Suncor Energy Inc. (SU) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Suncor Energy First Quarter 2025 Financial Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Suncor Energy's Senior Vice President of External Affairs, Mr. Troy Little.

Thank you, operator, and good morning. Welcome to Suncor Energy's First Quarter Earnings Call. Please note that today's comments contain forward-looking information. Actual results may differ materially from the expected results because of various risk factors and assumptions that are described in our first quarter earnings release as well as in our annual information form, both of which are available on SEDAR, EDGAR and our website, suncor.com. Certain financial measures referred to in these comments are not prescribed by Canadian generally accepted accounting principles. For a description of these financial measures, please see our first quarter earnings release. We will start with comments from Rich Kruger, President and Chief Executive Officer; followed by Kris Smith, Suncor's Chief Financial Officer. Also on the call are Peter Zebedee, Executive Vice President, Oil Sands; Dave Oldreive, Executive Vice President, Downstream; and Shelley Powell, Senior Vice President, Operational Improvement and Support Services. Following the formal remarks, we'll open the call up to questions. Now I'll hand it over to Rich to share his comments.

Good morning. Suncor's first quarter was about maintaining momentum and starting 2025 strong. I believe we successfully accomplished both objectives. I'll comment on some operational highlights, and Kris will further focus on financial performance. I'll start with personnel safety. Previously shared that 2024's performance was as good or better than 2023's best ever with recordable and lost time events down significantly. I'm pleased to report the positive performance has continued year-to-date 2025. Special call out to Dean Wilcox's base plant team, winners of the John T. Ryan 2024 National Safety Award for outstanding safety performance in major projects and civil work. This is awarded annually by the Canadian Institute of Mining, and it's the Holy Grail in mine safety. Process safety. Previously shared that 2024's performance was best ever first quartile in North America, while the first quarter of '25 performance demonstrated continued improvement, significantly better than 2024's. Personal belief, you can't be a well-run company without being a safe company. Upstream production, 853,000 barrels a day, our highest first quarter ever and our second highest quarter ever, 18,000 barrels a day higher than our previous best first quarter, which was achieved last year. Upgrader utilization, a very strong 102%. It's the fourth quarter out of the last 5, where we've been at 99% or higher. Continued high performance from our profitability pacesetter Firebag at 248,000 barrels a day, results particularly good considering harsh weather for much of February in Alberta. Refining throughput, 483,000 barrels a day, far and away the highest first quarter in our history, 28,000 barrels a day higher than our previous best first quarter, again set last year. Refining utilization, exceptional at 104%, the third consecutive quarter above 100%. In fact, every refinery achieved higher throughput and higher utilization year-on-year. And our overall bottom line is within 5,000 barrels a day of our best ever quarter of any quarter. Refined product sales, 605,000 barrels a day. Here again, far and away the highest first quarter in company history, 24,000 barrels a day higher than the previous best first quarter, again, set last year. The third highest quarter ever with the top 2 quarters being the last 2. In fact, the past 5 quarters have been our highest in company history. In 1954, a gentleman named Roger Bannister, the world's first 4-minute miler, said records are meant to be broken, and that is exactly what Suncor teams continue to do, break records. Total costs, OS&G, $3.3 billion, down $143 million or 4.2% in absolute dollars versus the first quarter of last year despite higher production and throughput across the board. 3% to 4% higher absolute volumes, 4% lower absolute cost, operating leverage achieved with a culture and a mindset that every barrel and every dollar matter. I want to take you back 12 months ago, Investor Day, May 2024. We established several objectives for the 3 years '24 through '26 to improve performance, create shareholder value. They were tied to production growth, cost reduction, free funds flow growth and net debt. At the end of last year, end of '24, we reported on the first year progress, production growth, we have achieved 75% of our 3-year target, breakeven reduction, 70% or USD 7 a barrel of the 3-year target. Free funds flow, $2.3 billion or 70% of the 3-year target. And of course, net debt achieved our $8 billion target in the third quarter of last year. The bottom line, 1 year into our 3-year plan, we've exceeded every single target, essentially achieved 2 years of our planned improvements in the first year. But the best and most important part, we aren't done yet. What gives me this confidence? In the first 4 months of the year, I've spent a lot of time in the field at our plant sites, in our mines, meeting with and talking to hard-working, card-carrying operational and technical experts. I spent time at the base plant looking at our