We are kind of smiling around here, and because -- you know what?

We are kind of in shock, I think, as the rest of everybody else is.

You know, what this feels like is, even though you have $88 crude or $86 crude or wherever we are this morning, and with this Canadian dollar it feels about the same as if crude were about $60.

So, what you are really seeing now, on one hand it helps you when you are buying equipment on Voyageur, so those kind of things roll through.

That looks particularly good.

But basically, the majority of your costs are in Canadian dollars; and so your operating costs are going up.

So you feel the squeeze from the bottom.

So it certainly is impacting the business.

It is impacting your profitability.

It is, again, it is -- it even emphasizes more why you've got to be picking technologies and driving efficiencies.

Because even though I don't know that we're going to stay above par forever here, but on the other hand we are not probably going down to $0.65 either.

So I think this is a real chance for us to work on productivity and efficiency, something you don't hear a lot of oil companies talk about.

But I think for Suncor, it is very important.

Right.

With regard to long-term planning, though, if it is a concern, does that make it more appealing to put money into the US market?

Like refining or upgrading in the US as opposed to Canada, does it go that far (multiple speakers)?

A lot of it depends on your tax systems, and [road] systems, and other systems.

So if we have, all things being equal, that takes into account now.

What I would say is that the cost of building in particularly northern Alberta is (technical difficulty) than you will see in other spots.

So that is another fact that we will take into account.

We look at what construction costs are on a relative basis from the Gulf Coast all the way up through to Fort McMurray.

So we know those numbers quite well.

That would be just one factor.

But it's only kind of one factor in the overall equation, in terms of that.

You also got to -- you got to be near pipe, you got to be near a market, and all those kind of factors are equally important when you kind of decide about where to sit assets.

Right.

Then, last question.

There is no option really of upgrading post Voyageur volumes at Sarnia.

Am I correct in that there is not enough (multiple speakers)?

Hey, you know what?

I wouldn't totally rule that out.

It is certainly something that I wouldn't rule out at this point.

It would not be something that I think we would naturally flow to.

But is it a possibility of building a coker in Sarnia?

Absolutely.

Is it in our current design scope?

No.

But it is something that I wouldn't totally preclude.

Okay, great.

Thanks.

Gordon Gee from RBC Capital Markets.

Good morning, guys.

Thanks for taking a second call from RBC this morning.

I was just interested on page 15 where you talk about your Oil Sands in-situ bitumen operating costs.

I have noticed on a nine-months this year to last year and a quarterly basis that the cash costs are quite a bit higher.

Gas I might be able to explain (technical difficulty) given the cycles.

But can you sort of comment what is happening there?

Is it just some onetime costs that have crept into this year's numbers?

You know what, Gordon?

I would -- so I could give you a full explanation of that particular question, let me get back to you.

Okay?

Okay, thanks.

John Harding from National Post.

Good morning, everyone.

Just -- I apologize.

I missed the very beginning of the call and I wanted to clarify something.

Rick, did you say that -- or did you suggest that you would have been prepared to provide a Voyageur cost estimate had it not been for the royalty panel review report today?

No, I did not say that.

Okay.

The other thing I wanted to ask is, is there any likelihood that a refinery in Canada could be something Suncor would look at down the road?

I don't know where that question is leading to.

We own, of course, a refinery in Sarnia, Ontario.

Rather, in Alberta, I'm sorry.

Just I'm thinking about that land that you have got East of Edmonton.

I would just say that our plans around that are just not firmed up at this particular time.

You know, this market is very well served by three refineries now.

To build a grass-root refinery is a very expensive proposition for a market that is already well served.

Okay.

Again, going just if I could back to the royalty, you didn't make a comment on the royalty situation to begin the call with?

You know, what I said is we're going to wait till 3 o'clock this afternoon, and we are not going to speculate between now and then on what that is.

That is not a good use of our time or your time.

Okay.

Thanks.

Ian McKinnon from Bloomberg News.

Hi, Rick.

I just want to clarify.

Are you saying that Firebag will stay at 42,000 barrels a day in 2008, like through the rest of this quarter into 2008, till you get that new equipment installed?

No, I am not necessarily saying that.

I think we will over time probably be able to ramp that up.

But -- as we install part of the equipment.

But if I were modeling, I would go ahead and model at the 42,000 range and we will start ramping up when we can.

But how long?

42,00 for Q4, Q1 next year?

Yes, for sure.

We're working very closely with the environmental regulators.

You know, I think this is a matter of both installing equipment, our operating parameters, and getting the confidence of the regulators that we are doing the right things which, you know, listen, Suncor is very well noted for.

