Suncor Energy Inc (SU) 2014 Q1 法說會逐字稿

完整原文

使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主

  • Operator

  • Good morning, ladies and gentlemen.

  • Welcome to the Suncor first quarter 2014 conference call and webcast.

  • I would now like to turn the call over to Mr Steve Douglas, Vice President Investor Relations.

  • Mr Douglas, please go ahead.

  • - VP of IR

  • Thank you, Wayne, a good morning, everyone.

  • Welcome to the Suncor Energy Q1 call.

  • We are coming to you this morning from Edmonton Alberta where Suncor will convene its 2014 annual general meeting later this morning.

  • With me here in the room are Steve Williams, our President and Chief Executive Officer; and Steve Reynish, our interim Chief Financial Officer.

  • I'd ask you note that today's comments contain forward-looking information.

  • That our actual results may differ materially from expected results because of various risk factors and assumptions described in our Q1 earnings release, as well as our current AIF, and these are both, of course, available on SEDAR, EDGAR and www.Suncor.com.

  • Certain financial measures that we refer to are not prescribed by Canadian generally accepted accounting principles and for a description of these please see our Q1 earnings release.

  • After our formal remarks we will open the call to questions first from members of the investment community and then if we have time to members of the media.

  • With that I'll hand over to our President and CEO, Steve Williams.

  • - President & CEO

  • Good morning and thank you for joining us.

  • I am very pleased this morning to have the opportunity to provide some color around what I think is a very strong first quarter.

  • As everyone knows by now we set a number of production and financial records in the quarter.

  • I'd like to put that performance into the proper strategic context in terms of what we are seeking to accomplish here at Suncor.

  • For a number of years now I've been talking about Suncor's unrelenting focus on operational excellence, capital discipline, and profit -- profitable growth.

  • And they are very simple concepts that almost any organization might embrace, but the challenge of course is in the execution, putting the proof points behind each of these concepts.

  • So let's look at how we are doing.

  • First I'll start with operational excellence.

  • At Suncor we have been driving a disciplined system of operating controls throughout our business.

  • And that means adopting consistent standards, processes and procedures for everything we do.

  • The goal is to reduce and ultimately eliminate causes of unplanned events and incidents.

  • But it's really as much about culture as it is about process, and we are working towards a culture of excellence across the Company.

  • The fruits of our labor are evident in our operating results.

  • Month after month, quarter after quarter we are steadily improving the reliability of our operations and reducing the frequency and the severity of unplanned outages and incidents.

  • In this quarter we achieved close to 90% throughput on our oil sands upgraders to produce a record average volume of 312,000 barrels per day of high-value synthetic crude oil.

  • And we accomplished this despite three weeks of planned coker maintenance in the number two upgrader complex.

  • So we are making real progress on upgrader reliability, and with no major turnaround maintenance planned until 2016, I'm confident that sustaining 90% utilization rates is now within our reach.

  • Our mining and in situ production increased by 4% and 13% respectively versus Q1 of 2013.

  • We did deal with a number of minor maintenance issues in both areas, and of course that was compounded by a bitterly cold winter here in Northern Alberta.

  • With Firebag now operating at capacity and winter weather behind us, we remain comfortable that production this year will be in line with our guidance.

  • In the downstream, where operational excellence programs are well entrenched, our refineries once again delivered it industry-leading reliability averaging 96% of utilization for the quarter.

  • And as result our refining and marketing business generated record operating earnings of CAD787 million.

  • Operational excellence was also evident in exploration and production at Terra Nova where we completed extensive maintenance in 2013.

  • We ramped production back up and operated reliably throughout the quarter.

  • We experienced similar performance at our non-operated properties.

  • With great prices remaining well over CAD100 per barrel and favorable exchange rates E&P delivered strong margins and cash flow even with the Libyan production shut in for the entire quarter.

  • So our focus on operational excellence is yielding strong results.

  • Reliability is steadily improving, and we are on track to meet or exceed our production guidance in all areas.

  • Of course that means we are generating a great deal of cash flow which puts the focus squarely on the capital discipline.

  • We continue to manage our spending in a very disciplined manner.

  • Our plan calls for CAD7.8 billion in capital expenditures this year.

  • But as with the past couple of years we will continue to look for opportunities to reduce capital and improve returns.

