Earnings Call Transcript - SU Q1 2025

Operator, Operator

Good day and thank you for standing by. Welcome to the Suncor Energy First Quarter 2025 Financial Results Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Suncor Energy's Senior Vice President of External Affairs, Mr. Troy Little.

Troy Little, Senior Vice President, External Affairs

Thank you, operator and good morning. Welcome to Suncor Energy's first quarter earnings call. Please note that today's comments contain forward-looking information. Actual results may differ materially from the expected results because of various risk factors and assumptions that are described in our first quarter earnings release as well as in our annual information form, both of which are available on SEDAR, EDGAR, and our website, suncor.com. Certain financial measures referred to in these comments are not prescribed by Canadian Generally Accepted Accounting Principles. For a description of these financial measures, please see our first quarter earnings release. We will start with comments from Rich Kruger, President and Chief Executive Officer; followed by Kris Smith, Suncor's Chief Financial Officer. Also on the call are Peter Zebedee, Executive Vice President, Oil Sands; Dave Oldreive, Executive Vice President, Downstream; and Shelley Powell, Senior Vice President, Operational Improvement and Support Services. Following the formal remarks, we'll open the call up to questions. Now, I'll hand it over to Rich to share his comments.

Rich Kruger, President and Chief Executive Officer

Good morning. Suncor's first quarter was about maintaining momentum and starting 2025 strong. I believe we successfully accomplished both objectives. I'll comment on some operational highlights, and Kris will further focus on financial performance. I'll start with personnel safety. Previously shared that 2024 performance was as good or better than 2023's best ever, with recordable and lost time events down significantly. I'm pleased to report the positive performance has continued year-to-date 2025. Special call out to Dean Wilcox's base plant team, winners of the John T. Ryan 2024 National Safety Award for outstanding safety performance in major projects and civil work. This is awarded annually by the Canadian Institute of Mining, and it's the Holy Grail in mine safety. Process safety previously shared that 2024 performance was best ever first quartile in North America. While the first quarter of 2025 performance demonstrated continued improvement significantly better than 2024. Personal belief, you can't be a well-run company without being a safe company. Upstream production, 853,000 barrels a day, our highest first quarter ever and our second highest quarter ever, 18,000 barrels a day higher than our previous best first quarter, which was achieved last year. Upgrader utilization a very strong 102%. It's the fourth quarter out of the last five where we've been at 99% or higher. Continued high performance from our profitability pacesetter Firebag at 248,000 barrels a day, results particularly good, considering harsh weather for much of February in Alberta. Refining throughput, 483,000 barrels a day, far and away the highest first quarter in our history, 28,000 barrels a day higher than our previous best first quarter again, set last year. Refining utilization exceptional at 104%, the third consecutive quarter above 100%. In fact, every refinery achieved higher throughput and higher utilization year-on-year. And our overall bottom-line is within 5,000 barrels a day of our best-ever quarter of any quarter. Refined product sales 605,000 barrels a day. Here again, far and away the highest first quarter in company history, 24,000 barrels a day higher than the previous best first quarter again set last year. The third highest quarter ever with the top two quarters being the last two. In fact, the past five quarters have been our highest in company history. In 1954, a gentleman named Roger Bannister, the world's first four-minute miler said 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. I want to take you back 12 months ago, Investor Day, May 2024. We established several objectives for the three years, 2024 through 2026 to improve performance, create shareholder value; they were tied to production growth cost reduction, free funds flow growth, and net debt. At the end of last year, end of 2024, we reported on the first-year progress, production growth. We have achieved 75% of our three-year target. Breakeven reduction, 70% or $7 a barrel of the three-year target. Free funds flow, $2.3 billion or 70% of the three-year target. And of course, net debt achieved our $8 billion target in the third quarter of last year. The bottom line, one year into our three-year plan, we have exceeded every single target, essentially achieved two years of our planned improvements in the first year. But the best and most important part—we aren't done yet. What gives me this confidence in the first four months of the year? I've spent a lot of time in the field, at our plant sites, in our minds, meeting with and talking to