Suncor Energy Inc (SU) 2017 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Suncor Energy's Second Quarter 2017 Financial Results Call and Webcast.

(Operator Instructions) As a reminder, this conference is being recorded.

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

Mr. Douglas, please go ahead.

Thank you, Michelle, and good morning to everyone.

Welcome to the Suncor Energy second quarter earnings call.

With me here in Calgary this morning are Steve Williams, our President and CEO; along with Alister Cowan, our EVP and Chief Financial Officer.

I'd ask you to note that today's comments contain forward-looking information, that our actual result may differ materially from expected results because of various risk factors and assumptions described in our second quarter earnings release as well as our current AIF, and both of these are available on SEDAR, EDGAR and our website, suncor.com.

Certain financial measures that we refer to in these comments are not prescribed by Canadian GAAP.

For a description of these financial measures, again, see our second quarter earnings release.

Following our formal remarks, we'll open the call to questions, first, from members of the investment community, and then, if time permits, members of the media.

With that, I'll ask Steve Williams for his comments.

Thanks, Steve, and good morning, and thank you to everyone on the line for joining us.

I think it's important right upfront to acknowledge that our second quarter results were somewhat mixed, both from an operational and a business environment perspective.

The past few months have brought us a combination of a falling crude price and a strengthening Canadian dollar.

And these trends and continued volatility, I think, simply underline the importance of concentrating our efforts on those things which we can control.

In Suncor's case, that means a continued focus on disciplined cost management, and of course, capital allocation.

And those 2 add up to equal -- what we call operational excellence.

On the positive side, I am very pleased with our continued success in taking costs out the business.

We're steadily moving the entire company towards a sustainably lower cost base that's positioning us to be globally competitive.

At the same time, we continue to exercise capital discipline, while executing on our growth programs, buying back shares and maintaining a strong balance sheet.

Our downstream and offshore business delivered strong operational and financial results.

However, as I said, I'm not satisfied with the operational performance of our Oil Sands assets in the second quarter.

The first major maintenance turnaround at Firebag units 3 and 4, after 5 years of operations, encountered a number of challenges, resulting in a significantly slower restart and ramp up than expected.

And at Syncrude, the planned April turnaround was advanced due to a fire and a pipe wreck in March, and then had to be extended as a result of repairs associated with the fire as well as several other, more minor operational issues.

Syncrude also had [coco] maintenance originally planned for the fall, in order to take advantage of the downtime.

So the end result was lower Oil Sands production than we had planned for in the quarter.

However, it's worth saying that I am confident that the learnings from these events will assist us in better understanding these assets going forward, and we are planning for a return to strong reliable production throughout the second half of the year.

It's important to note that even in the quarter, where our Oil Sands production fell short of plan, and average oil prices were below expectations, Suncor still generated funds from operations of over $1.6 billion.

And this just demonstrates once again, what a powerful cash generation team the Suncor integrated model is.

So let's get into the details of our second quarter.

At Oil Sands, we produced a total of just over 350,000 barrels a day, including 290,000 barrels a day of upgraded product.

We completed major plant maintenance activities at Firebag and the unit 2 upgrader, and held our cash costs to just $27.80 per barrel.

And that's the lowest second quarter Oil Sands cash costs in over a decade.

With the bulk of our Oil Sands maintenance for the year net complete, our Oil Sands operations have been running at full rates in July.

We expect our production guidance for the -- we expect to meet our production guidance for the year, and have actually lowered our cash cost guidance to $23 to $26 per barrel, thanks to our strong year-to-date performance.

At Syncrude, planned and unplanned outages reduced Suncor share production by over 100,000 barrels a day in the quarter.

And once again, this performance is not acceptable.

I remain confident that we can achieve the long-term operational goals we have set.

We always knew that the road to operational excellence would not be a straight line, and that there will be some setbacks like what we experienced in the quarter.

However, we will continue to work closely with Syncrude and other owners to execute on a plan that we expect will drive utilization rates above 90% and cash costs below 30%, but below $30 per barrel by 2020.

So those original commitments, we're confident in.

In E&P, we continue to see excellent performance in the second quarter.

Our total offshore production year-to-date is tracking 4% ahead of last year.

At the same time, cash operating costs have come down to 22%, with average operating costs year-to-date on the East Coast below $10 per barrel and in the North Sea, well below $5 per barrel.