  • Our capital priorities are very clear, invest in the base business to ensure reliable and sustainable operations, invest in profitable growth and steadily improve our returns, and return meaningful cash to shareholders through competitive dividends and opportunistic share buybacks.

  • In the first quarter we continue to make strong progress on all of these fronts.

  • Record cash flow generation enabled us to comfortably fund our sustaining growth capital programs, and we continue to aggressively return cash to shareholders with another dividend increase and a CAD1 billion extension two our share buyback authorization.

  • Turning to profitable growth I am pleased to say we're on track to meet all of our commitments.

  • On the Fort Hills mining project all the key engineering procurement and construction market stones are tracking to plan, and to put in context we now have 1700 people on that side.

  • Our schedule calls for first oil in late 2017.

  • Our various oil sands debottleneck plans continue to progress as well.

  • Notably we just begun to steam the new wells associated with the Mackay River debottleneck project, and we expect to see first oil later this year.

  • This project is expected to expand Mackay River production by about 20% capital cost of less than CAD10,000 per flowing barrel.

  • Our major growth projects in E&P are also moving forward on schedule.

  • At Golden Eagle in the UK North Sea topsides and subsea infrastructure are now over 90% complete.

  • We continue to anticipate first oil around the end of this year.

  • At the Hebron project on Canada's East Coast engineering is now over 80% complete.

  • Construction of the gravity-based structure is approaching 30% completion.

  • And the -- that project is on schedule to deliver first oil in 2017.

  • In the midstream this quarter we commenced shipping on what is now known as the Gulf Coast project.

  • We used to refer to it as the southern leg of the Keystone pipeline.

  • We immediately began to realize considerable price uplifts versus sales in the mid-continent.

  • Our investments in shipping capacity across the continent have positioned us very well to move our production to globally priced markets and minimize our net backs.

  • I've been beating this drum for a number of years now.

  • And again we are in the first quarter we got to 96% of our crude production achieving global prices.

  • In our downstream we've made significant progress on growing margins at the Montréal refinery.

  • In the first quarter we ramped up our crudes by rail deliveries to average 20,000 barrels per day, and we achieved a feedstock cost reduction of more than CAD10 a barrel on inland crude versus the alternative rent-based supply.

  • With the recent approval of the line 9 pipeline we are anticipating supplying 100% of Montréal refinery feedstock with cheaper inland crudes up by this time next year.

  • In preparation we are investing over CAD200 million in upgrades that will increase operating flexibility and improve yields.

  • So as you can see guided by our commitment to operational excellence, capital discipline, and profitable growth Suncor is improving reliability, growing returns, and laying the groundwork for future success.

  • So we've had a great start to 2014.

  • We are on track to meet our operational financial and growth commitments, and deliver strong value to shareholders.

  • So I am going to pass it over to the interim Chief Financial Officer Steve Reynish to provide his insights on our strong financial performance in the first quarter.

  • - Interim CFO

  • Thanks and good morning, everyone.

  • Well, as Steve pointed out the first quarter saw Suncor deliver a number of production and financial records.

  • All of our businesses operated reliably, and we took advantage of strong pricing in the upstream and solid margins in the downstream.

  • We also leveraged our strong midstream capability to maximize the margins we captured.

  • It all added up to a very good quarter.

  • We posted operating earnings of CAD1.79 billion including a record CAD787 million from refining and marketing.

  • Cash flow from operations was also a record at CAD2.88 billion.

  • We invested CAD641 million of sustaining capital and CAD737 million of growth capital.

  • After factoring CAD108 million for capitalized interest, that left us with free cash flow for the quarter of CAD1.39 billion.

  • This continues the trend of strong, reliable cash generation.

  • Over the past three years Suncor has produced an average of approximately CAD50 cash flow and CAD15 of free cash flow for every barrel of production.

  • That puts us at or very near the top of the global energy industry.

  • And we've taken steps to steadily increase that cash flow generation by trading out lower margin barrels for higher-margin barrels.

  • For example our production mix in the first quarter of this year was 99% crude oil and liquids, up from 92% in the same quarter last year.

  • This of course is primarily the result of divesting our low margin conventional natural gas business in the fall of last year.

  • The past few years as we've refocused our production portfolio on oil sands and high-quality offshore properties, the divestments we've made have tended to mask the growth in our core production.

  • As we go forward the increase in high-margin production driven by our suite of profitable growth projects is expected to produce a corresponding growth in earnings and cash flow.