U1 coke drum replacement project and reviewing autonomous haul truck operations. Time at Syncrude's, Mildred Lake and Aurora mines, observing best-in-class truck and shovel operations, touring Syncrude's heavy equipment maintenance shops at Fort Hills inspecting the major new state-of-the-art heavy equipment arrivals. I've been at our Montreal and Sarnia refineries with teams driving industry-leading utilization, touring our retail site network, meeting Petro-Canada associates across the country. Why do I and my colleagues spend all this time in the field? Because Suncor's leadership team knows the game is won on the field with the players and on the field is where you'll find us. So what did I see that reinforces we're not done yet. Base plant autonomous haul truck operations Mike [Gartenberg's] team, at year-end 2024, we achieved our objective of 91 autonomous haul trucks moving all productive ore. Since then, we've increased our fleet to more than 100 trucks on the way to 140. In 9 months, we've achieved performance equal to staffed operations versus a typical industry benchmark of 2 years. We're leveraging data analytics, creating a new world-class AHS command center. We're collaborating with our partners, Komatsu and SMS to upgrade AHS software to improve all-weather or what we call mud mode operating performance. The productivity expectations we have in AHS at the base plant is expected to yield the equivalent of [10, 3 400-ton] haul trucks by 2026. Coke boiler replacement and cogeneration project, [Mike Hage's] team, where we replaced 3 old coke drum -- our coke-fired boilers with 2 new 400-megawatt gas-fired generators, added new high-efficiency heat recovery steam generators. We completed the project and achieved start-up in the fourth quarter of last year. We've now tested each unit at over 400 megawatts. The project will meet steam needs for the base plant with surplus power exported to the Alberta grid, improves reliability, lowers cost, generates power revenue and lowers emission. Syncrude, Aurora mine truck loading operation, Alex Stark's team. Aurora supplies 2/3 of Syncrude's mined bitumen. The mine is supported by a fleet of 70 to 75 Caterpillar, 797 400-ton haul trucks. Historically, we've loaded each truck to 93% of capacity or 370 tons per truck. Alex's team has increased its load factor to over 100% now, a full 10% increase, 30 to 40 more tons of productive ore on each and every truck achieved through shovel operator best practices and load sensing technology. The impact, lower unit costs, higher productivity equal to [7, 3 400-ton trucks]. Fort Hills, new hydraulic shovel, [Hollister Givens] team, last Thursday, I attended a ceremony commissioning the world's largest hydraulic shovel the PC 9000, first of its kind, serial #1, designed in partnership with Komatsu and SMS, purpose-built for Suncor to be perfectly paired with our Komatsu 400-ton truck fleet, larger bucket, longer reach, greater digging force, swivel capacity for duals side loading, the results, faster loading, less repositioning, less spillage. Having seen it and walked on it personally, the PC9000 is a beast. I personally pulled out my a stop watch on my phone and timed loading operations, 4 scoops, 404 tons in 1.5 minutes. Folks, that's fast. Deployed in Fort Hills Center pit, we've got a second shovel scheduled for delivery in July and 2 more next year. This is an example of vision, partnership, technology and scale driving productivity and lowering costs. Refining operations. I spent time with [Connor Putney's, Sarnia team] and [Isabelle Arbor's] Montreal team, seeing how maintenance and reliability best practices are driving higher utilization, how turnaround benchmarking and risk-based work selection are reducing capital and operating costs, how low-cost debottlenecking is achieving record-setting refining throughput. Two examples I want to share with you of grassroots focus on driving performance and adding value brad Jones, process operator Sarnia Refinery Brad had the idea to spend $200,000 for tie-ins to maintain flow flexibility during our recent April turnaround. $200,000 added $4 million in jet fuel margin, a 20:1 payout in 1 month. Well done, Brad. [Remi Liberge], crude unit operator, Montreal refinery, whose idea for minor piping modifications at a onetime cost of $300,000 to increase refining capacity by 500 barrels a day is adding more than $1 million in margin every year. 2025 will be the first full year. These examples illustrate the power of clear, simple priorities, focusing on the fundamentals, understood and embraced top to bottom delivering results. Supply trading and marketing. In the first quarter, I witnessed Paula O'Shaughnessy's, [Paula Dimas] and Derek Davies' teams supplying and trading in volatile East-West crude and refined product markets to capture premium margins at lower cost. And lastly, I spent time with Pat Ritchie, Petro-Canada retail and wholesale associates working in partnership to increase market share and site margins nationwide. I'll stop there, but here again, these are only a few examples I could share of Suncor teams, technical, operational and commercial working together to deliver industry-leading results, teams with the drive of fierce competitors and the determination of champions, teams unstoppable in their commitment to be the best of the best. With that, I'll turn it over to Kris.

