Suncor Energy Inc.

Good day and thank you for standing by. Welcome to the Suncor Energy second quarter 2026 financial results call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Suncor Energy Senior Vice President of External Affairs, Mr. Adam Albeldawi. Please go ahead.

Thank you, Operator, and good morning. Welcome to Suncor Energy's second 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 second quarter earnings release as well as in our current annual information form, both of which are available on CDAR+, 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 second quarter earnings release. We will start with comments from Rich Kruger, President and Chief Executive Officer, followed by Troy Little, Suncor's Chief Financial Officer.

Also on the call are Peter Zebedee, Executive Vice President Upstream, 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. Thanks, Adam. Our second quarter involved completing major maintenance and positioning for a strong second half, and that's exactly what we did. Troy will cover financial performance. I'll first discuss operational, starting with safety. I'm pleased to report that our base plant mining received an industry safety award, the John T. Ryan Award. for best-in-class safety performance as recognized by the Canadian Institute of Mining. This marks the second consecutive year a Suncor mining team received this award. Extremely proud of our team for this well-deserved recognition for excellence in an area that represents our highest overall priority. Moving to upstream production, 761,000 barrels a day in the second quarter. Before I continue, though, a pop quiz. What's the difference between the story of Noah's Ark told in the book of Genesis and the Fort McMurray region in the second quarter of 2026? In Noah's Ark, the torrential rains stopped after 40 days and 40 nights. In Fort Mac, record rain and snow melt continued throughout the quarter, with total precipitation the highest in more than 30 years, 50% higher than the 10-year average, and unfortunately, it materially affected mining productivity and quarterly production with an estimated 50 to 60,000 barrels a day impact in the second quarter. Clearly this was an unusual one-off event, but we learned from it to build resilience for future events by improving our planning and preparation with new 48 and 72 hour weather outlooks. by stockpiling mine in the most vulnerable areas within each mine, by pre-securing critical minerals and equipment such as gravel and graders, by using technologies such as drones to monitor mine conditions real time. The takeaway is we can't eliminate weather risk, but we can better mitigate the impact. The good news, since late, Second quarter, things are back to normal with production at expected rates. In fact, July's preliminary production is on the order of 870,000 barrels a day, which would be our second highest July ever. Despite this year's weather, over the last three years, second quarter production has averaged 59,000 barrels a day higher than the second quarter of the prior three years, with better turnarounds and higher asset performance driving the results. Upgrader utilization, 93% in 2Q, with our spring turnaround at base plant now complete. Year-to-date, we're at 94%, a new record, 1% higher than the first half of last year. Refining throughput, 471,000 barrels a day in the quarter, our second highest 2Q ever, 28,000 barrels a day higher than our previous best 2Q, which was last year. Montreal and Edmonton, our largest refineries, led the way at 151 and 161,000 barrels a day respectively, and a combined utilization of 99%. Overall, 2Q network utilization, 92% on our new higher re-rated capacity of 511,000 barrels a day. with major maintenance activities completed at both Commerce City and Sarnia. Year-to-date utilization is 95%, a new record, 4% higher than the first half of last year. Here again, over the last three years, 24 through 26, 2Q throughput has increased every year, averaging 78,000 barrels a day higher than the 2Q of the prior three years, continuing to raise the bar and improve performance. Product sales. 655,000 barrels a day, like refining throughput, our highest second quarter ever. 54,000 barrels a day higher than the previous best second quarter, which was last year. Our eighth quarter in a row now with sales greater than 600,000 barrels a day after never achieving 600,000 barrels a day in any quarter over our history. A note of interest, jet sales were a record 51,000 barrels a day, 90% higher than our previous record of 27,000 barrels a day in the first quarter, achieved by fine-tuning our product slate to maximize global market value. Over the last three years, 24 through 26, 2Q sales have increased every year, averaging 101,000 barrels a day higher than the 2Q of the prior three years. Here again, raising the bar, improving performance. Over the last several years, we've talked a lot about turnaround performance. improving cost and schedule. As a reminder, historically, greater than 20% of our capital, roughly $1.25 billion per year, was spent on turnarounds. During our I-Day in May 2024, we committed to reduce turnaround costs by $250 million per year over three years. We achieved that objective in two years versus three. In mid-25, we increased our ambition to $350 million per year in capital reductions. We now expect to achieve that in 2026, again earlier than expected. And this year on March 31st, we upped our goal to $400 million a year. With that context, I'll highlight 2Q performance, focusing on firebag, illustrating ways in which we continue to improve performance. Our firebag turnaround involved major maintenance of the two largest of our four plants, 93 and 94. Combined, the two plants processed roughly two-thirds of the field's 250,000 barrels a day capacity. In our guidance for the year, we included an estimated impact of 85,000 barrels a day in the second quarter. This was our longest duration, biggest volumetric impact event of the year. The last turnaround of similar scope was completed in 2022, four years ago. It took 58 days at a cost of $150 million. This year, with a slightly larger scope, we completed the work in 44 days for $118 million. 24% reduction in duration, 21% reduction in cost. This work, to achieve this, started more than two years ago, included innovations in equipment inspections and work practices. Examples, using ROVs for internally inspecting long steam line sections, using drones for inspections inside large diameter pipes and vessels, circulating mineral oil inside process vessels to accelerate cleaning cycles. An idea by firebag coordinators Max Bombardier and Samantha Snow. Max literally observed a contractor years ago using Johnson & Johnson baby oil to clean equipment. He contacted Samantha, a process engineer at the time, to research it. Samantha identified a Petro Canada lube product. We tested it over time, and this year we applied it at scale in plants 93 and 94, cutting two full days off of vessel cleaning by one simple idea. Save time, save money, kept people safer. This is one of a litany of examples of what Suncor people are doing today company-wide. Firebag results, lower cost, lower duration. and faster production restoration. The second quarter impact was 60,000 barrels a day from the turnaround work, a 25,000 barrel a day improvement versus the plan. We also completed prep work for future tie-ins and further planned de-bottlenecking, working smarter today and smarter for tomorrow. The final prize is with the work we did, we will now be extending plant 93 and 94's next turnaround cycle to five years versus the historic four years. A total team accomplishment, compliments to Nabil Jaffrey and his regional turnaround team, Miles Fleming and his operational management team, and Jason Gaudet and his central support team. Working together, focused, collaborative, results oriented. I've highlighted firebag, but we also completed other second quarter work successfully. Base plant U2 Coker, completed in 46 days versus 60 days in 2021. $203 million cost, 10% less than the last event at $225 million. Commerce City Refinery, completed in 50 days versus 74 days in 2021. We've got more work to do in the third quarter, but our second quarter results position us well for a strong second half. My overriding message, Suncor remains focused like a laser to perform, compete and win by operating standards, best in class performance ambitions, clear definitive plans, priorities, short term and long term A deep team-based, results-oriented, high-performance culture focused on what we can control and what we can execute. We believe we offer a compelling value proposition, reliable, rateable high performance, reliable, rateable high cash flow. A literal machine built to deliver in all business environments. With that, I'll turn it to Troy.