hard-working, card-carrying, operational and technical experts. I spent time at the base plant looking at our U1 coke drum replacement project in reviewing autonomous haul truck operations. I toured Syncrude's Mildred Lake and Aurora mines, observing best-in-class truck and shovel operations. I toured Syncrude's heavy equipment maintenance shops; at Fort Hills, inspecting the major new state-of-the-art heavy equipment arrivals. I've been at our Montreal and Sarnia refineries with teams driving industry-leading utilization, touring our retail site network, meeting Petro Canada associates across the country. Why do I and my colleagues spend all this time in the field? Because Suncor's leadership team knows the game is won on the field with the players, and on the field is where you'll find us. So, what did I see that reinforces that we are not done yet? Base plant autonomous haul truck operations, Mike Gartenberg's team. At year-end 2024, we achieved our objective of 91 autonomous haul trucks moving all productive ore. Since then, we've increased our fleet to more than 100 trucks on the way to 140. In nine months, we've achieved performance equal to staffed operations versus a typical industry benchmark of two years. We're leveraging data analytics, creating a new world-class AHS command center. We're collaborating with our partners Komatsu and SMS to upgrade AHS software to improve all weather or what we call mud mode operating performance. The productivity expectations we have in AHS at the base plant is expected to yield the equivalent of 10/3, 400-ton haul trucks by 2026. Coke drum – coke boiler replacement and cogeneration project, Mike Hague's team, where we replaced three old coke-fired boilers with two new 40-megawatt gas-fired generators, added new high-efficiency heat recovery steam generation—we completed the project and achieved startup in the fourth quarter of last year. We've now tested each unit at over 400 megawatts. The project will meet steam needs for the base plant with surplus power exported to the Alberta grid, improves reliability, lowers cost, generates power revenue, and lowers emissions. Syncrude Aurora mine truck loading operation, Alex Stark's team, Aurora supplies two-thirds of Syncrude's mined bitumen. 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 equals 73 400-ton trucks. Fort Hills, new hydraulic shovel Alisdair Gibbons' team, last Thursday, I attended a ceremony commissioning the world's largest hydraulic shovel, the PC 9000—first of its kind, serial number one, designed in partnership with Komatsu and SMS, purpose-built for Suncor to be perfectly paired with our Komatsu 400-ton truck fleet—larger bucket, longer reach, greater digging force, swivel capacity for dual side loading; the results, faster loading, less repositioning. Having seen it and walked on it personally, the PC 9000 is a beast. Personally, Todd, I pulled out my stopwatch on my phone and timed loading operations; four scoops, 404 tons in one and a half minutes—folks, that's fast. Deployed in Fort Hills Center pit, we've got a second shovel scheduled for delivery in July and two more next year. This is an example of vision, partnership, technology and scale, driving productivity, and lowering costs. Refining operations—I spent time with Conor Poutney's Sarnia team and Isabelle Arbour's Montreal team, seeing how maintenance and reliability best practices are driving higher utilization, how turnaround benchmarking and risk-based work selection are reducing capital and operating costs, how low-cost debottlenecking is achieving record-setting refining throughput. Two examples I want to share with you of grassroots focus on driving performance and adding value. Brad Jones, process operator, Sarnia refinery. Brad had the idea to spend $200,000 for tie-ins to maintain flow flexibility during our recent April turnaround, adding $4 million in jet fuel margin—a 20:1 payout in one month; well done Brad. An operator at the Montreal refinery whose idea for minor pump or piping modifications at a one-time cost of $300,000 to increase refining capacity by 500 barrels a day added more than $1 million in margin every year. 2025 will be the first full year. These examples illustrate the power of clear, simple priorities, focusing on the fundamentals, understood and embraced top to bottom, delivering results. Supply trading and marketing. In the first quarter, I witnessed Paula O'Shaughnessy and Paul's teams supplying and trading in volatile east-west crude and refined product markets to capture premium margins at lower costs. And lastly, I spent time with Pat Ritchie, Petro-Canada retail and wholesale associates working in partnership to increase market share and site margins nationwide. I'll stop there, but here again, these are only a few examples I can share of Suncor teams technical, operational, and commercial working together to deliver industry-leading results—teams with the drive of fierce competitors, and the determination of champions—teams unstoppable in their commitment to be the best of the best. With that, I'll turn it over to Kris.