All right. Thanks, Rich, and good morning, everyone. Building on Rich's comments, it was yet another strong operational and financial quarter as we continue the positive momentum we built in 2024. But first, with respect to the business environment in the quarter, there was obviously a lot of uncertainty around the impact of U.S. tariffs. But in the end, the commodity prices across the quarter remained constructive. In the quarter, WTI and the light heavy differential remained relatively flat versus Q4 at USD 71.40 a barrel and USD 12.65 a barrel, respectively, while synthetic crude decreased about $3 a barrel, averaging a discount of USD 2.35 a barrel to TI. On the refining side, New York Harbor 2-1-1 cracking margins improved versus Q4 by USD 2.25 a barrel, driven largely by improving distillate cracks. And our 5221 refining index remained strong at USD 26.80 a barrel. Finally, natural gas prices increased by CAD 0.60 a GJ versus Q4, averaging about $2 a GJ in the quarter, but obviously remain attractively priced for natural gas consumers like our business. Rich has already detailed our Q1 operational performance in his remarks, so I won't repeat them here other than a few points. Oil sands production in the quarter was 791,000 barrels per day with in situ averaging 283,000 barrels per day in the quarter. Fort Hills continuing to deliver solid operations with 176,000 barrels per day in the quarter, while upgrading was strong at both base plant and Syncrude at 103% and 100% utilization, respectively. E&P averaged 62,000 barrels a day in the quarter, which is up 5,000 barrels per day from Q4 despite some temporary logistics challenges at [indiscernible] loading terminal in the quarter, which have since been resolved. In addition to very strong refining throughput and refined product sales in the quarter, our refining business also posted a very strong margin capture, averaging 99% on a LIFO basis when compared to our 5221 index. This high asset utilization and margin capture is a reflection of the powerful combination of strong asset reliability and our best-in-class supply and marketing business, which maximizes value across our various trade channels. We also continue to demonstrate operating leverage with total OS&G expense of $3.3 billion, which is down quarter-over-quarter, while production and sales were up in both the upstream and the downstream, while capital expenditures totaled $1.1 billion in the quarter, including $600 million of economic investments and $500 million of sustaining and maintenance capital. This strong operational performance and cost management led to very positive financial results in the quarter. We generated $3 billion of adjusted funds from operations or $2.46 per share in the quarter and adjusted operating earnings of $1.6 billion or $1.31 per share. I think it's worth noting that when comparing quarter-over-quarter, Q1 '25 to Q1 '24, despite a 7% decline in WTI and average 24% decline in New York Harbor and Chicago 2-1-1 cracks, you see that our AFFO per share is the same and our free funds flow per share is actually 6% higher. This is a clear demonstration of the impact of our improving performance. As Rich just said, at Suncor, every barrel and every dollar matters, and this is proof of that. In the quarter, we also returned nearly $1.5 billion to shareholders, including $705 million in dividends and $750 million in share buybacks, which was 1.1% of our float. We continue to focus on returning 100% of excess funds to shareholders while prudently investing in the business to grow returns to our shareholders. As expected, we saw a working capital increase during the quarter of about $1 billion, contributing to net debt at quarter end being $7.6 billion, which is aligned with our debt management and capital allocation strategy. Overall, first quarter operational and financial performance demonstrate a continued relentless focus on executing the fundamentals of our business and generating value for our shareholders. Now before handing it back to Rich, I just want to make a few comments on the second quarter. We're into our second quarter turnaround program, and it is on plan for our 2025 guidance. The Sarnia refinery started its crude Unit 1 turnaround on March 29, which includes planned maintenance work on the cat cracker and alkylation units, and I'm pleased to say the team has made great progress on the event against the plan. As well, the Edmonton refinery spring turnaround, which includes the sour crude unit, hydrotreaters, sulfur train and delayed coker unit started on April 15 and is also proceeding very well and on plan. And lastly, the Base Plant Upgrader 1 turnaround, which includes the coke drum replacement project is also underway. The event started on May 1 and is a planned 91-day outage. We are extremely pleased with the planning and preparation the team has done going into this event, and we're very well positioned for the execution of both the turnaround and this important project. And we look forward to completing all these events and reporting on them at the end of our second quarter. Finally, I want to take a moment to acknowledge the market conditions we're currently facing with WTI prices currently bouncing around $60 a barrel amid the market uncertainty we've seen over the last few months. I'm very pleased that the significant strides we've made over the last 2 years to improve our operational and financial performance, significantly reduce our WTI breakeven and strengthen our balance sheet has significantly improved our company's resiliency and position Suncor to weather these uncertain times and continue to generate solid free cash flow for our shareholders. Suncor is a resilient company with a best-in-class integrated business model and a highly focused and capable team. You heard many examples from Rich, both of which will prove to be a significant advantage during times like these and position us extremely well into the future. And with that, Rich, I'll turn it back to you.