Last question, just to clarify.

I know you said the cost hasn't been finalized, but can you give ballpark?

Are we talking C$50 million?

C$100 million?

C$10 million?

What sort of (multiple speakers) looking at?

No estimates currently.

Thanks.

Mark Polak from RBC.

This must be RBC's day.

Thanks (inaudible) it's the last one.

Rick, you have mentioned the location adjustment (technical difficulty) Gold Coast and Fort Mac.

I have heard some recently talk about that in the 175% to 200% range, which struck me as quite high.

Just curious from Suncor's perspective what you see that at; and if perhaps also Gulf Coast to Edmonton, how you see those factors?

Yes.

So listen, I don't want to get too specific.

But the 200% number over Gulf Coast sounds very high to me.

You know, what I would -- and I don't have the numbers before me.

But it would be in the 150% to 170% range.

In that range, somewhere.

You know, part of that is just the remote location, the camps you have to build, the transportation of equipment there.

There's lots of factors.

The weather is another one of them that you always have to face.

So you know, some of that is a natural expectation.

There is no question about that.

Of course, the other part of that is just the number of projects that are going on in the region, as well.

Would you see Edmonton more like 125% to 150%?

No, I just don't have the numbers before me.

So maybe you can get back to John; he can actually pull the numbers for you.

Yes, Mark, if you phone me after, I will see what I can do for you.

Thanks, John.

Robert Plexman from CIBC World Markets.

Good morning, Rick and John and Ken.

Being a third-party upgrader, it looks like a pretty good business right now given where differentials are.

I'm just wondering how accessible you are to those volumes that you could be upgrading.

I know you have got the connection to Fort McKay and there is a terminal close by.

So could you get (technical difficulty) that business in a bigger way (technical difficulty)?

Yes, I think so.

I mean you are dealing with other operators where you might be able to fill in some of their gaps in terms of if they are going to produce some bitumen before they build whatever upgrading capacity they have.

So we're talking to all the players in that region and basically are open to all of them in terms of doing a deal.

Remember, most of these are going to be all you -- we do pickup short-range bitumen as well in the area.

But a lot of these are going to be longer-term kind of deals.

One of the ways I think about that, Rob, is if you have an upgrade complex of 550,000 barrels a day, you know, even if you had an arrangement where you're processing 50,000 to 100,000 barrels a day of third-party bitumen, the would be I think a good business model.

What I see as feeding this upgrade complex from more than one source, we're going to have Firebag, we have our own mine, we have Petro-Canada now.

If I had a couple more sources feeding into that, I think it reduces your risk and your volatility.

So that is kind of the image that I would kind of bring to it.

Okay.

If I can ask you another one, it is understandable why you don't want to get involved in talking about Voyageur costs at this point in the process.

But you did mention earlier that you are placing orders for equipment.

I am just wondering in a general sense, are you finding costs continuing to escalate, ex the foreign exchange factor?

Or is there any moderation in the cost of what you need to build Voyageur?

I would say we haven't seen a real moderation, yet.

I do think it could be on the horizon here.

I have been one of the guys who has been saying I think we are through the worst part of this.

I would say the rate of escalation of inflation has probably slow down a bit.

But we have seen no backing off.

Now part of that is the industry is very busy.

If you look at the kind of manpower that Canadian Natural, OPTI/Nexen, Shell, Petro-Canada have on their sites currently, pretty much absorbing the availability of manpower and of course, contractors, equipment, and everything else.

So you would not expect to see that until so you see a slowdown in excess capacity in those areas.

It is just the supply and demand thing.

So, not really.

On the equipment side, of course, we're competing against worldwide projects.

LNG, offshore platforms, as I have discussed before, even nuclear plants on some of these big vessels that are going on around the world.

You know, a 1 million barrel a day refinery in India.

So all this equipment comes from the same set of suppliers.

So I don't think we're seeing any kind of modification.

Even if you do see a slowdown in Alberta, you won't necessarily see a lot of those costs roll in, because it is a worldwide issue, not a local issue.

Right, thanks, Rick.

(OPERATOR INSTRUCTIONS) Mr.

Rogers, there are no further questions at this time.

Please continue.

Great, thanks, Melissa.

Thanks, everyone, for listening into our third-quarter conference call.

If you have any questions, further questions, please give me a call, 403-269-8670; and Brenda, Greg, and I will be happy to get back to you.

Goodbye.

Ladies and gentlemen, this concludes the conference call for today.

Thanks for participating.

You may now disconnect your lines.