Kris Smith, Chief Financial Officer

All right. Thanks, Rich, and good morning, everyone. Building on Rich's comments, it was yet another strong operational and financial quarter as we continue the positive momentum we built in 2024. But first, with respect to the business environment in the quarter, there was obviously a lot of uncertainty around the impact of U.S. tariffs, but in the end, the commodity prices across the quarter remained constructive. In the quarter, WTI and the light heavy differential remained relatively flat versus Q4 at $71.4 a barrel and $12.65 a barrel respectively, while synthetic crude decreased about $3 a barrel average, a discount of $2.35 a barrel to TI. On the refining side, New York Harbor 211 cracking margins improved versus Q4 by $2.25 a barrel, driven largely by improving distillate cracks. Our 521 refining index remained strong at $26.80 a barrel. Finally, natural gas prices increased by CAD0.60 at DJ versus Q4, averaging about $2 a GJ in the quarter, but obviously remain attractively priced for natural gas consumers like our business. Rich has already detailed our Q1 operational performance as remarks, so I won't repeat them here other than a few points. Oil sands production in the quarter was 791,000 barrels per day with in situ averaging 283,000 barrels per day in the quarter. Fort Hill is continuing to deliver solid operations with 176,000 barrels per day in the quarter, while upgrading was strong at both base plant and Syncrude at 103% and 100% utilization respectively. E&P averaged 62,000 barrels a day in the quarter, which is up 5,000 barrels per day from Q4 despite some temporary logistics challenges at Newfoundland loading terminal in the quarter, which has since been resolved. In addition to very strong refining throughput and refined product sales in the quarter, our refining business also posted a very strong margin capture, averaging 99% on a LIFO basis when compared to our 5221 index. This high asset utilization and margin capture are a reflection of the powerful combination of strong asset reliability and our best-in-class supply and marketing business which maximizes value across our various trade channels. We also continue to demonstrate operating leverage with total OS&G expenses of $3.3 billion, which is down quarter-over-quarter, while production and sales were up in both the upstream and the downstream. While capital expenditures totaled $1.1 billion in the quarter, including $600 million of economic investments and $500 million of sustaining and maintenance capital. This strong operational performance and cost management led to very positive financial results in the quarter. We generated $3 billion of adjusted funds from operations or $2.46 per share in the quarter and adjusted operating earnings of $1.6 billion or $1.31 per share. 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. This is a clear demonstration of the impact of our improving performance. As Rich just said, at Suncor, every barrel and every dollar matters, and this is proof of that. In the quarter, we also returned nearly $1.5 billion to shareholders, including $705 million in dividends and $750 million in share buybacks, which was 1.1% of our float. We continue to focus on returning 100% of excess funds to shareholders while prudently investing in the business to grow returns to our shareholders. As expected, we saw a working capital increase during the quarter of about $1 billion, contributing to net debt at quarter-end being $7.6 billion, which is aligned with our debt management and capital allocation strategy. Overall, first quarter operational and financial performance demonstrates a continued relentless focus on executing the fundamentals of our business and generating value for our shareholders. Now, before handing it back to Rich, I just want to make a few comments on the second quarter. We're into our second quarter turnaround program, and it is on plan for our 2025 guidance. The Sarnia refinery started its crude unit 1 turnaround on March 29, which includes planned maintenance work on the cat cracker and alkylation units, and I'm pleased to say the team has made great progress on the event against the plan. As well, the Edmonton refinery spring turnaround which includes the sour crude unit, hydro treaters, sulfur train, and delayed coker unit started on April 15th and is also proceeding very well and on plan. Lastly, the base plant Upgrader 1 turnaround, which includes the coke drum replacement project is also underway. The event started on May 1st and is a planned 91-day outage. We are extremely pleased with the planning and preparation the team has done going into this event, and we're very well-positioned for the execution of both the turnaround and this important project. We look forward to completing all these events and reporting on them at the end of our second quarter. Finally, I want to take a moment to acknowledge the market conditions we're currently facing. With WTI prices currently bouncing around $60 a barrel amid the market uncertainty we've seen over the last few months. I'm very pleased that the significant strides we've made over the last two years to improve our operational and financial performance, significantly reduce our WTI breakeven and strengthen our balance sheet has significantly improved our company's resiliency, positioned Suncor to weather these uncertain times and continue to generate solid free cash flow for our shareholders. Suncor is a resilient company with a best-in-class integrated business model and a highly focused and capable team. You heard many examples from Rich, both of which will prove to be a significant advantage during these times and position us extremely well into the future. And with that, Rich, I'll turn it back to you.