Thanks, Kris. A couple of comments before we just dive into the Q&A. Our objective, today's Suncor high-performance sustained excellence. '24 was a good year, '25 is off to a good start. Kris talked about our strength and resiliency. I'll end with a quote from the late Academy Award-winning actor, Jean Hackman. In the 2000 film, The Replacements, Hackman starred with Keanu Reeves, the quote,” Winners always want the ball when the game is on the line." Folks, I am seeing Suncor teams company-wide continue to show me they want the ball. With that, I'll turn it back to Troy.

Thank you, Rich. I'll turn the call back to the operator to take some questions.

[Operator Instructions] Our first question will come from the line of Dennis Fong with CIBC.

Congratulations for a very strong first quarter. My first question here, just you had to contend with the impacts of colder weather in January and February. Can you talk towards your strategy around managing the various oil sands assets and operations that you have through kind of those challenging conditions?

Yes, I'll take it. Thanks, Dennis. I don't mean to be flippant here, but the last time I checked, it's always cold in Canada in the first quarter. So we have taken a strategy of philosophy. We're not going to be a weather taker. We're going to be a weather maker. And so what Peter and Dave have done is they focus -- they've designed into our operation, the resiliency for extremely cold weather conditions, whether that's the fuel in our haul trucks, whether that supplemental winterization at our refineries. We face this uncertainty, this variability every year. And for the last 2 years, we have been very focused on how do we engineer or design out that risk of that variability. So if you want any further examples, I can ask Peter and Dave to comment. But like so many other things in our company, we've looked at it and just not accepted the outcome, but saying, what can we do that can change or improve our performance independent of what the circumstances would be. And I think our winterization program is a -- you didn't read about winterization in our press release because we've engineered to accommodate and deal with it.

Appreciate that color. I'm not sure if Peter was going to step in there.

I don't know that -- Peter, do you have anything to add particular to that?

Maybe I'll just add a couple of things, Dennis. But I also -- you really start to see the strength of our integration across oil sands come out here. So where if an issue crops up in a single asset, we can really lessen or buffer out that impact by moving barrels across our integrated production ecosystem. And you saw that in the high asset transfers that we reported on this quarter. That's really the strength of Suncor and the strength of Suncor integration coming through.

I can add a little bit from a refinery perspective as well. It's Dave here. There's thousands and thousands of things you have to get right for winterization to work at a complicated refinery, and I've seen these things all over the world. And the key really is to learn from past winters and make sure you capture the learnings of the instruments and the various things that freeze up and make sure you have a disciplined approach to ensure that they're in good shape for the following winter. And the other thing that is probably interesting and people may not appreciate is, we start our winterization program sometime around July, right? It's the middle of summer, and that's when we're starting to focus on it because we know winter comes every year.