And remember, of course, those are Canadian dollars.

So as a result of this strong performance, we've raised our 2017 production guidance for E&P twice this year by a total of 20,000 barrels per day.

In the downstream, our Refining and Marketing business turned in another excellent quarter.

Utilization rates, our refineries rose to 94%, which drove a 10% increase in production and a 6% drop in unit operating expense versus Q2 of last year.

The increased production supported that strong retail sales and set a Suncor record for the first half of the year.

So despite market concerns around gasoline demand, our downstream business is squarely on track to deliver another year of strong earnings and cash flows.

Turning to our growth projects.

It's an exciting time at Fort Hills and Hebron, as they rapidly approach first oil.

Our focus is increasingly on commissioning, startup and operations as we move into the last few months of construction.

At Fort Hills, we've been tracking to previously announced budget and schedule.

The mining, ore operation, major site infrastructure and primary extraction assets have all been handed over to operations, and the turnover of utilities is now in progress.

Just 2 weeks ago, the East Tank Farm, which will support the Fort Hills operation, was commissioned and declared ready for service.

That just leaves secondary extraction, the paraffinic froth treatment, as the final area where construction activities are currently concentrated.

We recently identified some opportunities to accelerate the construction schedule in order to take best advantage of productivity and further derisk the full plant startup.

This would result in some capital spending originally scheduled for 2018 being brought into 2017.

And accordingly, you'll have noted that we have adjusted our guidance.

And Alister will go into the details a bit later on the call.

Now remember that we're proceeding with phased commissioning and startup plan that will see the front end of the plant, including the water assets fully tested, prior to the onset of cold winter weather.

This allows for early identification and resolution of any issues that may arise.

And as a result, we expect to significantly derisk the production of first oil late in 2017.

Approximately 85% of personnel have been hired, of operating personnel have been hired, including all critical front line positions.

Training activities are well advanced, and we have greatly benefited from attracting experienced staff in the PFT process.

There has been 1 recent development on the Fort Hills project that is a little disappointing.

Our partner Total has chosen not to approve or provide additional project sanction funding for the Fort Hills project.

And as a result, we are now in the early stages of a commercial dispute with Total.

Given the factor that construction is now 92%, as of the end of July, we're not anticipating that this issue will impact the plan to achieve first oil by the end of the year.

Our major growth -- our other major growth project is, of course, Hebron off the east coast of Canada.

During the second quarter, the Hebron platform was successfully towed back to its offshore location and safely positioned on the seafloor.

Drilling operations commenced just last week, and the project remains well on track to produce first oil by the end of this year, as planned.

So with all operations back up and running, and our major growth project expected to deliver first oil by year end, we're well set for a strong second half to 2017.

Perhaps the one other thing that seems most top of mind to investors is the M&A climate, in light of recent transactions in the sector and the much lower for much longer oil environment.

What I would say is that beginning over 5 years ago, Suncor has maintained a strong balance sheet.

And as you've seen, we see this as a strategic asset.

We generate discretionary free cash flow that is after sustaining capital and dividend above a $40 U.S. crude -- U.S. WTI price.

And we allocate that cash in a disciplined manner, with a focus on returns between organic growth, M&A and share buybacks.

So as you look to the future, judge us by what we've done in the past.

We will continue to make disciplined choices, always targeting the best returns for shareholders.

So with that, I'll turn it over to our Chief Financial Officer, Alister Cowan, to go into some more detail on our financial performance.

Thanks, Steve.

As Steve mentioned earlier in the call, in the second quarter we saw average benchmark crude prices fall by about USD 3.50.

And towards the end of the quarter, we saw the Canadian dollar strengthen sharply against U.S. dollar.

Nevertheless, we did produce solid financial results once again.

We generated, as Steve said, over $1.6 billion in expense from operations and approximately $200 million in operating earnings.

Notably, our E&P business, which is well above expectations, and generated approximately $440 million in funds flow.

And our Refining and Marketing delivered over $500 million of funds flow, despite a negative FIFO impact as a result of falling crude prices.

This was very consistent with last year's strong second quarter in R&M, after adjusting for FIFO impacts and the lubricant sale, which was completed in the first quarter of this year.

Our funds from operations for the quarter more than covered our sustaining capital spending of $891 million and our dividends of approximately $530 million, leaving almost $200 million in discretionary free cash flow.