Rich Kruger, President and Chief Executive Officer

Thanks Kris. A couple of comments before we just dive into the Q&A. Our objective, today's Suncor high-performance sustained excellence. 2024 was a good year; 2025 is off to a good start. Kris talked about our strength and resiliency. I'll end with a quote from the late Academy Awards-winning actor Gene Hackman. In the 2000 film, the replacements Hackman starred with Keanu Reeves, "winners always want the ball when the game is on the line." Folks, I am seeing Suncor teams company-wide continue to show me they want the ball. With that, I'll turn it back to Troy.

Troy Little, Senior Vice President, External Affairs

Thank you, Rich. I'll turn the call back to the operator to take some questions.

Operator, Operator

Thank you. Our first question will come from Dennis Fong with CIBC. Your line is open.

Dennis Fong, Analyst

Hi, good morning and thanks for taking my question as well as congratulations for a very strong first quarter. My first question here, just you had to contend with the impact of colder weather in January and February. Can you talk towards your strategy around managing the various Oil Sands assets and operations that you have through kind of those challenging conditions?

Rich Kruger, President and Chief Executive Officer

Yes, I'll take it. Thanks Dennis. I don't mean to be rude, but the last time I checked, it's always cold in Canada in the first quarter. So, we have taken a strategy of philosophy. We're not going to be a weather taker; we're going to be a weather maker. And so what Peter and Dave have done is they focus, they design our operation with the resiliency for extremely cold weather conditions, whether that's the fuel in our haul trucks or supplemental winterization at our refineries. We face this uncertainty; there's variability every year. And for the last two years, we have been very focused on how do we engineer or design out that risk of that variability. So, if you want any further examples, I can ask Peter and Dave to comment, but we, like so many other things in our company, have looked at it and just not accepted the outcome but said, what can we do that can change or improve our performance independent of what the circumstances would be? And I think our winterization program is—you didn't read about winterization in our press release because we've engineered to accommodate and deal with it.

Peter Zebedee, Executive Vice President, Oil Sands

Maybe I'll just add a couple of things, Dennis. You really start to see the strength of our integration across oil sands come out here. So where if an issue crops up in a single asset, we can buffer that impact by moving barrels across our integrated production ecosystem. And you saw that in the high asset transfers that we reported on this quarter. That's really the strength of Suncor and the strength of integration coming through.

Dave Oldreive, Executive Vice President, Downstream

I can add a little bit from a refinery perspective as well. It's Dave here. There are thousands of things you have to get right for winterization to work at a complicated refinery, and I've seen these things all over the world. The key is to learn from past winters and capture the learnings of the instruments and the various things that freeze up and ensure you have a disciplined approach to keep them in good shape for the following winter. The other thing that may not be appreciated is we start our winterization program around July, right? It's in the middle of summer, and that's when we're starting to focus on it because we know winter comes every year.

Dennis Fong, Analyst

Thanks. Really appreciate that underlying context. My second question shifts a little bit towards technology in aggregate, improving operations. I know back at the May Investor Day and update, you talked a little around the Mine Connect tool, which helps optimize the mine fleet. But I think the other thing you've mentioned a few times in conference calls is that while you present some very interesting opportunities, a lot of those new ideas come from within the organization. I wanted to kind of like address how is the Mine Connect tool doing in terms of optimizing operations? And secondarily, what has that maybe spun out in terms of incremental benefits that you may not have realized right when you implemented the tool to begin with?