Thanks, Rich, and good morning, everyone. This quarter was a powerful demonstration of just how much Suncor's ability to generate cash has changed in the past four years. You may recall in our Q1 conference call that I highlighted that not only has our resilience improved through the lowering of our corporate breakeven by $10 per barrel, the earnings power of today's Suncor at higher prices has been improved by an even greater measure. Proving this point, we finished the second quarter of 2026 with $5.3 billion in adjusted funds from operations, nearly double that of a year ago, and tying our all-time quarterly record set in the second quarter of 2022. The difference is that this time WTI averaged $93 per barrel for the quarter, roughly $15 per barrel lower than in the second quarter of 2022, when it averaged $108 per barrel. Even more meaningfully, on a per share basis, AFFO in the second quarter of 2026 of $4.52 per share is nearly 20% higher than the AFFO per share in that same historical quarter of 2022. We're delivering more cash flow and more value per share with less help from commodity prices. That's the result of building a stronger, more reliable, and more profitable business over the last few years. and what's important to remember, this wasn't a perfect quarter. Unprecedented weather conditions impacted production and left value on the table. Even so, we matched our all-time AFFO record and delivered our highest ever AFFO and free funds flow per share. As we continue to advance our investor day plan, we see further opportunities to improve and grow earnings power from an already record level of performance. Now I want to highlight our downstream business, which has again taken advantage of a strong margin environment to generate record segment AFFO. Suncor generated record downstream AFFO of $2.3 billion this quarter, nearly $200 million above our previous record in the second quarter of 2022. And we did that with a New York Harbor 211 crack margin net of the Renewable Volume Obligation, or RVO, more than $10 per barrel lower than in the second quarter of 2022. Margin capture this quarter came in at 89%. Not bad, but that number the underlying strength. This is because unlike many of our peers, our benchmark does not deduct RVO even though the gross margin we compare it to nets out our own RVO compliance costs. With average RVO pricing jumping $5 per barrel from the first quarter to the second, This single factor drove a variance of 10 percentage points of capture. Excluding this increase, we saw a very strong margin capture of 99% for the quarter. How did we achieve such strong margin capture? Our sales and marketing and supply and trading teams, again, turned market dislocations into value, in particular in export markets. Through ports in Berard and Montreal, we exported 56 cargoes in the first half of the year, nearly matching the 58 cargoes shipped in all of 2025. That's our integrated model at work, providing flexibility, capturing stronger netbacks, and turning market volatility into value. Years of logistics and commercial build-up paid off once again this quarter. Now let me spend a minute on our balance sheet as well as our capital allocation. Suncor ended the quarter with $4.5 billion in net debt, 75% lower than where we started this decade, and placing us at less than half of our guardrail of one times net debt to cash flow at $50 per barrel WTI. Just like our low corporate break even, this amount of net debt gives the company a level of resilience that it has never had in its history. With our balance sheet in excellent shape, backed by a business that is able to generate meaningful excess funds across the commodity cycle, our focus is then on getting funds back to shareholders in a reliable and predictable way. From a shareholder return perspective, in the second quarter we returned $1.8 billion to shareholders in the form of $1.1 billion in buybacks and $706 million in dividends. and starting this week, those buybacks will increase to $500 million per month or $1.5 billion per quarter, reflecting the substantial growth in excess funds this business is generating in the current environment, as well as the benefits of the improvements we detailed at our recent investor day. This marks our second increase in shareholder returns this year. As a reminder, we entered 2026 with a buyback of $275 million per month. We then increased it to $350 million per month in April, and now we're increasing it again to $500 million per month. Put simply, the better this business performs, the more shareholders should expect to share in that success. And while we will always retain the flexibility to respond to material changes in market conditions, we believe that predictable and rateable shareholder returns can be achieved even as commodity prices inevitably move around. With that, I will turn the call back over so that we can take some questions.