Over the last 12 months, we have generated over $3.6 billion in discretionary free cash flow.

And as Steve said, that's after sustaining capital and payment of the dividend.

A key contributor to the free cash flow generation is our continued success in reducing costs across the business.

Not everyone is aware of the steady reduction in our Oil Sands cash costs in the past few years, and that's certainly a very considerable accomplishment.

But I just wanted to emphasize it's not only in our Oil Sands operations that we're improving productivity and driving our cost.

Right across the company, we've been steadily streamlining business processes, eliminating non-value-added work and increasing productivity.

In the first half of 2017, our total operating, selling and general expenses were more than 10% lower than the first half of 2014.

And at the same time, our total production increased by almost 19%.

The result as you've seen is lower breakeven cost and increased cash flow.

On the capital front, we've invested close to $1.7 billion in the second quarter, bringing our year-to-date total growth and sustaining capital spend to almost $2.9 billion.

Progress in the Fort Hills project accelerated during the quarter, and we now see the potential to advance work that was planned for early 2018 into this year.

Accordingly, we've increased the capital spending guidance range of 2017 to $5.4 billion to $5.6 billion.

Now to be honest, we've had some concerns about this, but let me assure you that this is simply an adjustment in the timing of the spend.

The 2018 capital budget will be reduced commensurate with the increase in this year's spend.

Our balance sheet continues to be a key strength for Suncor.

We finished the quarter with approximately $2.4 billion in cash and over $8 billion of liquidity.

During the quarter, we repaid USD 1.25 billion of long-term debt.

Our net debt to cash flow decreased to less than 2x, and our debt to capitalization fell to approximately 27%, both within their target ranges.

We expect debt levels to continue to decline organically, as our production and cash flow increase moving forward.

On our last call, we managed the initiation of a $2 billion 1-year share buyback program, which we commenced on May 1. We've been aggressively executing on the program for almost 3 months now.

To give you a bit of an update: As of today, we have repurchased and canceled over $11 million shares -- 11 million shares for approximately $450 million.

So we've been quite aggressive in July on this program.

The buyback program was premised in an oil price in the low USD 50 range, with funds coming from our discretionary free cash flow.

Now as everyone is aware, the oil prices fell during the quarter.

And while the short-term trend in those oil prices has not influenced just the repurchases, we do believe it's prudent to flex the program based on the discretionary free cash flow in light of the current business environment.

Irrespective of oil prices, you can expect Suncor to continue its focus on reducing costs, carefully allocating our capital and lowering comparative returns for our shareholders.

And I'm ready to pass it back to Steve Douglas.

Well thank you, Alister and Steve.

Just a few things to note before we go to the questions.

There was a fall in crude price, as Alister noted.

And so there was a FIFO expense of $38 million after-tax, and that brings year-to-date to very close to 0, a $5 million positive year-to-date.

Stock-based compensation during the quarter was an after-tax expense of $19 million, bringing the year-to-date total to $91 million after-tax.

And the FX impact was actually a $278 million gain in the second quarter, bringing us to a $381 million gain year-to-date.

There are, as Steve and Alister mentioned, a number of changes to our guidance.

The updated guidance is available on our website, suncor.com.

But a few highlights.

We did, as mentioned, increase the capital spending range to $5.4 billion to $5.6 billion for the year, and we will be reducing our 2018 budget accordingly.

Due to strong performance and outlook, the E&P production range has been raised by a further 5,000 barrels per day.

And as a result of the extended outage at Syncrude, the production range there has been lowered by the same amount, 5,000 barrels per day.

So the net impact is no change to our 2017 production range of 680,000 to 720,000 barrels per day.

The Suncor Oil Sands cash cost range has been reduced by $1, to $23 to $26 per barrel, as a result of strong year-to-date cost management.

And Syncrude cash costs have been increased to $42 to $45 per barrel, reflecting the impact of the extended outage.

Cash taxes have been increased by $100 million, and that's primarily to reflect the higher cash taxes associated with increased North Sea production.

And I should note that the range excludes the cash taxes associated with the lubricants and wind farm sales earlier this year.

There's also a number of small changes made to the business environment assumptions, and those are simply based on year-to-date actuals and expectations going forward.

With that, I'll turn it back to Michelle to take questions.