  • At the same time we continue to place a huge focus on effectively managing costs.

  • At oil sands our cash cost came in at CAD35.60 per barrel which is slightly above our guidance range of CAD31.50 to CAD34.50.

  • Higher gas costs and reduced bitumen production drove the higher unit cost.

  • But as we move into our peak production season we are well-positioned to meet our cash cost forecast for the year.

  • Another example of cost improvement is our inland crude supply to the Montréal refinery.

  • Our crude by rail program saved the company over CAD20 million in feedstock costs in the first quarter.

  • And as Steve mentioned we plan to increase rail shipments to Montréal and by this time next year move to 100% inland crude access once the line 9 pipeline is reversed.

  • These developments are expected to further reduce our crude feedstock costs and significantly improve the profitability of our Montréal refinery.

  • Strong cash flow and prudent cost management are having a positive impact on returns.

  • Our trailing 12 month return on capital employed rose to 12.7% this quarter.

  • So we're making definite progress, and we continue to target a 15% ROCE.

  • With another strong financial quarter in the books our balance sheet continues to look very good.

  • Our net debt stands at CAD6.96 billion for a debt to cash flow ratio of 0.7 to 1, and we have ample liquidity to fund our capital priorities for 2014.

  • We are also positioned to continue to fund a strong return of cash to shareholders.

  • As you know during the first quarter we increased our dividend by a further 15% bringing the five-year compounded annual dividend growth to over 35%.

  • And it's interesting to note this was the 12th consecutive year that Suncor has increased its dividend.

  • In addition we continue to aggressively execute on our share buyback program.

  • During the quarter we invested CAD384 million to repurchase and cancel almost 10.5 million shares.

  • That brings our total investment since the program was initiated two and a half years ago to over CAD4 billion for a total of almost 125 million shares or over 8% of the Suncor float.

  • Approximately CAD1.4 billion remains on the current buyback authorization, and we are continuing to execute the program.

  • Recently we've seen an uptick in Suncor share price as the Canadian energy space comes back into favor with investors.

  • We believe that Suncor's unique combination of growth and free cash flow merits a valuation premium, and we continue to see strong upside to investing in our shares.

  • So to sum up it's been a solid start to the year, and we are well-positioned to continue that strong performance.

  • We will maintain our focus on running our assets well, allocating our capital in a disciplined manner, and profitably growing our business.

  • We are confident that the market will welcome the results and reward our efforts.

  • And with that I will pass it back to Steve Douglas.

  • - VP of IR

  • Thank you, Steve and Steve.

  • As was referenced earlier, we have made only a very small change to our 2014 guidance, and the details are available on our website www.Suncor.com.

  • The one change was around our assumption on natural gas prices moving forward, and we've upped that from CAD3.86 to CAD4.50 per gigajoule, but there is no corresponding increase in cash cost.

  • We remain confident we can hit our guidance on cash cost for the year.

  • A couple of other notes to the financials.

  • In a rising crude price environment the impact of FIFO accounting was a net positive of CAD200 million in the first quarter.

  • With our share price rising, stock-based compensation was a negative impact, an expense of CAD94 million after-tax.

  • And our US denominated debt is more expensive with a weaker Canadian dollar.

  • That was a net after-tax impact, an expense of CAD308 million.

  • With that I'm going to turn it back to Wayne for the Q&A.

  • I would ask if you have detailed modeling questions the IR team and controllers team will be available throughout the day, and we can certainly pick those up off-line.

  • Wayne, you can open the lines.

  • Operator

  • (Operator Instructions)

  • Our first question is from Greg Pardy from RBC Capital Markets.

  • - Analyst

  • Thanks and good morning.

  • Steve, aside from Firebag and maybe Mackay, you've got a multitude of these smaller in situ oil sands opportunities.

  • I'm just wondering how some of those might fit into your longer-term plan and when they might hear more about them.

  • Thanks very much.

  • - President & CEO

  • Okay thanks, Greg.

  • The first comment I would make, Greg, is that we've got fast resources in situ as you say.

  • And we've been one of the longest term operators now, so we've learned quite a lot as we built Firebag and Mackay.

  • One of the good bits of news around the first quarter is Firebag did perform very well, but maybe not so clear as we actually hit the design capacity on a number of occasions.

  • So we're very encouraged by the way that plant is now performing.

  • But as you say we have lots of other opportunities.