Really appreciate that underlying context. My second question shifts a little bit towards technology and in aggregate, improving operations. I know back with the May Investor Day update, you guys talked a little bit around the Mine Connect tool, which really kind of helps optimize the mine fleet in aggregate. But I think the other thing that you've mentioned at least a few times in conference calls is that while you present some of the really interesting opportunities, a lot of those kind of new ideas come from within the organization. So I wanted to kind of like address like how is the Mine Connect tool doing in terms of optimizing operations? And secondarily, what does that maybe spun out in terms of incremental benefits that you maybe didn't realize right when you kind of implemented the tool to begin with?

Peter and I got -- we were up at Fort Hills last Thursday, and we went -- the folks took us through and they were giving us their dashboards and their screen. Peter, do you want to comment on some of the things we were focused on?

Yes. And Dennis, the Mine Connect tool is only that -- it really is a tool, but it provides insights to the operations team so that they can take action, and that's obviously where the value is generated. When Rich and I were up at Fort Hills last week, we talked with the Fort Hill team about their short [indiscernible] control and the use of some Mine Connect data and how that comes into our operating cadence and our operating performance through our operational excellence management system. So it's really about identifying an outlier which is delivered by the Mine Connect tool, taking immediate action and then generating the value in the field. And that's really kind of where the power comes in from data and insights and technology to quick action by the leadership team.

And Peter, one of the things that really struck me as we sat there is the real-time nature of the team leads who had the gentleman in the room with us, he talked about how they meet periodically multiple times a day every few hours as the opportunity is migrating from whether it's a shovel operation or a truck efficiency. And so we don't lose a moment in the ability to optimize or improve overall performance. To me, that was really a powerful discussion that we had.

Yes. It really is about the timely response to a varying condition.

One moment for our next question. And that will come from the line of Greg Pardy with RBC Capital Markets.

I wondered if we can maybe just pivot to the downstream and then specifically progress made on retail EBITDA growth. Like as I ride my bike around Toronto, what I see are you're closing some stations. I know there's enhancements going on elsewhere. Just curious how the strategy is unfolding and whether the retail kind of in the same question, but whether the retail is ultimately core to your business longer term?

Thanks, Greg. I'll ask Dave to comment in a second, but you're exactly right. If you go back to either our retail review or our Investor Day, we talked about how that we're looking at that portfolio of some 1,600-plus sites nationwide, and we're high-grading and upgrading major markets, the highest volume, highest margin sites, we're growing those, and then we're rationalizing on the other end of that. Dave, do you want to comment on how we're doing?

Yes, for sure. And Greg, riding your bike around it's not helping our retail business. We'll have to [indiscernible] for a burger at an A&W.

You got to loyalty program.

We do have other options though for you, Greg, in our convenience stores and our quick-serve restaurants. But we are executing plans to grow our domestic retail business. I'd say actually retail and wholesale. And we mentioned back in May that we're committing to grow that by EBITDA by $200 million by the end of 2026. And in fact, we have plans that go beyond 2026 as well. And that serves us well in terms of finding good domestic outlets for our products. And that plan involves high grading or transforming 20% of our network between '24 and '26. And I would say it is well on track. As Rich mentioned, he likes to say we're building sites that you can take the family to for the day and enjoy hours of fun at our retail sites. They're larger sites with larger C-stores, quick-serve restaurants, car washes and all really designed to achieve top returns. In the first quarter, we actually completed 8 site enhancements and 1 new build. We also rebranded 7 competitors [indiscernible] Metro Canada brand, and that's part of a program of 20 sites, which are actually -- we completed 16 up until today. So 7 in the first quarter, 17 today, and the final 3 are actually opening today. So there'll be 20 new rebrands there. And we're enhancing our sites to drive increased fuel sales and reduce our overall pumping costs and have resilient sites over time. We also mentioned previously our Canadian Tire relationship that continues to go strong. And that's helped us over the past year increase our PetroPoints membership by over 30%. So that really material increases. We're starting to see that now in the volumes and play into the strong Canadian brand that we have that's been really helpful through the first quarter. We saw a 6% year-on-year increase in retail, a 9% year-on-year increase in our Petro-Pass truck stop business. So we continue to grow on that business and it's delivering.

