Suncor(SU) - 2025 Q1 - Quarterly Report

First Quarter Highlights Suncor achieved record Q1 upstream production and refining throughput, returning $1.5 billion to shareholders despite slight declines in adjusted funds from operations First Quarter Highlights Suncor reported strong operational performance in Q1 2025, achieving record first quarter upstream production of 853,200 bbls/d and record first quarter refining throughput of 482,700 bbls/d Q1 2025 Financial Results vs. Q1 2024 | Financial Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted Funds from Operations | $3.045 billion | $3.169 billion | | Adjusted Operating Earnings | $1.629 billion | $1.817 billion | - Returned approximately $1.5 billion to shareholders, consisting of $750 million in share repurchases and $705 million in dividends[12] - Achieved record first quarter total upstream production of 853,200 bbls/d, driven by a record first quarter at Firebag[12] - Oil Sands production reached 790,900 bbls/d with an upgrader utilization of 102%, the second highest in company history[12] - Set a first quarter record for refining throughput at 482,700 bbls/d (104% utilization) and refined product sales at 604,900 bbls/d[12] Consolidated Financial and Operating Information This section provides a comprehensive overview of Suncor's Q1 2025 financial and operational performance, highlighting key metrics and trends Financial and Operating Highlights In Q1 2025, Suncor's net earnings increased to $1.689 billion from $1.610 billion in Q1 2024, while adjusted operating earnings and adjusted funds from operations decreased Consolidated Financial Highlights (Q1 2025 vs Q1 2024) | ($ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net earnings | 1,689 | 1,610 | | Adjusted operating earnings | 1,629 | 1,817 | | Adjusted funds from operations | 3,045 | 3,169 | | Cash flow provided by operating activities | 2,156 | 2,787 | | Capital and exploration expenditures | 1,087 | 1,237 | | Free funds flow | 1,900 | 1,858 | Consolidated Operating Highlights (Q1 2025 vs Q1 2024) | (thousand barrels per day, unless otherwise noted) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total upstream production | 853.2 | 835.3 | | Refinery utilization (%) | 104 | 98 | | Refinery crude oil processed | 482.7 | 455.3 | | Refined product sales | 604.9 | 581.0 | Financial Results Analysis Adjusted operating earnings decreased to $1.629 billion in Q1 2025, mainly due to lower upstream sales volumes from inventory builds, despite strong production - Net earnings for Q1 2025 were $1.689 billion, up from $1.610 billion in Q1 2024, influenced by a $14 million unrealized foreign exchange gain on U.S. dollar debt[17] - The decrease in adjusted operating earnings was primarily driven by lower upstream sales volumes due to inventory build, partially offset by record first quarter refining throughput and higher refined product sales volumes[21] - Cash flow from operating activities was impacted by a larger use of cash in working capital ($889 million) in Q1 2025 compared to the prior year quarter ($382 million), mainly from a build-up of inventory[23] Operating, Selling and General (OS&G) Expenses Total OS&G expenses for Q1 2025 decreased to $3.297 billion from $3.440 billion in the prior year quarter, primarily due to lower upstream sales volumes OS&G Expenses (Q1 2025 vs Q1 2024) | ($ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operations, selling and corporate costs | 2,666 | 2,815 | | Commodities | 486 | 466 | | Share-based compensation | 145 | 159 | | Total OS&G expenses | 3,297 | 3,440 | - The decrease in OS&G was mainly due to lower upstream sales volumes and a related decrease in operating expenses from inventory build-up, partially offset by increased mining, maintenance, and commodity input volumes[25] Business Environment In Q1 2025, key benchmark crude prices like WTI and Dated Brent were lower than in Q1 2024, while heavy and synthetic crude differentials narrowed Key Benchmark Prices (Average for Q1) | Benchmark | Unit | 2025 | 2024 | | :--- | :--- | :--- | :--- | | WTI crude oil at Cushing | US$/bbl | 71.40 | 76.95 | | WCS-WTI heavy/light