Thank you, Troy. We'll turn the call back to the operators to take some questions.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, press star 1-1 again. Please stand by while we compile the Q&A roster. and our first question will come from the line of Greg Party with RBC Capital Markets. Your line is open.

Yeah, thanks. Good morning and thanks for the rundown. You know, probably the most obvious question is just, you know, with the increase in the buyback now to $500 million per month, Is that sort of a forever number? It certainly has good legs as you move into 27, just given free cash flow generation, the balance sheet. And let's just say at the $500 million level, you still have net debt kind of trending down to zero, which would be an incredibly good problem to have. But are there other levers that you could pull in terms of returning cash to shareholders?

Yeah, sure. Thanks, Greg. You know, I think you should look at our action to answer that question. Recall that in 2025, the crude price moved between the low 70s and the high 50s per barrel. Throughout that entire time, we kept our buyback constant at $250 million a month until we actually increased it in December by 10%. And that increase came at the lower part of that year's commodity cycle. More recently, look at Q2. We started the quarter with WTI at over $100 per barrel, and ended the quarter with it under $70 per barrel. Yet our buyback continued rateably and predictably at $350 million per month. So like any company, we have to maintain some flexibility for extreme events. But it should be clear by now that we want to deliver something that's unique and anxiety to investors, and that is predictable and rateable shareholder returns through the commodity cycle. And that's not the only thing we're doing that we think is unique. We also do not have an absolute dollar net debt target that includes thresholds for when we pay shareholder returns. We don't because we don't think shareholder returns should be driven by what our debt is, but rather should be driven by what our performance is. That is why we instead have a guardrail of one times net debt to cash flow at $50 per barrel WTI. That allows us to manage our leverage alongside how our underlying business evolves. So as to specific timing, I would recommend you all take your view of commodity prices, even if it's a low one, and run it through your models for the foreseeable future with a $500 million a month buyback and see how long that would last. That duration is what a rock solid balance sheet and a top quality business can offer.