And David, I can just build off of that one. I think it's important, Greg, to recognize all barrels aren't created equal. There is a clear Pareto chart a priority of the highest value barrels, the branded company-owned retail in major markets, top of the food chain and so on. And what I like Dave and Pat Ritchie's teams understanding that. It's not about volumes. It's about value. But when you can couple volume with value, that's when you get the exponential effect. And that's what I see this team doing.

Okay, Rich. So kind of a part of the same question, I mean, back at Imperial, you did that big transaction where you guys sold off the retail for a huge price at the time. Not to put words in your mouth, but are you -- is this an asset that you're absolutely wed to? Or is it -- how do you think about the retail ultimately as a core part or not a core part of the business?

The only thing I unconditionally love are my kids and my grandkids. Everybody else has to earn their seat at the table. And I'm not making a statement about retail at all, but we look at all of our assets for their ongoing contribution and their value to us. And right now, with the value that's being created here, this is a very, very valuable part of our portfolio where we think there is continued growth in an uncertain world like we're in today, that full integration all the way through the value chain is another set of value opportunities for us. So I never say never, but right now, that is a very, very valuable part of the company's operations.

Okay. Okay. And it will oblige me maybe just on a second one. So if I roll back the clock this time last year, you talked about $3.3 billion of incremental free funds flow. You've accelerated it in terms of what you've been able to achieve. But I'm just curious, from what I understand that, that number was actually bigger that there were headwinds that you kind of factored into the estimation of that number. And I'm just curious, what are you seeing in terms of -- are the headwinds as acute as you expected or what have you?

I think we're seeing examples where the -- if you talk about inflation or things like this, that's part of it. But I also like the proactive things both Dave and Peter are doing that also affect those headwinds. As we, for example, and I'll use a simple example, as we deliver and take ownership of bigger haul trucks, we send home rental trucks that are smaller. Well, that also influences the market. And so I would say that the headwinds we're facing, and gentlemen, don't let me put words in your mouth, we're probably counteracting more of those headwinds than we would have anticipated a year ago. Fair?

I would agree with that. It is all about driving efficiency and productivity and getting more out of the assets that we have than what has been historically generated. So that is something that is at the forefront of our minds and our daily drive each and every day.

I'll come back to a point I made just a few minutes ago, Greg, though. We're approaching everything is we don't want to be a market taker, but a market maker. And so whether that's for goods and services, whether that's how we participate in the refined product sales is, historically, you could look at things and well, this is up, this is down. What can we do to alter that for a better outcome for Suncor. It's a mindset. It's a culture. It's just a -- it's a passion for making things the absolute best they can be. And I think this area on the headwinds is the same thing. We didn't -- if there's -- whatever that number was in our Investor Day, it was an offset, and we're saying, okay, well, that's just like everything else. What can we do to reduce that impact and create more value.

One moment for our next question. And that will come from the line of Manav Gupta with UBS.

I wanted to first focus on the refining side, 99% capture, one of the highest we have seen in North America. Help us understand a little more what's driving this high amount of capture versus relative to your peers and how you continuously on a per barrel basis, remain one of the most profitable North American refiners.

Dave, how we do it?

How we're doing it? It really comes down to our integration and capturing value all the way through the value chain. Our Suncor integration helps us -- we grow our branded channels. We're leveraging our trading capacity. We're optimizing our production in upstream and downstream assets. And as I mentioned in response to Greg's question, one of the big things that drove margin capture is improving our channel mix. And we saw that specifically in the first quarter, we saw retail volumes up 6%. We saw our truck stop business up 9%. And more importantly, even with increased throughput and record throughput at the refineries, we saw our exports down 25% in the quarter. And that's really what helped drive -- that's a big factor in driving the margin improvement. So we're capturing -- or the -- yes, the margin capture and the improvement of that margin capture. So we're capturing the full value, and we're trying to keep more and more of that domestically.