differential | US$/bbl | (12.65) | (19.35) | | SYN-WTI differential | US$/bbl | (2.35) | (7.40) | | New York Harbor 2-1-1 crack | US$/bbl | 21.05 | 27.05 | | Suncor custom 5-2-2-1 index | US$/bbl | 26.80 | 35.95 | | Exchange rate (average) | US$/Cdn$ | 0.70 | 0.74 | Segment Results and Analysis This section analyzes the financial and operational performance of Suncor's Oil Sands, E&P, R&M, and Corporate segments Oil Sands The Oil Sands segment reported a significant increase in adjusted operating earnings to $1.620 billion in Q1 2025, driven by narrower crude differentials and favorable foreign exchange rates Oil Sands Financial Highlights (Q1 2025 vs Q1 2024) | ($ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating revenues | 7,141 | 6,922 | | Adjusted operating earnings | 1,620 | 1,365 | | Adjusted funds from operations | 2,810 | 2,443 | - The increase in adjusted operating earnings was primarily due to narrower heavy crude oil and SYN-WTI differentials and favorable foreign exchange rates[31] Oil Sands Production and Sales (thousand barrels per day) | Volume Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Oil Sands bitumen production | 937.3 | 932.1 | | Total Oil Sands production volumes (to market) | 790.9 | 785.0 | | Total Sales Volumes | 773.4 | 784.1 | Oil Sands Cash Operating Costs ($/bbl) | Asset | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Oil Sands operations | 27.80 | 26.85 | | Fort Hills | 33.85 | 32.85 | | Syncrude | 36.10 | 35.70 | Exploration and Production (E&P) The E&P segment's adjusted operating earnings decreased significantly to $158 million in Q1 2025, primarily due to lower sales volumes, increased exploration expenses, and lower realized crude prices E&P Financial Highlights (Q1 2025 vs Q1 2024) | ($ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted operating earnings | 158 | 274 | | Adjusted funds from operations | 330 | 467 | - The decrease in earnings was mainly due to lower sales volumes, increased exploration expense, and lower realized crude prices[53] E&P Production and Sales (thousand barrels per day) | Volume Type | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total production | 62.3 | 50.3 | | Total sales volumes | 55.0 | 63.3 | - Production increased primarily due to higher output at Terra Nova and Hebron[54] Refining and Marketing (R&M) The R&M segment's adjusted operating earnings fell to $667 million in Q1 2025, primarily driven by lower benchmark crack spreads and an unfavorable FIFO inventory valuation impact R&M Financial Highlights (Q1 2025 vs Q1 2024) | ($ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted operating earnings | 667 | 1,118 | | Adjusted funds from operations | 902 | 1,306 | - The earnings decrease was mainly due to lower benchmark crack spreads, narrower crude differentials, and a FIFO inventory valuation loss of $60 million compared to a $40 million gain in the prior year quarter[63][69] R&M Operational Highlights | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Crude oil processed (thousand barrels per day) | 482.7 | 455.3 | | Refinery utilization (%) | 104 | 98 | | Refined product sales (thousand barrels per day) | 604.9 | 581.0 | | Refining operating expense ($/bbl) | 6.75 | 7.15 | Corporate and Eliminations The Corporate segment's adjusted operating loss increased to $301 million in Q1 2025, while the Eliminations segment realized $72 million of intersegment profit Corporate and Eliminations Financials (Q1 2025 vs Q1 2024) | ($ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted operating loss | (229) | (319) | | Adjusted funds used in operations | (349) | (398) | - The Corporate segment's adjusted operating loss increased from $196 million to $301 million, mainly due to an operational foreign exchange loss[73] - The company realized $72 million of intersegment profit in Q1 2025, compared to an elimination of $123 million in Q1 2024, due to lower crude costs and inventory volumes[74] Income Tax Q1 2025 income tax expense decreased to $601 million, with the effective tax rate falling to 26.2% Income Tax Income tax expense for Q1 2025 was $601 million, a slight decrease