Rich Kruger, President and Chief Executive Officer

Peter and I were up at Fort Hills last Thursday, and the team showed us their dashboards and screens. Peter, do you want to comment on some of the things we're focused on?

Peter Zebedee, Executive Vice President, Oil Sands

Yes, the Mine Connect tool is really a tool; it provides insights to the operations team so they can take action. That's where the value is generated. Rich and I were up at Fort Hills last week; we talked with the Fort Hills team about their short interval control and use of some Mine Connect data and how that comes into our operating cadence and operational performance through our operational excellence management system. It's really about identifying an outlier delivered by the Mine Connect tool, taking immediate action, and generating value in the field. That's where the power of data and insights and technology lies—quick action by the leadership team.

Rich Kruger, President and Chief Executive Officer

And Peter, one of the things that struck me is the real-time nature of the team leads in the room with us. They talked about how they meet periodically, multiple times a day, as the opportunity migrates from whether it's a shovel operation or truck efficiency. We don't lose a moment in the ability to optimize or improve overall performance. To me, that was a powerful discussion.

Dennis Fong, Analyst

Great. Thanks for the color. I'll turn it back.

Operator, Operator

Thank you. One moment for our next question, and that will come from the line of Greg Pardy with RBC Capital Markets. Your line is open.

Greg Pardy, Analyst

Yes, thanks. Good morning. I wondered if we can pivot to the downstream. Specifically, progress made on retail EBITDA growth. As I ride my bike around Toronto, I see you're closing some stations. I know there's enhancements going on elsewhere. Just curious how the strategy is unfolding and whether retail is ultimately core to your business longer term?

Rich Kruger, President and Chief Executive Officer

Thanks Greg. I'll ask Dave to comment in a second, but you're right. If you go back to our retail review or our Investor Day, we talked about how we're looking at that portfolio of some 1,600-plus sites nationwide, and we're high grading and upgrading major markets—the highest volume, highest margin sites. We're growing those and rationalizing on the other end. Dave, do you want to comment on how we're doing?

Dave Oldreive, Executive Vice President, Downstream

Yes, for sure. And Greg, right in your bike area is not helping our retail business—we'll have to get you the loyalty program. We do have other options for you like our convenience stores and quick-serve restaurants. But we are executing plans to grow our domestic retail business. Actually, retail and wholesale. We mentioned back in May that we're committing to grow EBITDA by $200 million by the end of 2026, and we have plans to go beyond 2026 as well. That serves us well in terms of finding good domestic outlets for our products. That plan involves high grading or transforming 20% of our network between 2024 and 2026, and I would say it is well on track. We've also mentioned previously our Canadian Tire relationship; that continues to go strong. That's helped us over the past year to increase our Petro-Points membership by over 30%. We saw a 6% year-on-year increase in retail and a 9% year-on-year increase in our Petro-Pass Truck Stop business, so we continue to grow that business, and it's delivering.

Rich Kruger, President and Chief Executive Officer

And Dave, I have to build off that one. It's important to recognize all barrels aren't created equal. There is clear Pareto priority of the highest value barrels—the branded company-owned retail in major markets—top of the food chain and so on. And what I like is that Dave and Pat Ritchie's team understand that. It's not about volumes; it's about value. But when you can couple volume with value, that's when you get the exponential effect. That's what I see from this team.

Greg Pardy, Analyst

Okay, Rich. So, part of the same question, back at Imperial, you did that big transaction where you sold off the retail for a huge price at the time. Not to put words in your mouth, but is this an asset that you're absolutely committed to? Or how do you think about retail ultimately as a core part or not a core part of the business?

Rich Kruger, President and Chief Executive Officer

The only things I unconditionally love are my kids and grandkids. Everyone else has to earn their seat at the table. And I'm not making a statement about retail at all. But we look at all of our assets for their ongoing contribution and value to us. Right now, the value that's being created here makes it a very, very valuable part of our portfolio. We think there is continued growth in an uncertain world, and that full integration all the way through the value chain is another set of value opportunities for us. So, I never say never, but right now, that is a very valuable part of the company's operations.

