Suncor Energy Inc. (SU) - Q1 2025
The recent Suncor earnings calls have been a delight to read. (Lesson: always invest in companies with CEOs named Rich?) Here are some highlights from the latest quarter (Q1 2025) earnings call:
- In 1954, a gentleman named Roger Bannister, the world’s first four-minute milers and records are meant to be broken, and that is exactly what Suncor teams continue to do break records. Total cost, 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 costs operating leverage achieved with a culture and a mindset that every barrel and every dollar matter.
- 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 73 400-ton trucks.
- I personally pulled out my stop watch on my phone and time loading operations, four scoops, 404 tons in one and a half minutes, folks, that’s fast
- I think it’s worth noting that when comparing quarter-over-quarter Q1 2025 to Q1 24 despite a 7% decline in WTI an average 24% decline in New York Harbor and Chicago 211 cracks, you see that our AFFO per share is the same and our free fund flow per share is actually 6% higher.
- Winners always want the ball when the game is on the line.
- The only thing I unconditionally love are my kids and my grandkids. Everybody else has to earn their seat at the table.
The current market capitalization of SU (at a $34.31 share price) is $42 billion and its enterprise value is $50 billion. (Net debt of $5.4 billion plus other liabilities.) Suncor returned approximately $1.08 billion of value to shareholders in the quarter with $540 million in share repurchases and $508 million in dividends, for a shareholder yield of 10.3% on the current market capitalization.
The number of shares outstanding is down 4.2% year-over-year. They bought back 5 million shares in April. They were doing 4.5 million/mo in Q1.
Suncor's adjusted cash from operations, excluding change in non-cash working capital, was $2.19 billion, compared with $2.28 billion a year earlier. Capital expenditure was $824 million compared with $944 million. The resulting free cash flow for the quarter was $1.37 billion (compared with $1.34 billion), which is an 11% yield (annualized) on the enterprise value.
Capital expenditure was down 13% while upstream production was up 2%, year-over-year.
This was in an environment of $71.40/bbl WTI vs $76.95 a year earlier. Luckily, the differential between WCS and WTI fell from $19.35/bbl a year ago to $12.65 in the first quarter.
It is obviously not good that WTI has dropped to $60/bbl. Suncor produces about ~310 million barrels of oil a year so a ~$10/bbl hit to crude costs us $3 billion annually assuming that differentials and refining margins remain the same. (Crack spreads are currently higher than last quarter.) That's a huge chunk of our cash flow. It amounts to $2.44 per Suncor share. Trump's trade war is costing us real money!