  • In fact we have probably the biggest in situ resource in the industry.

  • We've done extensive delineation.

  • We've drilled a dozen sweet spots at Lewis and Meadow Creek.

  • And so we are getting into the stages of defining what and when that investment will take place.

  • If you remember at our Investment Day we talked about the modular design concept we are taking forward so it's designed the plant once and then build it many times.

  • And as we start to get into more of a manufacturing mode, and we are building into those modular designs the lessons we've learned from Firebag and Mackay River.

  • Optimistic -- we've got multiple opportunities we're delineating, and as we get towards the end of the year we will give you a little bit more clarity on what the timing of those programs look like.

  • - Analyst

  • Great.

  • Thanks very much.

  • Operator

  • The following question is from Guy Baber from Simmons.

  • - Analyst

  • Thank you all for taking my question.

  • Upgraded sales volumes during the quarter obviously very strong and above the high end of the guided range for the full year I believe.

  • Despite the fact that your total oil ands production was not as strong as it could have been.

  • Could you just comment a bit more on the strength of the upgraded sales volumes and your confidence in -- your confidence level in maintaining those strong rates?

  • And at this point should we be viewing your full-year guidance as conservative on the upgraded volumes?

  • - President & CEO

  • Thanks for the question, Guy.

  • We've been on a reliability push around upgrading for a number of years now and recognize it's been something we had to work on, because it wasn't acceptable to us.

  • We are definitely making real progress, and we are comfortable and confident in the progress we are making.

  • You heard me say in the prepared notes there that we achieved the 312,000 barrels a day in spite of the fact we went into planned annual maintenance on unit 2 for three weeks.

  • So very encouraging what we are seeing there.

  • Just a comment for those who don't necessarily appreciate the detail of upgrading.

  • Of course there is a Catch-22 and upgrading.

  • Which is absolutely the right business decision and absolutely the right thing to do from an earnings and cash generation point of view particularly from a margin point of view which is you do destroy volume across an upgrader.

  • So for every barrel you put into an upgrader about 0.8 comes out.

  • So you see -- so part of the reduction in bitumen is to do with the fact that we are more reliable in terms of the upgrading.

  • So we will see some of that.

  • Part of it is to do with the fact as I said we had some maintenance issues in mining and in extraction compounded by the weather that we had to work through.

  • But let me directly answer your question.

  • We are not changing any of our guidance so that gives you an indication of how comfortable we are with the volumes from the front-end.

  • We haven't increase the guidance around upgraders, because the position we've wanted to adopt for the last two years has been to understate and over deliver.

  • So we are very comfortable with the guidance ranges.

  • We will take another look at those towards the middle of the year.

  • - Analyst

  • Great.

  • Very helpful.

  • And then my follow-up was I was hoping to get just a little bit more clarity on the medium-term growth outlook.

  • A substantial increment of your new production volumes between now and 2016 should be driven by those logistics debottlenecks.

  • Can you be a little bit more specific around the incremental production that you could unlock and what specific projects we need to be looking for that can contribute to that production improvement.

  • Just trying to gain a bit more confidence in that production growth given it's going to be such an important driver over the next few years.

  • - President & CEO

  • Okay.

  • We are quietly confident about what we are looking at.

  • If you think that the majority of the growth in that period comes from Firebag coming up to full throughput and staying there, and we're very comfortable.

  • The plant came up much faster than we expected.

  • It's been very reliable.

  • And as I said we've actually gone through on a daily basis the [180,000 barrels] level and so now we are working at how we can reproduce that day after day.

  • So very comfortable with Firebag.

  • Mackay River of course is one of the other ones, and I talked about that project has gone very well.

  • We drilled the wells.

  • We got first steam in, and production from that will come towards the end of the year so very comfortable.

  • And we are also quietly confident around the logistics pieces as we've started to utilize the facilities that we put in over the last 12 months.

  • The tankage, the cooling and the pipelines.

  • We have been able to take advantage of that.

  • Of course that was partly related to why we are seeing the upgrader reliability improve as we've improved the feed quality into the upgrader itself by using -- by putting those volumes of Firebag material straight to market as opposed to going through the upgrader feed system.

  • So in summary a bit complicated -- in summary I would say we're comfortable, and we are confident with the -- with those debottlenecks projects.

  • - Analyst

  • Great.

  • Thank you for the comments.

