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!

Thursday Night Links

• The proposal I have outlined is – for now – a carefully estimated thought experiment drawn from existing data, not an empirical report on costs from the front lines of a hundred-gigatonne-a-year sequestration megaproject. It is not unreasonable for readers to regard some of my numbers as a little rough around the edges. But even if energy costs are off by a factor of two, the conclusion seems inescapable: one promising, comparably cheap, and relatively easy pathway to reversing global warming and returning to the cooler, more stable world of the second millennium is by deploying Earth’s natural sequestration process at industrial scale, using technology we already have, at a cost that might feasibly clock in at less than one percent of the world’s GDP. [Works in Progress] 
• Their political hero’s trade adviser kept attacking what the county’s business guru called their “golden goose,” and no one knew how to quell the clash between two of the most beloved brands in Spartanburg. Around here, it’s like watching Santa Claus kick the Easter Bunny. Or Uncle Sam stomp an apple pie, nay, strudel. “This is Trump country,” said Eddie Tallon, a retired Republican lawmaker in South Carolina’s conservative Upstate, “but we love BMW.” In the days since White House aide Peter Navarro publicly bashed the German carmaker credited with resuscitating the local economy, GOP leaders here have faced an awkward dilemma: How do they defend the foreign firms propelling South Carolina’s growth against a ruthlessly America First president? [The Washington Post]
• Republican Sen. Rand Paul left a lunch meeting with U.S. Trade Representative Jamieson Greer this week feeling thoroughly unimpressed — not only with the administration’s strategy, but also with his own colleagues. “Most of it was Republican senators congratulating him, wishing him well as the industrial czar and pleading for exemptions to the tariffs for their people,” Paul told NOTUS afterward. “It reminded me of a meeting on industrial policy in the Soviet Union, where you have to be nice to the czar because if you’re nice to the czar, they’ll bequeath upon you exceptions to the iron fist,” he said. [NOTUS]
• "We are pleased to report the best quarter in ICE’s history, highlighted by record revenues, record operating income and earnings per share growth. Amidst a backdrop of continued geopolitical and macroeconomic uncertainty, our first quarter performance reflects the quality of our all-weather business model and the value of our markets, technology and data services. Looking to the balance of the year and beyond, ICE's diverse platform is well positioned to serve our customers, generate growth and create value for our stockholders." [Intercontinental Exchange, Inc.]
• I live in Washington and have friends who are heavily involved in the horse world in Middleburg and Upperville, as well as in Baltimore County, and I agree you see plenty of Subarus amongst the truly old old money wasp folks, and Volkwagon station wagons. I also spend a lot of time in Thomasville, Georgia, the quail hunting capital of the country, and amongst my friends- all boarding school educated old money folks, with historic in town houses, and plantations in the country, almost all have a Subaru Outback. How else can you maneuver the dirt and gravel drives in the country? Anyone who drives a Mercedes or BMW suv is identified as a yuppie, with no place in the country. [Salt Water New England]
• In this paper, I provide a descriptive analysis of religious worship attendance using geodata from smartphones for over 2 million Americans in 2019. I establish several key findings. First, 73% of people step into a religious place of worship at least once during the year on the primary day of worship (e.g. Sundays for most Christian churches). However, only 5% of Americans attend services “weekly”, far fewer than the ~22% who report to do so in surveys. The number of occasional vs. frequent attenders varies substantially by religion. I estimate that approximately 45M Americans attend worship services in a typical week of the year, but with large changes around Holidays (e.g. Easter). [Devin Pope] 
• When considering the effects of bank regulation on community banks, we should ask ourselves why so much financial activity has moved out of the regulated banking system. For example, the shift of mortgage lending to nonbanks has undercut an important line of business for community banks. It is clear this shift out of the banking system is to some degree driven by regulation—and in particular by outdated capital requirements on some exposures that are well in excess of the latest evidence on the actual risk of those exposures. [Treasury Secretary Scott Bessent]