Thank you.

(Operator Instructions) Our first question comes from the line of Greg Pardy with RBC Capital.

Steve, really just wanted to dig in to a couple of areas.

Not surprisingly, probably just Syncrude and Fort Hills.

But maybe just before that, in terms of the capital increase that you've got this year, how much of that is related to, call it, the Syncrude repair work?

And it sounds as though you'll be able to recover a bunch of that through insurance, is that right?

Yes, I mean, we haven't been explicit about the breakdown, but yes.

In excess of $100 billion has to do with the work at Syncrude, of which a large proportion of that is CapEx.

And we would expect to get a recovery.

We can't be absolutely sure of the timing of the recovery.

So we've been prudent in the allowance.

So the 500 is the balance of Fort Hills and Syncrude.

As Alister said, the Fort Hills piece is really just timing.

We're still anticipating on Fort Hills that we will come in towards the top end of the range we guided on earlier in the year.

Okay, great.

And just with Syncrude, can you touch maybe on just what -- what's going right?

What's going wrong?

And just how you're thinking about the ramp-up coming into August?

Yes.

I mean, first of all, perhaps it's worth just getting a snapshot of where we are operationally today.

And I'll do it a little bit broader than just Syncrude.

I mean, Syncrude is already up at between 70% and 80% of its nameplate capacity this morning.

So we're already exporting well in excess of 250,000 barrels a day, and there's another move planned later today.

So it's already in that 70% to 80% range.

(inaudible) to having most, I'm talking current operations.

The base plant, Firebag McKay River, are up at full throughputs and have been for most of July.

So although I found the results unacceptable to me through the second quarter, they're very much back on target already in the third quarter.

But to get back to your comments, Greg.

Overall, I'm not completely surprised by the Syncrude performance.

We did talk about it.

In not being a straight line, there would be -- we had very good operation and even when we had the good operation last year, I said, we didn't build that in to expectations every day just yet.

We are absolutely confident in the 90% and -- to 90% utilization and a soft $30 a barrel in that 2020 time range.

We are working those programs in detail.

Great work going on between ourselves, Imperial, Exxon and Syncrude itself.

And we will bring that and take you (inaudible) during the year.

We'll bring that out and show you that in a lot more detail.

It's also quite clear to us that the synergies are higher than we've anticipated, both in the day-to-day operation of the plant and the way we believe we will manage going forward.

But also, in terms of those other synergies I've talked about, how we connect the plants, how we can get -- when we increase the utilization of the Suncor-based facility, it was how we got security of bitumen supply from 3 or 4 sources rather than 1. We can do some of that with Syncrude, by cross-connecting some of the bitumen supplies.

We can keep the upgraders and export to market going longer by having connections on the product side between the plants.

So those projects are moving ahead with some pace now.

So I'm very comfortable in the long term.

At this point, we're not completely surprised in the short term.

And maybe just the last one is, you touched on the, just the commercial dispute with Fort Hills.

Can you elaborate on that at all?

I mean, it's a little bit early.

It's literally -- we're only a few days into the discussion.

So it's too early for me to comment in detail on the dispute itself.

What I would say is, the plant is 92% complete as of today.

And so we're really on the final stretches.

Suncor and Teck remain completely aligned in our approach to the project.

And I am not anticipating any impact on cost and schedule.

So if anything, the result of this -- what we've discussed today about the -- because we're getting progress, very good progress on the project.

So what we're planning to do is to finish off the bulk of it this year.

What that means is, it positions us much better than for -- no water introduction through the winter.

It will be done all pre-freezing season.

And we'll be able to move into the start up with a higher degree of confidence.

So the project itself, the brick and mortar piece is in really good shape.

We're still talking about the possibility of the first intermediate product sometime in September or October.

And we're still talking about the first train up at the end of the year, and then progressively starting the other 2 trains up in the early part of next year.

So it bodes very well for the ramp-up next year.

And our next question comes from the line of Neil Mehta with Goldman Sachs.

First question is related to the FX strength to CAD USD, and we recognize that you lowered the cost guidance here today as part of the release.

Could you just talk about how that exchange rate has changed, makes you think about the cost structure going forward?

And I have a follow-up.

Neil, the change in the operating cost guidance we gave on the Oil Sands Operations is really just -- it's got nothing to do with the FX, it has all to do with us driving costs out of the business in a sustainable manner.