  • Operator

  • The following question is from Paul Cheng from Barclays.

  • - Analyst

  • Hi, gentlemen.

  • Good morning.

  • Several quick questions.

  • Steve, any update about the Montreal coker project?

  • - President & CEO

  • Let me just back up a little bit and take an opportunity to say what's going on there Paul.

  • If you recall we put the rail facility in, and that rail facility is designed for in the mid 30s in terms of thousand barrels a day.

  • We put about 20 through there on average through the first quarter as we brought the facility online.

  • Would expect to average for the rest of the year north of 30,000 barrels a day.

  • So the rail facility the first part is done.

  • We are delighted with the news around the Line 9 reversal and anticipate that line being reversed plus or minus a few months on the end of this year.

  • We're just working through the specific schedules on a now.

  • And that enables us then, if we choose to fill the refinery with inland crudes.

  • The reason I wanted to restate that is the vast majority of the upgrade you get on the refinery comes by moving from international crudes to inland crudes.

  • I know I have a smile on my face when Steve D has been talking about just to put that in context we put 50 million barrels of through that refinery.

  • If you'd looked at last year margin was CAD20 a barrel a difference between international and inland.

  • It would've been CAD1 billion cash.

  • That differential is significantly different this year.

  • What we've seen this year on average as the near CAD10, and of course we affect the market as we start to move that material, so we would expect to see it less than that.

  • But you see a significant amount of earnings and cash generation just by putting inland crudes in.

  • We then have a sequence of projects which range through, first of all, changing some of the [metalleity] on the refinery, then the Isomax project and then the coker project.

  • The first two projects we've already approved and are in play.

  • So the metalleity pieces and the Isomax project are being executed now.

  • The final piece then is the cokers.

  • The cokers are an important and strategic project for us but are a margin project and the returns on not as immediate and not necessarily as high as the first piece is.

  • So you will see it doing -- us doing sequence.

  • So that's a long way of saying I expect to have on my desk by the end of this year the proposal for the coker project so we will be in a much clearer position towards the end of this year maybe beginning of next year to decide whether we go ahead with that project when we've seen the -- some of the impacts of the mods we are making.

  • - Analyst

  • Steve, do you have a preliminary cost estimate for the coker given you already have the equipment on hand.

  • Should we assume it's going to be more like in the CAD500 million instead of say a couple billion dollars?

  • - President & CEO

  • We haven't talked.

  • I have one, but we haven't talked publicly about a public -- an estimate, Paul.

  • I would give you two benchmarks.

  • One it will be significantly less than anything we could build in the Fort Murray region partly to do with major project productivity and execution.

  • And then there's another reduction because we already have all of the significant pieces of that project constructed.

  • So it comes in a fraction of most upgrading projects.

  • So the economics relative to other coking projects a very good.

  • So it puts us in a very strong position.

  • - Analyst

  • Second question as the Gulf Coast oil prices start to moving into a discount for the international market, two questions -- two-part question.

  • One is, any plan for the remainder of the year before the Line 9 re-reversal completes going to ship so oil from the US Gulf Coast to the Montreal.

  • Also whether you have any plans after you ship your oil through the Gulf Keystone XL to the Gulf Coast to export it to other regions.

  • - President & CEO

  • Sorry Paul you broke up on the second part of your question.

  • - Analyst

  • The two parts on this question is that with the US Gulf Coast start to move into a discount position comparing to the international market do you have any plan before the Line 9 re-reversal complete for the remainder of this year to ship oil from the US Gulf Coast to the Montreal.

  • And secondly that once that you get the oil down through the Keystone XL sent down to the Gulf Coast to re-export it to another country.

  • - President & CEO

  • You know two comments I want to make.

  • First on the Line 9. If we move things by ship it's opportunistic, and we've done it.

  • We did actually put a big ship in last year deliberately to test out the logistics, because one of the benefits of the Line 9 reversal is it gives us with our rich stream capability a lot of flexibility in that region and actually on the continent, because you have the Line 9 going into the refinery.

  • We have the rail capability, and the mix of the two is a very effective.

  • We use ships regularly, and so we look at the markets, look at the arbitrage and take advantage of that and will continue to do it on an opportunistic basis.

  • So in a sense you're right, but we don't necessarily have to wait until Line 9 is reversed in order to get preferred ethanol mix there.

  • On the Keystone we have opportunities.