Okay, well, I'm glad I asked that question. I think you got the answer. Rich, love the reflection, you know, with like a multitude of things you've already kind of come up with in terms of mitigation and how you're prepared for this. I know you're always thinking through things. Are there any other, you know, just observations, learnings from the core operationally, whether it's upstream or downstream, you know, and just how you're continuing to shape the company for resilience that you'd like to share?

Craig, you're cracking up quite a bit, but I think I got the gist of it. And I'm going to turn it over to Peter in just a second to use an upstream example. You know, what we're seeing as we've institutionalized a high performance culture in the organization, We can't always stop things from happening or things we can't control, but we can very much control how we respond and recover when things off plan happen. And I think the example of the rainfall is a good example in it that we step back and learn from that and just didn't accept what we were given, but said, how can we change this outcome in the future? and Peter, you and I were talking yesterday. Why don't you share a further example of what we're doing to learn as we go on?

Thanks for the question, Greg. I would say we've really taken the time to step back and understand what the learnings are from the significant rainfall events that we saw through the first quarter and really start to proceduralize even more our response to adverse weather conditions. Rich mentioned a couple of them in his comments there, but strategically placing stockpiles of ore in and around the mine, strategically placing materials for road construction and support equipment to make sure our road networks come up quicker are just a couple examples of that. We've also looked at implementing technologies such as drone technologies and overlaying that on some maps to look at where are we most vulnerable and where do we have to deploy our equipment more rapidly. And we've seen some success post Q2 in recent rainfall events where our response times are much quicker, our ability to ramp back up to full production capacity has increased significantly. and maybe one more example of where we talked about on previous calls implementation of a mud mode in our AHS system at base plant. In fact, we've now moved to mud mode 2.0 and seen a lot of success in reducing the slippage events on the trucks as a result. In fact, the slippage events are down 80% relative to the initial version of this software. I think that's a good example of the continuous improvement mindset that our teams have, working collaboratively with our vendors to be able to do that and deploying that at scale. So lots of learnings and pleased with the results and with recent performance.

One other thing I'll just add to that. Thanks, Peter. We have the ELT. I'm looking around the room. We have a text thread that we communicate with pretty continuously. We'll talk about everything from flames draft picks to movie quotes to performance. I'm looking at Dave as I say this. they will share with us a particular unit at a refinery that went down and about the time I catch up with the text thread he's already put another note in there and we fixed it we're back on at full rates again it's just an organizational capability that rallies and focuses when something goes off plan to correct and rectify it ASAP and we can give you dozens of examples of that that are different today than they were at points in time in the past.

Terrific. Thanks very much.

Thank you. One moment for our next question. And that will come from the line of Dennis Fong with CIBC World Markets. Your line is open.

Hi. Good morning. Thanks for taking my questions and appreciate the prepared remarks there around how you're managing through a very tough quarter. My first question harkens back to the investor day where you discussed thoughts around near-term growth as well as long-term resource development, but with a large focus on value and volume. As we look towards scenarios where egress out of Western Canada have the potential to increase and increase quite significantly, how does that necessarily maybe shift or shape your thoughts around managing options to either accelerate development from some of your in-situ opportunities at Lewis and Firebag or how have your teams maybe found opportunities to showcase that same amount of growth but maybe with lower capital or more efficient deployment of that capital?

Thanks, Dennis. It's like you sat in on our board meeting last week. You recall on March 31st, We defined or described that plan as largely within our control. It didn't need fiscal and regulatory reform. It didn't need new pipelines. This is something we had confidence that we could deliver and execute. Of course, it was underpinned by the large, high-quality resource base, predominantly in situ, that gives us a lot of optionality. We are very much embracing this design one, build multiple strategy approach. for a whole host of reasons. But today we're also looking at what's the right pace, cadence of that. We have optionality to accelerate that if growth were to be valued by us and our shareholders. We've not shifted to that mode at all, but we have that flexibility. Certainly things in Canada have been more encouraging over the last year or so than the prior decade. But the beauty with us is we have the optionality to go at a quicker pace at a ramped up growth if and when market conditions would say that is the right strategy. We're not there yet, but we're paying very close attention to the signposts and doing some pre-work that would preserve our options to do that if we selected it.

