Capital spending and growth
Suncor spent $7 billion on capital and exploration expenditures in 2012, compared to $6.9 billion in 2011 and $6 billion in 2010.
In December 2012, Suncor's Board of Directors approved a $7.3 billion capital spending plan for 2013, balanced between growth and sustaining projects. Our 2013 corporate guidance is planned for average production of 570,000 to 620,000 barrels of oil equivalent per day (boe/d)*, representing an increase of approximately 8% in overall production and approximately 12% in oil sands production year-over-year.
- Approximately $3.3 billion of the 2013 capital spend is targeted toward growth capital, balanced between high-return projects in Oil Sands and Exploration & Production.
- In Oil Sands, the company anticipates spending more than $1.2 billion to support near-term production growth in both in situ and base plant operations, including the execution of a debottlenecking project at the MacKay River facilities, as well as funding longer term growth projects.
- In Exploration & Production, growth capital of approximately $1.6 billion is expected to go towards advancing the Hebron and Golden Eagle area development projects, and various development projects in existing operating areas.
- A $60 million growth capital spend in Refining & Marketing will largely be deployed on projects to prepare our Montreal refinery to receive shipments of western crude.
- Approximately $4 billion of the 2013 capital spend is expected to go toward sustaining capital investments focused on improving reliability across the company's assets, maintaining current production capacities through planned maintenance activities, and ensuring the safety and efficiency of existing operations.
In April 2013, Suncor announced it had reached an agreement to sell a significant portion of its natural gas business in Western Canada for $1 billion, subject to closing conditions with an effective date of Jan. 1, 2013, to a newly established partnership between Centrica plc (LSE:CAN) and Qatar Petroleum International. Estimated production from these assets in 2013 is approximately 42,000 boe/d (90% gas).
Steve Williams, president and chief executive officer, described the announcement as "further proof of our commitment to capital discipline and aligning assets with strategic objectives. We will continuously review and refine our portfolio of assets to ensure we are investing in projects that deliver profitable growth and strong returns for our shareholders."
The above Capital Spending highlights contain forward-looking statements. See the Legal Notice
Suncor's growth strategy
Suncor's growth plan includes a prudent balance of both in situ and mining oil sands projects, providing internal diversification, given the different capital and operating cost structures and potential technology advances associated with these two recovery methods. Outside the oil sands, we are also targeting production growth in our conventional Exploration & Production division. This includes our working interest in the Hebron project off the east coast of Canada, which received project sanction in 2012, with first oil anticipated in 2017, as well as our working interest in the Golden Eagle project in the U.K. North Sea, which is expected to achieve first oil in late 2014 or early 2015.
While our growth plan includes targets and goals, Suncor is committed to taking the time up front to ensure our projects deliver the highest possible value to our shareholders. The focus is on cost and quality, rather than achieving scheduled target dates. This drive for profitable growth underpins every decision we make.
Disciplined, profitable growth also requires making strategic choices in response to changing market conditions. This helps explain our decision, announced in March 2013, that we would not proceed with the Voyageur upgrader project. This decision was the result of a joint strategic and economic review launched by Suncor and its joint venture partner, Total E&P Canada Ltd., in late 2012.
The North American energy market has changed since we initially proposed building a third oil sands upgrader. Most notably, with significantly higher volumes of tight oil being produced today, there is a potential surplus of light sweet crude on this continent. Because an upgrader takes advantage of the margin between light crudes and heavy crudes, a world with more tight oil put the Voyageur economics on a more challenging footing.
Observed president and CEO Steve Williams: "The decision not to proceed with Voyageur is in line with our commitment to capital discipline and our stated plan to allocate capital with priority given to developing higher return growth projects and accelerating the return of cash to shareholders through dividends and share buybacks."