  • We are in a very strong position because we did part of our market access strategy and why I was bullish for the last couple of calls around what we think is a preferred position we've gotten into, is because we were one of the companies who secured firm capacity on the Keystone side.

  • So yes we have -- we will have the opportunity, and we're looking to see what we would do around putting some of that onto water.

  • - Analyst

  • Okay.

  • Do you already have the permit to export oil from US into the Montreal or that you have to apply yet?

  • - President & CEO

  • We've done four cargoes and that's not difficult for us to get.

  • - Analyst

  • Okay.

  • Final one, Steve, can you give us some quantification in your oil sand price realization in this quarter.

  • How much is the benefit of your Keystone XL [self] assess in terms of improvement on your price realization.

  • - President & CEO

  • Very little in this quarter.

  • I think Steve is just signalling to me the actual numbers 3,000 or 4,000 barrels a day.

  • But clearly the opportunity is there for that to increase, because just about the timing it came on and the products we had available to the period.

  • - VP of IR

  • I would just add -- it's Steve Douglas here, Paul.

  • We didn't -- we weren't marketing a lot of third-party bitumen this quarter so the impact was small.

  • But what we did see going down to the Gulf we were saying about an CAD8 a barrel uptick or premium versus marketing that -- those barrels in the mid-continent.

  • - Analyst

  • Perfect.

  • Thank you.

  • Operator

  • The following question is from David McColl from Morningstar.

  • - Analyst

  • Good morning.

  • I have two questions here.

  • The first one you mentioned four cargoes that you've already shipped.

  • I was wondering if you could clarify whether that was one that you offered maybe three out of the last cargoes up from the Gulf Coast and looking forward I know you mentioned a more optimistic volumes by tanker once Line 9 comes on.

  • Is that implying that you would see or expect to see lower LLS volumes coming up?

  • - President & CEO

  • I will answer the first part, and I'll let Steve pick up the second part.

  • My line broke up there David.

  • We've had four cargoes.

  • Three were on the Eagleford and one was Light Louisiana Sweet.

  • - Interim CFO

  • Just in terms of -- the cost to us to move those barrels David is in the CAD4 a barrel range.

  • To move them to Montreal or to the Gulf.

  • So it's purely opportunistic.

  • If we saw the Louisiana Light Sweet at CAD6 or CAD7 under the alternate barrel, the Brent barrel, then we'd look at doing it again.

  • - Analyst

  • Okay, great.

  • Maybe just one other question on the rail side then.

  • Can you give any split between of the volumes that came up to Montreal how much were from Western Canada and maybe how much were Bakken volumes on the US side.

  • - Interim CFO

  • Not sure the exact split, but we are loading out of North Dakota and also out of Cromer, Manitoba.

  • Cost typically is about CAD10.

  • It can be as high as CAD12 all-in to move the barrels.

  • So a little higher out of North Dakota than north of the border.

  • And on a landed basis we realized about a CAD10 cost -- feedstock cost improvement over the alternate barrels.

  • - Analyst

  • Okay.

  • So you can't give us a breakdown on how much was Canadian but a good portion was from the Bakken region you think?

  • - Interim CFO

  • That's right.

  • Off-line David I will pick that up and get the actual split.

  • - Analyst

  • Perfect.

  • Thank you very much.

  • Operator

  • The following question is from Evan Calio from Morgan Stanley.

  • - Analyst

  • Thanks.

  • It's Benny Wong from Morgan Stanley.

  • My question is with a fair amount of cash on hand, is there the potential to accelerate the return on capital to shareholders or are you trying to balance that ahead of the upcoming Fort Hills compacts.

  • Can you provide a sense of how you think about that and your pace.

  • - President & CEO

  • I think we have been very clear Benny around what our priorities are, and as I said those.

  • You are going to see us focusing on ops excellence, generating the cash and then exercising capital discipline.

  • We're putting the capital towards making sure we are sustaining reliability of the business first.

  • Then we've got this suite of growth projects where we are -- relentlessly focused on productivity and not -- spending that money effectively.

  • And as you say we've got money left over when we've satisfied those priorities.

  • We've committed to dividends which will -- we are not giving specific numbers but will continue to grow as our earnings grow and as our production grows.

  • You will see that trend continuing through time.

  • Of course that is a Board approval.

  • We've been have been aggressively buying shares back.

