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Suncor keeps 2019 capex budget flat to prior year at between C$4.9B and C$5.6B

Alberta-based Suncor Energy Inc. announced Dec. 14 that it plans 2019 capital expenditures of between C$4.90 billion and C$5.60 billion, in line with the prior-year budget despite government-mandated production cuts.

The integrated oil and gas firm said approximately 63% of the spending will be allocated to projects that sustain the business, while the remaining budget will focus on low capital intensity, value-creating projects such as the implementation of autonomous haul trucks, development of the Syncrude bidirectional pipeline, investment in midstream logistics infrastructure, digital technology adoption and accelerated deployment of technology to support tailing pond reclamation.

The firm plans to spend the lion's share of its 2019 capex budget on its upstream business, with between C$3.05 billion and C$3.40 billion devoted toward oil sands projects and between C$1.00 billion and C$1.20 billion devoted toward other upstream projects.

Suncor plans to spend between C$700 million and C$775 million on its downstream business.

The company also targets an average upstream production of 780,000 barrels of oil equivalent per day to 820,000 boe/d, with the midpoint of that range up 10% year on year. Those figures include mandatory production curtailments of 8.7% ordered by the Alberta government starting Jan. 1, 2019.

Suncor, who opposed the cuts, noted its production guidance assumes the mandatory production curtailments are in place for three months before dropping to 30% of initial levels for the remainder of 2019.

"The market for Alberta's heavy and synthetic crude oils has been significantly impacted by the lack of market access out of the region," Suncor President and COO Mark Little said. "As discussed on our Q3 earnings call, our strategy has been to mitigate such volatility by significant investment in integration between our upstream and downstream assets, such as upgrading and refining capacity, along with commitments to long-term take or pay pipeline access to markets, largely mitigating impacts to our cash flow in situations such as the one we are in.”

Suncor expects more than half of its production, or between 410,000 bbl/d and 440,000 bbl/d, to come from oil sands operations. From Fort Hills, in which Suncor has a 54.11% working interest, the company expects production of between 85,000 bbl/d and 95,000 bbl/d. From Syncrude, in which Suncor has a 58.74% working interest, Suncor expects production of between 160,000 bbl/d and 180,000 bbl/d.

For its conventional exploration and production business, Suncor expects production of between 105,000 boe/d and 115,000 boe/d.

Suncor said 2019 production guidance excludes Libyan operations due to continuing political unrest in the country.

For its downstream business, Suncor expects refinery throughput of between 430,000 bbl/d and 450,000 bbl/d for a utilization rate of between 93% and 97%.

Suncor estimates 2019 oil sands cash operating costs of between C$24.00 per barrel and C$26.50/bbl due to reduced planned maintenance and increased cost efficiencies.

The firm estimates Fort Hills cash operating costs of between C$23.00/bbl and C$26.00/bbl, while it pegged Syncrude cash operating costs at between C$33.50/bbl and C$36.50/bbl.