And I'd say the other thing I'd add to it, David, I think the kind of the philosophy that over the last couple of years is our -- we have said to our refining teams run your facilities to the full extent of their capacity. That drives down unit cost. It increases the throughput. And then the opportunity for your marketing teams is go out there and capture that improved volume mix. So as opposed to in the past, at times, we have said, okay, well, here's what the demand is. So we might have and we have actually adjusted refining throughput to meet an anticipated demand or our expectation of the markets. Last time I checked, I can never sell a barrel I don't produce or refine. So we've turned that around and said, get after it, and we'll find valuable homes. And I think our teams have risen to that opportunity.

My second question is you do have a big turnaround on upstream coming up. Help us understand the risk planning around it and how you will make sure that this turnaround completes on time and on budget.

It's a combination of a turnaround and then a project on a coke drum replacement. So Shelley, let me ask you to comment on that because the real determinant of the success of this is the 91-day coke drum replacement project. Talk about the preparation your teams and the risk management your teams have undertaken on that.

Yes, for sure. So we're in a very good spot with this project. The team is in place. And as you said, we are well into the start of execution with that turnaround now underway. And in fact, this weekend, we just completed one of our first important lift -- so it's been very good to get that behind us. It sets the team up well for the remaining lift activities. And as you said, coming into the event, we did a lot of work focused on risk, risk management, risk mitigation, and we were really well prepared. We have all of the prework done, and that included actually doing some early planning and preparatory lifts. So we practiced some of this stuff ahead of time to make sure that we had the equipment in the right spot. We had the people trained and ready to go and everybody knew what their role was going to be. So we're very confident with the team that we have in place. A lot of these folks have actually done some of this type of work before, not necessarily at our site, but certainly the crane, the crane operator, they go around the world lifting coke drums into place. So this is just a different site for them to do that work.

And we were up there as a leadership team, what, 6 weeks ago, 6, 7 weeks ago or something. And I was going to say we crawled all over that steel, but we crawled over a lot of concrete as well. And so it's a mix. It's a project, but it's extremely integrated with the operations. And I would say the Shelley's, your team -- your team, coupled with Peter's team, that is the best collaboration between technical -- operations and projects that I probably witnessed in my career. And that's what it will take for this to be a huge success. We have to be seamless in our execution and our handoffs and the -- we won't declare victory until we're done, but we feel quite good about our level of preparation and planning.

Congrats on another strong quarter. Every quarter, you seem to be setting new positive records. Congratulations.

One moment for our next question and that will come from the line of Neil Mehta with Goldman Sachs.

Just want to start off with -- in a choppier macro, capital flexibility has been a hallmark of the businesses, Rich, you've run over the years. And so as we think about that 6.1% to 6.3% of capital, how are you thinking about that? And how do you drive and maximize capital efficiency to ensure that there's headroom to continue to return capital to shareholders?

Yes. Thanks, Neil. If I -- let me step back just a little bit further than that. If you go back to May of last year, we outlined what our strategy, how do we win with the asset base we have. And we talked about industry-leading performance in operational integrity, reliability, we highlighted -- in fact, it was on Page 4, if I remember correctly, of the deck that driving to a cost structure that gave us financial resilience in a less than a $45 WTI business environment. I think I heard someone recently in a call referenced their tagline that they're built for this. Well, Suncor's version, we are rebuilt for this. We are rebuilt for this business environment. And what it allows us to do is execute our plans without hitting the gas or jamming on the brakes and doing what we know is in the best long-term interest of the business. And I think that's important. We go through commodity swings in this business, whether that's the early '90s, the early 2000 -- or the late '90s, early 2000s, 2014, 2020. If you've been in this business long enough, you've seen this movie. It's not new. But I'll take your question more explicitly. You do get more judicious on your economic spend. Does it -- you establish a high hurdle for the economic payout? Do we need to spend it today? Or can we let the dust settle and see where we are 6 months or a year from now. Those are the prudent things we're doing and looking at. And as we drive down our sustaining capital through improved turnaround performance and just risk-based work selection, our overall capital decompresses. We're also at a stage where a lot of our economic capital is wrapping up. And so we have the ability to say kind of what's next and at what pace. I talked about the CBR project. Shelley just commented on the U1 CDIP. So as those tail off, we will determine what economic capital replaces those? Does it replace it now? Does it replace it later in the macro? And I like that flexibility. But it all starts with a rock-solid balance sheet, a low and very, very competitive WTI breakeven. And today's Suncor is rebuilt for this business environment.