  • We bought 8% of the Company back already as part of the program.

  • And last quarter we put another CAD1 billion into that program.

  • We currently have CAD1.4 billion approximately left of back authority to buy back.

  • And at these prices -- even at the prices we're seeing today, I expect that program to continue and at the current rate of buyback, we will need to revisit the program towards the end of the year when we will have exhausted the fund which is currently available to us.

  • So I would say you're going to see more.

  • We are aggressively pursuing it.

  • We recognize that part of this first quarter was excellent operation around typically the upgraders and the de-sulfurization plants in oil sands to get us very high margin projects, excellent reliability in the downstream which means for that oil sands crude we were fully realize margins there and some exchange rate pieces in there.

  • So we did some really good things, and we're pleased with that, but the market give us some things as well.

  • So you're right.

  • We've erred on the side of being cautious in terms of the balance sheet, and we test that regularly.

  • So clearly with the amount of cash we generated in the first quarter if we see that continue then it gives us even more opportunity to pursue that set of priorities that I've laid out there.

  • And clearly that will include looking at move moves in dividends and potentially more share buybacks.

  • - Interim CFO

  • Benny I would add to that.

  • The Fort Hills capital program represents something like 15% of our annual capital.

  • So I wouldn't view it as any sort of threat to any decisions at we will be making on returning cash to shareholders.

  • Great.

  • Thank you.

  • Operator

  • The following question is from Chris Feltin from Macquarie.

  • - Analyst

  • Good morning.

  • Question more on the gas side actually.

  • I'm curious net of your recent dispositions you're down to about 99% oil -- I guess up to 99% oil and down to a pretty small position on a relative basis within the Montney.

  • Just curious what your strategy is looking forward here now that I think you've rationalized essentially all of the gas assets you had.

  • Is the Montney something you view as strategic?

  • Is it something you would look at getting bigger in?

  • Just kind of your current thoughts on that part of your portfolio in particular.

  • Thanks.

  • - President & CEO

  • You know we are still very pleased with the deal we did around our gas business.

  • We'd assumed a mid long-term price of gas in that decision process in the sort of CAD4 to CAD6 range.

  • Gas prices are very much where we expected them.

  • We do have a sort of hedge on gas prices, because we are such a large power generator.

  • We are -- depending on how that spread between gas price and power is on a particular day.

  • We can be hedged in that 20%, 30%, 40% range effectively of gas prices coming into our business.

  • So our strategy was very clear.

  • We have a view that there is relatively cheap long-term gas on this continent, and even with the strike we saw and the higher levels we've seen that pieces still holds good in our view.

  • I sort of pushed back a little bit on the Montney.

  • It's a world-class piece of resource there.

  • It's absolutely top quartile in terms of its quality.

  • It's right in the sweet spot.

  • And it is 7 trillion, 8 trillion cubic feet.

  • It's a major piece of gas if we chose to develop it.

  • We've delineated it.

  • We're in a position where for very low cost we can hold the lease.

  • We can also have the capability in the Company should something happen that we don't anticipate to produce that gas as well.

  • So we like our options around it.

  • We don't have any plans to sell that at the moment.

  • We don't have any plans to put that into an LNG facility at the moment.

  • But we like our options there.

  • - Analyst

  • Okay.

  • Thanks.

  • Operator

  • The following question is from Menno Hulshof from TD securities.

  • - Analyst

  • Thanks and good morning.

  • I've got a couple of questions.

  • First you mentioned that you produced through design capacity of Firebag on a few occasions.

  • So how should we thinking about Firebag run rate production through 2014 into 2015.

  • And then moving on to the North Sea I'm seeing three turnarounds at Buzzard totally roughly nine weeks between now and the end of the year.

  • So does that take care of turnaround activity at Buzzard for the next little while, or should we expect more downtime in 2015?

  • - President & CEO

  • Okay.

  • Let me just comment on Firebag.

  • We -- Firebag is included in our guidance, and we are comfortable with guidance.

  • So I would put just a slightly optimistic note on the end of it which is underlining what I said earlier.

  • What we bought was a 180,000 barrels a day facility.

  • We've already been through that for a number of days in the first quarter.

  • It's been very reliably producing, and as you can see from a our numbers got up into the 160,000s on average through the quarter even including the cold weather.

  • So very encouraged by Firebag.

  • One of the things we will be looking at as we go through this year is we talked about the debottleneck capability of Firebag, and we will start to get clearer.