I mean, on the FX, we, the plusses and minuses, you -- we take some negative impacts on the oil prices, you translate it back into Canadian dollars, but you saw a big FX gain offsetting dollars, we translate into U.S. dollar debt.

So on a net-net basis, we manage it through the balance sheet, and so we don't typically go forward, only we hedge it, and we don't really see big of an impact on the equity cost structure of the business.

That's great.

Second is the strength in E&P just surprised us over the course of the year.

Can you just talk about where you're seeing that strength?

Does that bother Hibernia elsewhere?

And how sustainable is that going forward?

Yes, I mean, we are very pleased with both the production and operating costs in that offshore business.

And as you know, it is a highly cash generative business.

We have been investing, albeit in not very material levels to Suncor, but we have been investing in a very selective, targeted way.

And we're starting to see the strong returns from those investments.

So you'll see us continue to do that.

It's all of those, if you like.

So it is broadly across the operation.

They've done exceedingly well.

And as we move towards the end of this year, you're going to see the ramp-up of Hebron as well.

So although it's not -- it's a very important part of our business.

We've always -- I often get questions about the divestment of that business.

And I said, we do see it as part of our integrated business.

It gives us some diversity.

So when we see some trends in other parts, it's a very robust cash generator for us.

So I'm pleased that strategy has been working, and one we plan to continue it.

Great.

The last question for me is just around share repurchase, just going back to your comments, Alister.

It sounds like, if I'm interpreting what you're saying is, if oil stays around $50 a barrel, we should assume that you continue to execute the program.

If it falls to the lower end of a range, let's call it, $45, you take your foot off the pedal a little bit.

If it goes above 50, you get a little bit more aggressive.

I might be putting words in your mouth, and I'm trying to create a formula where there might not be one, but any comments there would be great.

I mean, let me just do it for him, if you like.

You've heard Alister speak, now let me just give you a slightly different cut.

I think you've nailed it, in a sense.

I mean, our -- the flex we have in our capital allocation is, we are committed to our dividend.

We have capital expenditure on organic stuff, which is starting to come to an end, but those programs are disciplined and executed over a period, and we tend not to slow down or speed those up.

So the piece of flexibility in our capital allocation is share buybacks, and we've never given specific targets, per se.

But I think we were quite clear.

We talked about $2 billion in the range we were looking at, which was in that 50, mid-50s range.

So you'll see us just be prudent and flex share buybacks up and down.

Let's just get back to the [indiscernible], Neil.

You did -- we have bought just under $500 million of stock in the last 3 months.

When oil prices are in a sort of, certainly the lower end of the range, but the flex is there, and we will utilize it when we need to.

And our next question comes from the line of Roger Read with Wells Fargo.

I just wanted to kind of come back on some of the OpEx questions.

But maybe starting with Syncrude.

As you had the downtime planned, you had the fire.

As you've gone through the restart process and the work, is this something we can identify as an equipment issue?

Is it a process issue within Syncrude?

Or are we talking about too few or maybe not quite the right people in place?

No.

This is a specific equipment issue, which is unlikely to be repeated.

So it doesn't -- it's not some -- that's why I'm confident, back the longer term.

This was what we in the industry call a process dead leg.

So -- because there's a valve in the line, there's a line that has no flow in it.

So we specifically understand the issue, not likely to be repeated, and we've worked across the plant to identify and remove them.

So no, it's a once-off, it's unfortunate, but not reflective of what you're going to see in terms of the improved utilization and reduced costs.

And as I say, not a complete surprise, because you do get these things happen occasionally, but it's why I'm so confident we'll get to our 90% plus utilization and $30, because this is meant to interrupt that program.

Okay.

And actually, that kind of steps into my next question.

As you think about the OpEx performance over the last year, I think, in the press release, some of that is obviously due to lower natural gas prices.

But where do you think you are in sort of the -- where you are today?

Where do you want to be with OpEx as a sort of a percentile marker?

And I'm thinking both the Oil Sands and the E&P side of business.

Okay.

I mean, let me just give you some general comments.

I mean, clearly, there's an industry, we'd benefitted from lower gas prices for a number of years now.

But they haven't changed significantly through this period.

So the costs you're seeing quarter-on-quarter and year-on-year are not largely driven by reduced energy costs.