No, that's fairly clear. And it might be too early to comment on this, Rich, especially given the macro. But as we start to bridge to '26, which is coming rapidly in front of us here, how should we think about the moving pieces around capital? And is it fair to say there's a downward bias relative to this year?

I think, again, if you go back to the investor deck of a year ago, we showed that '24, '25, '26. We showed that coming down. And a part of that is improvement in the overall level of sustaining spend as we just make better, wiser decisions there. And then, of course, the rest of it is the economic. And we'll -- I think the specific number, I think, for '26 that we showed was 5.7. So it does show coming down year-on-year-on-year. And I think that's exactly what we'll be driving toward. And if the business environment warrants that further, that's exactly what we will -- that's exactly what we'll evaluate as we go through our business planning process this year.

And that will come from the line of Menno Hulshof with TD Securities.

I'll start with a bigger question on the political landscape. And I think it's probably too early to comment, but has there been any response from the Feds on the group industry letter that was issued in recent weeks? And I guess the more specific part of the question is, have you been given any loose guidance on pathways or the oil and gas emissions cap? It feels to me like it's all generally a part of the same conversation, but any thoughts there would be helpful.

Yes. I think you described it well. It's pretty early in it. But if I go back to the 2 letters that industry signed, the first one was 7 or 8 weeks ago now before the election where 14 CEOs signed a letter to all of the political leaders on when we looked at the ambitions of the leadership for economic growth and prosperity for Canadians, that was our call to action that energy can and should, in fact, must be a part of that. And we said for that to occur, we're ready, willing and able to do that, but we need these conditions. And so the more recent letter, which was those original 14, and we had another long list. I think the final count was 38 energy CEOs signed on to that letter where we reiterated those conditions that we need to be a part of the ambition of the economic health and prosperity of Canadians. And it's a bit early. I won't get into -- there are conversations going on. I won't get into what he said or she said. But I think that the alignment within the industry, the importance of the industry to the economic health and well-being of the country, I think that is understood. And I hope our call to action, which has a sense of urgency to it. I hope we see the political powers that be, the will to enable that investment environment to allow this industry to perform to its full potential. And when we do that, Canadians nationwide will benefit. And Suncor looks forward to being a part of that.

And then my second question is on Firebag, which continues to perform exceptionally well. Is there anything you would want to flag in terms of recent changes to surface or subsurface best practices? Or is it more a function of improved execution on existing standards and protocols?

Firebag is one of the few big assets that I have not went to yet year-to-date, primarily because I want to stay out of their way. That team is focused like a laser on incremental value. But what I will tell you is, several of us here in the leadership team, we've had, what, 5 now. I think it's 5 sessions with our technical experts, geophysicists, engineers, geologists with logs, maps, cores, looking at how can we continue to extract and develop the full potential of this asset. We're looking at completion technologies. We're looking at the noncondensable natural gas utilization, further infill drilling. So the folks around the table with me, we've rolled up our sleeves to engage with the folks that see the opportunities. And every time I'm in one of those sessions, I walk away with a higher ambition, a higher expectation of what that asset can do not only in the short term, but the long term. I referred to it as everything as from a rock star to the gift that keeps on giving. I got to come up with some new phrases for it because that is a winning asset, and that team understands that. We're prioritizing the work, the allocation of capital to achieve it. And I think you can get used to on calls to come, we are going to continue to talk about progress at Firebag because it is just an incredible -- it is a pacesetting asset that I -- as I've said before, you give me a choice of any single in situ asset in the province, my #1 draft pick is Firebag.

Just a point of clarification. Are you applying [NCG] already? Or is that future upside?

Small amounts, but we see when we look at -- this is a great example of today's Suncor. When we look over our fence line and look at what others are doing and try to capture and accelerate their learnings, we see an opportunity for us to further expand that, redistribute steam, lower our steam oil ratio and develop incremental barrels. So yes, we've been applying it, but our future will be applying it at a larger scale.

I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Troy Little for closing remarks.

Thank you, everyone, for joining our call this morning. If you have any follow-up questions, please don't hesitate to reach out to our team. Operator, you can end the call.

This concludes today's conference call. Thank you for participating. You may now disconnect.