from $610 million in the prior year quarter, reflecting lower taxable earnings Income Tax Expense (Q1 2025 vs Q1 2024) | ($ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Current income tax expense | 648 | 649 | | Deferred income tax recovery | (47) | (39) | | Income tax expense included in net earnings | 601 | 610 | - The effective tax rate decreased to 26.2% in Q1 2025 from 27.5% in Q1 2024, mainly due to non-taxable foreign exchange gains on the revaluation of U.S. dollar debt[78] Capital Investment Update Q1 2025 capital expenditures decreased to $1.087 billion, focusing on economic projects and asset sustainment Capital Investment Update Suncor's capital expenditures in Q1 2025 totaled $1.087 billion, a decrease from $1.237 billion in the prior year quarter, with investments focused on economic projects and asset sustainment Capital Expenditures by Type (Q1 2025 vs Q1 2024) | ($ millions) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Asset Sustainment and Maintenance | 498 | 574 | | Economic Investment | 589 | 663 | | Total | 1,087 | 1,237 | - Key economic investments included the Upgrader 1 coke drum replacement, autonomous haul systems at Oil Sands Base, and the West White Rose Project[81] - Asset sustainment expenditures were primarily for preparation for planned turnarounds and maintenance projects within the Oil Sands and R&M segments[81] Financial Condition and Liquidity Suncor maintains strong liquidity with $2.773 billion cash and $5.470 billion credit facilities, supporting its capital program Capital Resources and Liquidity Suncor maintains a strong liquidity position with $2.773 billion in cash and cash equivalents and $5.470 billion in available credit facilities as of March 31, 2025 Key Financial Indicators (Twelve months ended March 31) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Return on capital employed (ROCE) (%) | 12.8 | 15.7 | | Net debt to adjusted funds from operations (times) | 0.6 | 0.7 | | Total debt to total debt plus shareholders' equity (%) | 18.7 | 21.3 | - As of March 31, 2025, cash and cash equivalents stood at $2.773 billion, down from $3.484 billion at year-end 2024[88] - Available credit facilities for liquidity purposes were $5.470 billion at the end of the quarter[89] Debt Management Suncor's total debt remained stable at $10.332 billion at the end of Q1 2025, though net debt increased to $7.559 billion primarily due to decreased cash reserves Change in Debt (Q1 2025) | ($ millions) | Amount | | :--- | :--- | | Total debt – beginning of period | 10,345 | | Total debt – March 31, 2025 | 10,332 | | Less: Cash and cash equivalents | 2,773 | | Net debt – March 31, 2025 | 7,559 | - The increase in net debt was primarily due to a decrease in cash and cash equivalents[95] - The company is in compliance with its financial covenant, with total debt and lease liabilities at 24.8% of total capitalization, well below the 65% limit[91] Shareholder Returns In Q1 2025, Suncor repurchased 13.6 million common shares for $750 million, and initiated a new Normal Course Issuer Bid (NCIB) Share Repurchase Activity (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Shares repurchased (thousands) | 13,600 | 6,438 | | Weighted average price ($/share) | 55.15 | 45.53 | | Share repurchase cost ($ millions) | 750 | 293 | - A new NCIB was launched on March 3, 2025, authorizing the repurchase of up to 123.8 million shares[98] Quarterly Financial Data This section summarizes Suncor's key financial and operational metrics, along with business environment indicators, over the past eight quarters Quarterly Financial and Business Environment Summary This section provides a summary of Suncor's key financial and operational metrics over the past eight quarters, from Q2 2023 to Q1 2025 Quarterly Financial Summary (Selected Data) | Three months ended | Mar 31 2025 | Dec 31 2024 | Sep 30 2024 | Mar 31 2024 | | :--- | :--- | :--- | :--- | :--- | | Total upstream production (thousand barrels per day) | 853.2 | 875.0 | 828.6 | 835.3 | | Net earnings ($ millions) | 1,689 | 818 | 2,020 | 1,610 | | Adjusted operating earnings ($ millions) | 1,629 | 1,566 | 1,875 | 1,817 | | Adjusted funds from operations ($ millions) | 3,045 | 3,493 | 3,787 | 3,169 | | Net debt ($ millions) | 7,559 | 6,861 | 7,968 | 9,552 | Quarterly Business Environment (Selected Data) | (average for the three months ended) | Mar 31 2025 | Dec 31 2024 | Sep 30 2024 | Mar 31 2024 | | :--- | :--- | :--- | :--- | :--- | | WTI crude oil at Cushing (US$/bbl) | 71.40 | 70.30 | 75.15 | 76.95 | | WCS-WTI heavy/light differential (US$/bbl) | (12.65) | (12.55) | (13.50) | (19.35) | | Suncor custom 5-2-2-1 index (US$/bbl) | 26.80 | 24.25 | 26.05 | 35.95 | Other Items This section confirms no material changes to accounting policies or internal controls, and no updates to 2025 corporate guidance Accounting, Controls, and Guidance This section confirms that there are no material changes to accounting policies or critical estimates, and internal controls over financial reporting were effective as of March 31, 2025 - Suncor's critical accounting estimates are detailed in the 2024 annual MD&A and audited financial statements, with no updates noted for Q1 2025[110] - The CEO and CFO concluded that the company's disclosure controls and procedures are effective as of March 31, 2025, with no material changes to internal controls over financial reporting during the quarter[112] - There have been no changes to Suncor's previously announced 2025 corporate guidance ranges[115] Non-GAAP and Other Financial Measures Advisory This section defines and reconciles non-GAAP financial measures used for performance, leverage, and liquidity analysis, noting their non-standardized nature Non-GAAP Measures Overview This section provides definitions and reconciliations for non-GAAP financial measures used throughout the report, which are not standardized under GAAP - Adjusted operating earnings is a non-GAAP measure that adjusts net earnings for significant items not indicative of operating performance to improve comparability between periods[117] - Adjusted funds from operations adjusts cash flow from operating activities for changes in non-cash working capital to analyze operating performance and liquidity[123] - Free funds flow is calculated by subtracting capital expenditures from adjusted funds from operations and is used to measure the capacity to increase shareholder returns and grow the business[126] - Net debt and total debt are non-GAAP measures used to analyze financial condition. The definitions were revised in Q2 2024 to exclude lease liabilities to better align with industry practice[134][135] Common Abbreviations This section provides a reference list of common abbreviations for measurements, places, currencies, and financial terms Common Abbreviations This section provides a reference list of common abbreviations for measurements, places, currencies, and financial terms used within the Management's Discussion and Analysis Selected Abbreviations | Abbreviation | Meaning | | :--- | :--- | | bbls/d | barrels per day | | WTI | West Texas Intermediate | | WCS | Western Canadian Select | | SCO | Synthetic crude oil | | DD&A | Depreciation, depletion and amortization | Advisories This advisory cautions on forward-looking statements, highlighting that actual results may differ due to various segment-specific and general business risks Forward-Looking Statements This advisory section cautions readers that the report contains forward-looking statements based on current expectations and assumptions, highlighting that actual results may differ materially due to risks and uncertainties - Forward-looking statements include expectations regarding planned maintenance, production levels at White Rose, the 2025 capital spending program, and management of debt and liquidity[146] - Key risks for the Oil Sands segment include price volatility, operational reliability, pipeline constraints, and operating costs[144] - Key risks for the E&P segment include price volatility, operational risks like blow-outs, and political risks in foreign operations such as Libya[145][147] - Key risks for the R&M segment include fluctuations in demand and supply for refined products, market competition, and operational reliability[148]