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Economic

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Major opportunities and risks

Opportunities:

  • Maintain a strong balance sheet
  • Maintain an enterprise-wide focus on operational excellence and continue to improve reliability in our operated assets
  • New technology improvements in operational and sustainability performance
  • Maximize value between our upstream production and our downstream assets
  • Continue efforts to reduce environmental impact
  • Deliver profitable growth through disciplined capital investments with a priority on cost and quality over schedule

Risks:

  • Our annual report includes information on financial and environmental risks
  • Commodity price volatility
  • Market access for all products (infrastructure approval and build-out risk)
  • Government policy
  • Environmental regulations
  • Operating outages and major environmental or safety incidents
  • Project execution and partner risk

Operational responsibility

  • President and chief executive officer, Steve Williams

Policy

  • As Suncor continues on a growth path, we will continue to maintain a strong focus on operational excellence — running our business in a safe, reliable and a cost-efficient way.
  • Operational excellence in an organization as large as Suncor isn't about doing one thing right one time — it's about doing thousands of things right all the time. It requires rigorous management, constant oversight and a talented work force.
  • We have adopted several policies related to economic performance. Among others, some include:
    • Competition
    • Accounting reporting and business control
    • Business conduct
    • Enterprise risk management

Key strategies and procedures for implementation

  • Implementation of our Operational Excellence Management System (OEMS) across the entire enterprise.
  • Suncor has a large suite of growth options and a greater ability to invest and grow through the commodity price cycle. Our focus is to sequence our investments toward those projects that have the highest expected return on capital, near-term cash flow and lowest risk. Suncor pursues a parallel path of investing simultaneously in conventional hydrocarbon production and renewable energy.
  • For more information on Suncor’s business strategy, growth projects, performance, financial goals and objectives, please visit the Investor Centre.

Major changes to systems or structures to improve performance

  • Suncor's growth plan features strategic partnerships which involve plans to develop two oil sands mining projects with other partners — the Fort Hills mine, which is expected to be operated by Suncor, and the Joslyn mine, which is expected to be operated by Total. In late 2012, Suncor committed to make a decision on the Voyageur Upgrader which was a third component of the strategic partnership with Total. In March 2013, the partners decided not to pursue the upgrader due to significantly changed market conditions.
  • See our annual reports for additional activities, investments, and system improvements we made in 2011 to 2012.

Goals and performance

  • Suncor remains committed to a set of goals and values that guide our business decisions. Central to this is the principle of a triple bottom line, which means managing our operations and growth plans in a way that enhances social and economic benefits while striving to minimize the environmental impact associated with resource development.
  • Suncor is committed to five enterprise-wide value driving goals:
    • Continue to advance our journey to operational excellence
    • Improve maintenance and reliability across Suncor's operations
    • Attract and engage employees in support of Suncor's business strategy
    • Generate and sustain industry-leading returns
    • Achieve long-term sustainability targets
  • See performance data

Key successes and shortcomings

  • Oil sands production increased 7.5% compared to 2010 levels, averaging 304,700 barrels per day (bbls/d), as the company safely and successfully completed the largest upgrader planned maintenance event in its history. This event, which was completed safely and on schedule, was followed by the two highest oil sands production quarters on record.
  • Strong execution at Firebag: Production at Firebag 3 successfully ramped up and we expect to come in under our announced cost estimate of Firebag 4, which achieved first oil ahead of schedule. Average production in 2012 increased to 104,000 bbls/d from 59,500 bbls/d in 2011. Suncor expects Firebag production to approach 180,000 bbls/day over the next year.
  • Leveraging an integrated model: High reliability in our four refineries demonstrate world-class reliability, with 95% utilization rates. Consistent strong reliability has resulted in higher nameplate capacities at three of the four facilities since 2011. Transferring employees from Refining & Marketing (R&M) to Oil Sands also leverages the strong capability in our downstream operations.
  • Disciplined investments: In 2012, Suncor sanctioned participation in the Hebron project, off Canada's East Coast, making Suncor the only company to participate in all four oil projects off the coast of Newfoundland and Labrador. First oil from Hebron is expected in 2017.
  • Returning cash to shareholders: Our dividend has risen by 21% compounded annually over the past five years including an 18% increase announced in May 2012. We also completed a $1.5 billion share repurchase program in September and authorized an additional $1 billion share repurchase program in 2012. We continue to see such repurchases as an attractive investment opportunity and in the best interest of our company and our shareholders.
  • Maintain a focus on operational excellence: Suncor continued to implement its company-wide operational excellence program. Although 2012 was a challenging year for reliability at our upgrading facilities, Suncor's underlying cost discipline and performance trends were positive, as reflected in a $2/bbl decrease in cash operating costs per barrel from 2011.
  • Maintain a strong balance sheet: Cash flow from operations exceeded capital and exploration expenditures (including capitalized interest) by over $2.7 billion and were higher than net debt at year end by $3.3 billion, while the company's net debt fell to $6.6 billion in 2012 compared to $7 billion at year end 2012.
  • Download our 2012 annual report (PDF, 139 pp., 776 KB) for additional successes and shortcomings.