  • As we test it up nearer to its limits then we are able to see where we are able either with investment or without investment maybe starting to push that 180,000 upwards.

  • What I would say is in the round we've included end guidance, and we're towards -- at the moment we're towards the top end of our expectations.

  • So you two want to handle the Buzzard one, Steve.

  • - VP of IR

  • Sure.

  • So, Menno, we included originally in our IR deck guidance in the first quarter, some fairly extensive maintenance at Buzzard a total of nine weeks.

  • And in fact some changes have been made to that.

  • They've been looking -- the operator has been looking to optimize the maintenance windows, because some of it was third-party maintenance.

  • So it will be less than that.

  • So there is some upside to Buzzard production for 2014.

  • We actually don't have the 2015 maintenance schedule yet.

  • I certainly anticipate typical four-week turnaround that we see annually in the summer but don't have the specifics yet for 2015.

  • - Analyst

  • Great.

  • Thanks.

  • That's it for me.

  • Operator

  • The following question is from Mike Dunn from FirstEnergy.

  • - Analyst

  • Thanks.

  • Good morning everyone.

  • Steve, just wondering if you have a schedule in mind for when you might be naming a permanent CFO.

  • - President & CEO

  • All I would say is the process is going very well to plan.

  • We as you know did an extensive -- we did a global search.

  • We've got some excellent external candidates, excellent internal candidates.

  • I would expect to bring it to a conclusion in the second quarter.

  • - Analyst

  • Okay.

  • Thanks.

  • That's all for me.

  • Operator

  • The following question is from Mohit Bhardwaj from Citigroup.

  • - Analyst

  • Hi.

  • Thanks for taking my question.

  • Just a quick question on the natural gas supply destructions.

  • If you could talk about the last opportunity in the first quarter.

  • - President & CEO

  • Let me just give you a few top context questions and then maybe later if you want specific discussion with the group.

  • They are relatively minor.

  • They were bigger in the fourth quarter, a combination of a better process with the service provider and our ability to manage around the impacts have been smaller.

  • They been smaller around Firebag and the base plan.

  • I don't see them having a bigger effect going powered.

  • It is possible there will be some things we are not aware of, but on current plans and the way the process is working as we have gone into the lighter demand period for gas generally in the region because of the seasonality and as the provider is starting to get into fixing some of the issues there I see the impact diminishing.

  • I think it will be negligible as we go forward.

  • - Analyst

  • Thanks for that Steve.

  • And just thank you also for sharing your thoughts around your use of excess cash.

  • I just wanted to come back to what you said during the last earnings call that you would want to maintain a run rate of around CAD500 million in share buybacks per quarter.

  • And I was wondering you said you are comfortable at current levels for buying back shares.

  • Your thoughts around that as well.

  • - President & CEO

  • You sort of summarized it there for me.

  • The supply side we have the cash assuming market conditions and the business performs as we are planning for this year.

  • And then it becomes a question of our view.

  • We are a opportunistic value buyer in the market so we do calculations just the same as everybody else.

  • Very comfortable at these levels, and the prices we expect this year we expect to continue.

  • So you saw it got the [bands].

  • I think -- we think it's been a relatively aggressive program buying 8% of the Company in a couple of years and see ourselves continuing to buy on a value based and continuing the program.

  • - Analyst

  • And final one for me.

  • On Mackey River for the expansion do we -- when do we get an announcement on the approval?

  • - President & CEO

  • Sorry that's for the -- well, the first one, the first piece of the project which is I'll call it the debottleneck is obviously approved and largely constructed and we expect to have that approximately 8,000 barrels a day by the end of the sure.

  • The duplication of the plant, the big expansion, I'm just looking at Steve for confirmation, but I think that comes across my desk by the end of this year.

  • - Analyst

  • Thank you for your thoughts.

  • - President & CEO

  • Thank you.

  • Operator

  • There are no following questions registered at this time.

  • I would like to return the meeting to Mr Douglas.

  • - VP of IR

  • Thank you, Wayne, and appreciate everyone taking part.

  • And of course just a reminder, we will be available throughout the day and going forward, and we welcome further detailed questions.

  • So I will sign off with that.

  • Thank you again.

  • Operator

  • Thank you.

  • That concludes today's conference call.

  • Please disconnect your lines at this time, and we thank you for your participation.