Greg Pardy, Analyst

Okay, thanks for that. And if I can, maybe just a second question. If I roll back the clock this time last year, you talked about $3.3 billion of incremental free funds flow. You've accelerated it in terms of what you've been able to achieve. I'm curious, are the headwinds as acute as you expected or what have you?

Rich Kruger, President and Chief Executive Officer

I think we're seeing examples where the headwinds from inflation or things like this are part of it. But I also like the proactive measures both Dave and Peter are taking, which also affect those headwinds. For example, as we deliver bigger haul trucks, we send home the rental trucks that are smaller. I'd say that the headwinds we're facing—we're counteracting more of those headwinds than we would have anticipated a year ago. Fair?

Unidentified Company Representative, Company Representative

I'd agree with that. It's all about driving efficiency and productivity and getting more out of the assets than historically generated. That's at the forefront of our lines and our daily drive every day.

Rich Kruger, President and Chief Executive Officer

I want to come back to the point I made just a few minutes ago—we don't want to be market takers, we want to be market makers. Whether that's for goods and services or how we participate in refined product sales, we ask ourselves—what can we do to alter that for a better outcome for Suncor? It's a mindset, a culture—a passion for making things the absolute best they can be. I think this area on headwinds is the same thing.

Greg Pardy, Analyst

Got it. Thanks very much.

Operator, Operator

Thank you. One moment for our next question, and that will come from the line of Manav Gupta with UBS. Your line is open.

Manav Gupta, Analyst

Good morning. I wanted to first focus on the refining side—a 99% capture, one of the highest we've seen in North America. Help us understand what's driving this high level of capture versus relative to your peers, and how you continuously remain one of the most profitable North American refiners on a per barrel basis?

Rich Kruger, President and Chief Executive Officer

Dave, how are we doing it?

Dave Oldreive, Executive Vice President, Downstream

It comes down to our integration and capturing value all the way through the value chain. Our Suncor integration helps us grow our branded channels. We're leveraging our trading capacity and optimizing our production in both upstream and downstream assets. We saw that specifically in the first quarter. Despite an increase in throughput, record refining, we managed to capture better margins—our retail volumes were up 6%, Truck Stop business grew by 9% with exports down 25% in the quarter, a key factor in improving our margin.

Rich Kruger, President and Chief Executive Officer

The philosophy over the last couple of years has been to run our facilities to their full capacity. That drives down unit cost, increases throughput, and allows marketing to capture that improved volume mix. We turned our approach around—get after it, and we will find valuable homes for all barrels produced.

Manav Gupta, Analyst

Thank you. My second question is you do have a big turnaround on upstream coming up. Help us understand the risk planning around it, and how you will ensure that this turnaround completes on time and on budget? Thank you.

Rich Kruger, President and Chief Executive Officer

It's a combination of a turnaround and a project on a coke drum replacement. Shelly, let me ask you to comment on that because the real determinant of success is our coke drum replacement project. Talk about the preparation your teams and the risk management your teams have undertaken on that.

Shelley Powell, Senior Vice President, Operational Improvement and Support Services

Yes, for sure. We are in a very good spot with this project. The team is in place, and we are well into the execution now. In fact, over the weekend, we completed one of our first important lifts. So, that's good to have behind us. It sets the team up well for the remaining life activities. We focused heavily on risk management, mitigation, and we are well-prepared. We completed lots of early planning and preparatory lifts, ensuring that we had the right people trained and everyone knew their role in the event.

Rich Kruger, President and Chief Executive Officer

We were up there as a leadership team a few weeks ago, crawling over a lot of steel and concrete. It's a project, but it's extremely integrated with the operations. I would say Shelley's team, coupled with Peter's team, has shown the best collaboration between technical operations and projects that I have witnessed. This will be key for this to be a huge success—we have to be seamless in our execution.

Manav Gupta, Analyst

Thank you so much for the detailed response and congrats on another strong quarter. Every quarter, you seem to be setting new positive records. Congratulations.

Rich Kruger, President and Chief Executive Officer

Thank you. Dial-in for the next quarter.

Operator, Operator

Thank you. One moment for our next question, and that will come from the line of Neil Mehta with Goldman Sachs. Your line is open.