Great. I appreciate that background, and I promise I was not sitting in your board meeting.

You're welcome. You're welcome anytime, Dennis.

I appreciate that. I want to ask a separate question just on regional integration. Clearly, through the second quarter, that benefited a lot of situations in what we'll call avoiding the worst outcomes associated with the unprecedented weather conditions that you guys experienced in the second quarter. Can you talk towards, again, I know that's frankly a backbone and a staple of the way that you think about operating your assets, but can you talk towards, again, in light of the potential growth Optionality, and even maybe the increased demand for diluent or even solvent for some of the technologies you're planning to employ. Can you talk towards how that regional integration really helps drive, we'll call it confidence in terms of your ability to execute on some of those operations?

You know, I've been known to say corny slogans now and then. You know, there's integration, there's Suncor integration, and you've hit right on it. And, of course, it's the unique level of fiscal. So I'm looking down the table and really, you know, Peter, Shelley, Dave, you all can comment on this because it's how your operating committee, how you work day in, day out to maximize value. Peter, do you want to start?

Maybe I'll start by saying, yes, you're right, Dennis. We did move up a large amount, over 90,000 barrels today. around the region in the quarter. That certainly helped to make sure we got the bitumen to those upgraders and maintain high upgrader utilization. Syncrude was a classic example of that where we saw impacts due to wet weather conditions in the Syncrude mines. We moved firebag bitumen over and kept the upgraders running full. That's really the name of the game. Having that operational flexibility for us, we've We know as a competitive differentiator, moving lots of four hills barrels into the base plants as well. Just to touch on the diluent side, we are fully integrated. We make our diluent at the base plant upgrader. We can ship it up to fire bag via a pipeline that's in place and operating today. We actually have a spared line in the ground as well today should we choose to scale up and that will be one of our in-situ development projects that we're going to bring on here in the next couple of years. And so it's one thing being integrated on the bitumen side, being integrated on the upgrading side between upgrader products, but also on the diluent side, which will help our in-situ operations. So yeah, it's a It's very handy to have as an operator when things don't quite go as expected.

Just to double down on that, the flexibility that provides us in the resiliency, market conditions, and many more.

We integrate our Edmonton refinery directly with our oil sands operations. We run a single, what we call linear programming model to optimize that. Think of that as a big AI tool that optimizes the region with the Edmonton refinery and all the way to our markets and to our export sales globally and our domestic markets. With that capability, we can do a lot of interesting things. One of those things is if there's an upset in the region, We can adjust the crude slate at Edmonton, take some special streams to help keep the base plant operator full, for example, while Edmonton refinery is optimized. We also have diluent processing capability. So if we're short diluent, we can send some diluent up north. But more interestingly, we can run intermediate streams, special blended crudes to fill out the Edmonton pots and pans, and you'll see that in this quarter. Rich mentioned we had record throughput. We also had record sales, and you'll note that the record sales are a much bigger gap than the record throughput, and the difference, a large part of that difference, is these intermediate streams that we ran to Edmonton Refinery. over the quarter. 10 to 15,000 barrels a day is our capability. We continue to grow that, and that really translates into pure diesel production that we sell really globally to our export markets around the world. From the oil sands all the way to diesel sales in Europe and Panama and Asia, we integrate this business.

So if we invited you inside our tent, what you'd see is operations teams driving the safety, integrity, reliability at an asset-specific level. But we've added, as our performance has reduced variation, elevated, integrated teams that are continually looking at maximum value. Where molecules move, how do they compensate when we have an operational upset. Again, the whole goal is maximize value. At an operational level, you can't always see that, but when you rise above it, you see the interconnectedness. and that is a difference today than the past. And you see it in our results. I thought Troy described it very well. The rateable, predictable nature that has less reliance on underlying market conditions. It's how we work.

Great. Really appreciate that color from all of you. I'll turn it back.

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

Thanks and good morning everyone. I'll start with a question on global product sales which were clearly very strong and continue to increase. Where do you stand in terms of building out access to global markets and would you frame this as a more sustainable improvement to the business or would you characterize it as being more transitory and largely driven by ongoing volatility in pricing for global refined products.