They're primarily driven by a structured program of working hard to drive systematically costs out of the system.

So both in Oil Sands and E&P, and in the downstream, you're seeing, in fact, in the corporate Center as well, we have a program in each of those areas.

In terms of the cost reductions, and I mean, we could be more specific off of the call, if you like, but just generally, something like approximately 70% of those costs we think are systematic and irreversible.

So those have come out and will stay out.

We're pleased -- we haven't finished yet, it's a continuous program.

We've made some good spikes, particularly in the Oil Sands business, again in this last quarter.

So you're going to start to see that in future quarters as we go forward.

In terms of long-term objectives, and I'll just talk about our base Oil Sands operations.

I still have set an ambitious target for the guys to get us something below CAD 20 operating cost.

So it's a mid- to longer term project.

We're still working towards it.

But I can see us getting there.

I mean, we're making -- the strides we're making are fantastic.

I think the next progress we'll make, some of it will be further refining our people systems, our processes, the way our supply chain works.

But we've also got some technology things we've been working on.

So if you think of all the work we've been doing on autonomous trucks, if you think of all the work we've been doing on different In Situ techniques, they come with commensurate reductions in operating costs as well.

So we still got the program, we're working really hard at it, and there's more to come.

And our next question comes from the line of Phil Gresh with JPMorgan.

This is John Royall sitting in for Phil.

On the CapEx raise, could you tell us how much has already occurred in 2Q versus -- to come for the rest of the year?

Certainly, John.

Could you repeat the question?

I didn't quite catch that.

Yes, the CapEx rates, just wanted to know how much has, how much of it is weighted towards things that have occurred in 2Q versus raises for the second half?

We're pretty much on budget.

As of today, our year-to-date, most of that will be an acceleration in the second half of the year.

Okay, great.

And then I think you talked about driving towards the longer term $5 billion all-in CapEx number.

Is that still a good number to think about, particularly in light of everything that's going on with Syncrude?

I mean, it would be as early as 2018 that you would think about that number?

No.

We are talking broadly $5 billion, and we've talked about in -- that's a good number to put into your multiple.

We talked about that for '18 and '19.

So they're good numbers.

Of course, what Alister said this morning, and that they're obviously approximate numbers, but you can expect the money we brought forward to come out of the 2018 budget.

So you will see a decrease from that $5 billion.

Okay, great.

And I know you touched on it a little bit, could you go into some more detail on the nature and the scope of exactly what you're doing on, in Fort Hills for the -- related to the CapEx rates?

Sorry, John, your line just broke up slightly at the end.

Could you repeat your question?

Yes, if you could just a little more detail on the scope of the -- what you're doing at Fort Hills with the CapEx raise?

I know you mentioned it a little in the remarks.

It's simply -- we've got the opportunity.

The -- what we're finding is, the progress we are making on secondary extraction is above the targets we had in.

So we've been able to see the opportunity by retaining the workforce more this year, to be able to get the major pieces of that project complete and all of the Hydro tested and complete this year.

We'd always plan that for the first drain.

There are 2 other drains.

It looks as though we're going to be able to do that with the productivity -- to the half this year.

So it's simply bringing that back from 2018 into '17.

(Operator Instructions) Our next question comes from the line of Frank McGann with Bank of America Merrill Lynch.

If I go back to the Total disputes.

Just to get a little bit more clarity on.

Is this primarily a, commercial, strategic, technical?

Is it primarily related to the CapEx increase?

What is actually driving that?

And assuming that they were not to go along with all of the spending, does that -- would that change the eventual ownership percentages, as a result of a carry that you might undertake for them?

Yes, I mean, as I said, it's too early for all of that.

We're a few days into it.

I mean, as I'd said, we're 92% complete.

So this is largely -- they're not very material conversations in terms of the context of the project.

It is a commercial discussion, not a technical discussion.

And I think -- I got asked several times last time on the call, are Total looking to sell parts of their project.

We know that they have been looking at various strategies, but in this case, this is a commercial discussion between ourselves and Total.

Too early to talk about the detail.

The reassuring message I would like investors to take away is, we're 92% complete, we're not anticipating this affecting either the cost or the schedule of the remainder of the project.

So frustrating at this stage, but not that significant.

And if I could just follow up.

Just in terms of overall cost trends.

