Resource World Magazine

58 www.resourceworld.com o c t o b e r / n o v e m b e r 2 0 1 6 T he energy sector, especially lately, is not for the faint of heart. The path already is littered with the carcasses of companies that either weren't prepared or couldn't adapt to the downturn of recent months. Suncor Energy Inc. [SU-TSX] isn't one of them. Under the guidance of CEO, Steve Williams, the Calgary-based firm is not only holding its own against the tide of plummeting prices, it's expanding with the planned acquisition of a 30% share in the North Sea's Rosebank oil play. Subject to conditions and regulatory approval, Suncor will pay US $50 million upon closing, expected in Q4, for shares held by Austria's OMV AG. The project's development is now in the final engi- neering and design phase. Suncor will pay OMV up to $165 million more if the partners, led by operator Chevron Corp. [CVX-NYSE], give the project the go-ahead. "Suncor's investment in the proj- ect is consistent with our strategy of delivering profitable growth for our share- holders," said Suncor spokesperson, Paul Newmarch. "Our decision to participate in Rosebank is based on the project's attrac- tive economics and fit with our focused capital allocation priorities. "The acquisition of the participating inter- est aligns with Suncor's E&P strategy, which is to leverage knowledge and expertise in existing resource basins and ensure profitable long-term growth options in our portfolio." The Rosebank Project, 130 km northwest of the Shetland Islands, discovered in late 2004, is in water approximately 3,600 feet (1,110 metres) deep and is considered one of the best and largest undeveloped resources in the North Sea. The project has a design capacity of 100,000 barrels of crude oil and 80 million cubic feet of natural gas/day. Subsequent to the successful close of this transaction, the joint venture parties would be operator Chevron North Sea Limited with 40%, Suncor 30%, OMV (UK) Ltd. [OMV-VSU] 20% and DONG E&P (UK) Ltd. [DENERG-NASDAQ OMX] 10%. "Our share of production from Rosebank, if we decide to be involved in the develop- ment, would be approximately 30,000 boe/d (based on our 30% interest in stated 100,000 bpd project design capacity) of high-quality sweet crude oil, following project sanction," said Newmarch. Rosebank will join other Suncor hold- ings in the North Sea; two of the largest and highest-quality producing fields there, Buzzard and Golden Eagle. Suncor holds a 29.89% interest in the Buzzard field in the Outer Moray Firth. Buzzard, operated by Nexen Petroleum (CNOOC Ltd. [CXEO-NYSE]), is among the largest fields discovered in the North Sea in the past 15 years. Golden Eagle is set to deliver 70,000 bpd (gross) oil production, with 18,690 bpd net to Suncor, which has a 26.69% working interest in it. But that isn't all. Suncor has spent 2016 bulking up on assets in its main operating areas as its rivals deal with the collapse in oil prices and its impact on debt lev- els. That includes expanding its holdings in Syncrude Canada Ltd. to almost 54%. Suncor acquired Canadian Oil Sands Ltd. for C $4.2 billion, then picked up Murphy Oil Corp.'s 5% stake for $937 million. Despite recent slowdowns, the oil sands is a good bet, according to Suncor num- bers, which predict that debottlenecks, brownfield expansions and growth proj- ects should raise total oil sands production from 463 mbpd in 2015 to more than 700 mbpd in 2019. "By increasing our stake in Syncrude we believe that we can generate significant value for our shareholders through syn- ergies in our integrated operating model, our record of operational excellence and our almost 50 years of oil sands operating experience that we bring to the table," said Newmarch. While he couldn't suggest why Suncor's strategy differs from that of many of its competitors, Newmarch said the Rosebank acquisition and other recent moves are consistent with Suncor's focus on "capi- tal discipline" – both carefully managing costs and spending money wisely to gen- erate value for shareholders. That strategy, the company forecasts in a July investor presentation, will see a compound annual growth rate moving from this year's 650 mbpd to 800 mbpd by the end of the decade, a CAGR of 6% per share. That has Suncor registering a 150% dividend growth for investors in the period from Q2 2011 to Q2 2016. That growth has been based on a value proposition that features operational excel- lence based on safety as a core value, industry-leading reliability, management discipline and sustainability leadership, and capital discipline that dictates a "rigorous capital allocation process" of a vast portfolio of high-quality organic grown opportuni- ties, strategic counter-cyclical acquisitions and divestments, a competitive and sus- tainable history of growing dividends and opportunistic share buy-backs. The company plans to continue expand- ing productivity through workforce reduction and the application of new technologies and using sole sourcing and contract concessions in its supply chain management. At the same time, its business practices will feature the elimination of low- value added work, streamlined reporting and reduced fly-in, fly-out. Company leaders predict operational gains will be achieved through improved reliability, increased scale, maintenance planning, and energy inputs (non-controllable). That's some good news in an otherwise turbulent time. n Suncor Energy heading to the North Sea Oil Patch Report by Bruce Lantz

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