Neil Mehta, Analyst

Yes, good morning Rich and team. I just want to start off with, in a choppier macro, capital flexibility has been a hallmark of the businesses Rich you've run. As we think about that $6.1 billion to $6.3 billion of capital, how are you thinking about that? And how do you drive and maximize capital efficiency to ensure that there's headroom to continue to return capital to shareholders?

Rich Kruger, President and Chief Executive Officer

Yes. Thanks Neil. If I could step back just a little further. If you go back to May of last year, we outlined our strategy on how do we win with our asset base. We talked about industry-leading operational integrity and reliability. We highlighted driving to a cost structure that gives us financial resilience in a sub-$45 WTI business environment. Suncor's version—we are rebuilt for this. It allows us to execute our plans without hitting the gas or jamming on the brakes to do what's in the best long-term interest of our business.

Neil Mehta, Analyst

Got it. That's fairly clear. It might be too early to comment on this Rich, especially given the macro. But as we start to bridge to 2026, how should we think about the moving pieces around capital? Is it fair to say there's a downward bias relative to this year?

Rich Kruger, President and Chief Executive Officer

I think we showed that 2024, 2025, and 2026 will come down. A part of that is improvement in the level of sustaining spend; we’re making wiser decisions there. The specific number we showed for 2026 was $5.7 billion. It does show a downward trajectory year-on-year as well. If the business environment warrants that further, we will evaluate that through our business planning process this year.

Neil Mehta, Analyst

Okay, all right. That’s really helpful. Thanks, Rich.

Operator, Operator

Thank you. One moment for our next question. That will come from the line of Menno Hulshof with TD Securities. Your line is open.

Menno Hulshof, Analyst

Good morning, everyone. I'll start with a bigger question on the political landscape. It's probably too early to comment, but has there been any response from the Feds on the group industry letter that was issued in recent weeks? Have you been given any guidance on pathways or the oil and gas emissions cap?

Rich Kruger, President and Chief Executive Officer

Yes, I think you described it well. It's early. I want to go back to the two letters the industry signed. The first was signed by 14 CEOs about seven or eight weeks ago now, before the election—demanding that energy must be a part of the ambition of economic growth and prosperity for Canadians. The more recent letter included those original 14 and another long list; in total, about 38 Energy CEOs signed that letter, reiterating our conditions that we need to be part of the ambition for economic health and well-being of the country. It's early. I won't get into what was said, but the alignment within the industry on the importance of it to the economic health and well-being of the country is understood. I hope our call to action is seen with urgency, to enable the investment environment to allow our industry to perform to its full potential.

Menno Hulshof, Analyst

Thanks for that, Rich. My second question is on Firebag which continues to perform exceptionally well. Is there anything you want to flag in terms of recent changes to surface or subsurface best practices? Or is it more about improved execution on existing standards and protocols?

Rich Kruger, President and Chief Executive Officer

Firebag is one of the few big assets I have not visited yet year-to-date primarily because I want to stay out of their way. That team is focused like a laser on incremental value. We've had several sessions with our technical experts looking at maximizing the asset. We're looking at completion technologies, non-condensable natural gas utilization, further infill drilling. They understand the work needed to achieve it and we're prioritizing the allocation of capital to achieve that. You can expect we'll continue to talk about progress at Firebag—an incredible pace-setting asset.

Manav Gupta, Analyst

Just to clarify, are you applying NCG already? Or is that future upside?

Rich Kruger, President and Chief Executive Officer

Small amounts, but we've observed others' practices and believe we can expand that. We plan to distribute steam, lower our steam-oil ratio and develop incremental barrels. We've been applying it, but our future will see larger-scale implementation.

Menno Hulshof, Analyst

Perfect. Thanks Rich. I'll turn it back.

Operator, Operator

Thank you. I'm showing no further questions at this time. I would now like to turn the conference back to Mr. Troy Little for closing remarks.

Troy Little, Senior Vice President, External Affairs

Thank you, everyone, for joining our call this morning. If you have any follow-up questions, please don't hesitate to reach out to our team. Operator, you can end the call.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.