Are you seeing any signs of pressure at any parts of your business?

No.

Not particularly.

We're seeing particularly operating costs and cost -- and capital costs still continue to move in the right direction.

And our next question comes from the line of Travis Wood with the National Financial.

Just a question around the E&P business, it looks like results have been a bit better than expected.

So can you help us understand as Hebron comes on in the ramp of that and what that could look like to the aggregate E&P production profile over that ramp period?

Yes, Travis, I think we've been clear that it's a 3-year ramp-up on Hebron.

As we drill the additional wells, or the production wells over the next few years from the platform, that will ramp up in '18 from -- to about $10,000 in '19, '20 and then a bit early in the day in 2021.

So obviously that will offset some of the declines that we're obviously going to see in the whole E&P portfolio, but that's a ramp-up in Hebron.

Do you think that more than offsets the other declining parts of the portfolio?

Yes.

To a certain extent, yes.

So you should see some increases in E&P production.

But I would caution you, it's not the whole thing, that there are some declines coming in over the period as well.

But yes, that means that business remaining where it is or maybe even slightly better due to the middle, maybe slightly beyond the next decade.

And our next question comes from the line of Dan Healing with the Canadian Press.

I'm just wondering if you can be a bit more specific on what the dispute with Total involves.

You said it involves funding.

Is that funding for the portion of the capital costs that have been moved forward?

Or is that for funding farther down the line?

I mean, we're -- it's very early stages of the dispute.

It's inappropriate for me to talk in any more detail than I have done.

The project is 92% complete, so we're very close to the end of the spend.

It's a commercial discussion, which is not that unusual at this stage, in a project of this size.

And most of the spend is really set to the end of the project.

We have 7,000 people on site finishing it off, and it's -- the 3/4 of the plant is in the hands of the operators and it's being started up.

So it's not unusual to have these discussions at this time.

Okay, if it's not unusual, and these kinds of things happen all the time, I guess I'm wondering why you're bringing it up on a conference call, Steve.

Because it's -- we're very transparent about where we are, and we think it's important to keep our investors fully appraised of where the project is.

And our next question comes from the line of Jeff Lewis with the Globe and Mail.

I just had 2 quick questions.

One about the share buyback.

Can you just clarify, are you suspending the share buybacks now, or just signaling that you have room to sort of tap the brakes on those?

No, we're not suspending the share buyback.

As Alister said, we bought about $500 million worth of our shares back over the last period.

We anticipate -- we're still buying, as we speak today, but we buy our stock back with our free cash, after all of our other commitments.

And as that cash flow fluctuates, depending on our spend and the price of crude, we'll flex the (inaudible) up and down.

But no, we're still committed to the program.

There's still the $2 billion, I believe it was, level, for the year?

That's our target, but it will depend on free cash flow.

Okay, and then just quickly, TransCanada has launched another open season for Keystone XL.

Do you see that project as still being necessary in today's market, given some of the changes that we've seen?

I mean, we generally support all of the projects which are currently seeking access to markets that we support.

Keystone, we support Trans Mountain, we support the Enbridge Line 3 project.

All 3 of them seem to be making steady progress, which I'm encouraged by.

And yes, I think, we certainly need these projects.

So it depends on what time they come into service.

But now I think the products are still needed in the industry, and there are some, of course, supporting them.

So are you a shipper around Keystone XL?

Yes.

And we're already a shipper on the lower half of Keystone, which is already in operation.

Our next question comes from the line of Nia Williams with Reuters.

Can you give us a sense of what levels of [EGI] Suncor needs to breakeven in its Oil Sands Operations?

I know you've spoken about operating costs, but I'm just wondering once you put in G&A costs and transportation and blend in, what the breakeven number is?

Okay, I think we've been very clear on this, but the breakeven cost with Suncor to cover its operating cost on sustaining capital is around USD 30.

If you add in the dividend, it's $40.

So for you, I would use $30.

And I'm not showing any further questions.

And I'd like to turn the conference back over to Steve Douglas for any remarks.

Thank you, Michelle, and thanks, everyone, for joining us today.

If you have further questions or detailed modeling questions, of course, we're available and welcome for calls.

So thanks again.

We will sign off.

Ladies and gentlemen, thank you for participating in today's conference.

This does conclude the program, and you may all disconnect.

Everyone, have a great day.