Thanks, Meadow. I'll start and then Dave will comment further. The strategy we put in place didn't just start with the recent volatility in global markets. We had a vision a few years ago of a broader presence that could open up markets and open up avenues of value for us. So yesterday we talked about how A few years ago, we could sell in 20-some countries around the world, and now that's in the mid-40s. We have described how we've expanded our logistical capabilities with time charters on vessels so we can move products and crude off of the West Coast, products off of the East Coast. So it has been a several year in creation. And what you've seen now most recently, you've seen the benefits of that. Dave, you want to comment a little bit about particularly this kind of, do we think there's a structural benefit here versus is this a one-off transient? And I'll tell you what the right answer is, but go ahead. I think I know.

Yeah, Mano, I'll comment a little bit on our, Rich commented on how we've been building out our trading platform over the last number of years, selling into multiple countries around the world. And I've commented before how we have unique capacity and capabilities to export off both coasts. So I'll talk about each coast separately. Off the west coast, we've been, you know, that is our terminal in Burrard. We We've been growing that logistic just through Attention to detail, constraint busting mindset. The integrated team kind of optimizes our rail loading, our rail movements, our rail offloading. We blend that with the pipeline shipments that come in on TMX. We optimize vessel loading windows, and we maximize a sufficient logistic. And with that, last year we could do three to four cargoes a month on a good month near the end of last year and into early 26. Through that constraint busting activity, we've moved that up to five cargoes a month. And in May, we actually achieved in the calendar month of May, we achieved for the first time six cargoes a month. So yes, it is structural. We can continue to do more from that efficient logistic and that competitive asset base. And then we market that through our trading organization off the West Coast. On the East Coast, we have similar capabilities. We have our new Parachem asset, which we can rail supply. We also have our Montreal refinery, which we can What I call orbit shift. We can decide how much of Montreal refineries supplies domestically versus exports. And the big story for Montreal in this quarter is our ability to export jet. Jet fuel, as you know, blew up in the kind of late first quarter into the second quarter. And we recently started making jet fuel in Montreal. really in the fourth quarter of last year and continued into the first quarter. And that was meant to be, you know, less than five KBD domestic sale opportunity that we would ultimately grow. In the second quarter, Nelson Kotu from Montreal, he's production control coordinator in Montreal, he went out, boots on the ground, walked the lines, looked around and said, I need to figure out how to export jet. What's the logistic that can do that? And found a zero-cost opportunity to go export jet fuel out of Montreal. and we were able to then take a number one diesel stream, which also meets jet qualities, convert it to jet qualities and continue to export. So we exported 22,000 barrels a day of jet fuel out of Montreal. That's a structural capability that we can continue to do if the market is there. At this time last year, that was zero. Zero. And our vision was five KPD. So we can now do 25,000 barrels a day of jet fuel out of Montreal. So lots of opportunities there to continue that.

So that's a long answer for both of us. It says this is structural change that will add value on an ongoing basis long term.

Terrific. Yeah, thanks for that. And maybe second question is on the Commerce City refinery. In the past, you've suggested that you may not necessarily be married to it, but more recently, you've suggested that the asset is performing at a higher level and holding its own. So there's a couple of questions here. How much of that is stronger regional cracks versus fundamental improvements to how the asset is operated? And then just in terms of refined product egress out of the Rockies, We're seeing some initiatives that point to improved egress from the Rockies to the West Coast. And how is that all dovetailing into how you're thinking about the longer term fit for that asset?

Just for clarity, I've never used the word married on any asset. That's a very high bar. But we talked about, do certain assets fit in the family photo? And make no mistake, Dave and I, a few years ago, went to Commerce City and we took a photo and showed it landscape and portrait and said, if you want to stay in it, here's what you need to do. and what you need to deliver. And that facility and that team has delivered. Improving their performance, fundamental safety, operational integrity, reliability, cost discipline. Still work to do, but they have changed their fate in a material way. Now we also have some market benefits in our favor. But as we look at it, we'll differentiate from that. We'll take the market, we can get it, but we really want to look at our underlying performance, and that facility's value to us has grown materially based on their performance, and we think that is also significant. I don't know, David, if you have anything specific on egress or the Rockies to add to that?

Maybe just a couple quick comments. So, yeah, Mano, you're absolutely correct. We've seen some – with the – growing short in California, particularly the Los Angeles area – We're seeing refiners in that mid-continent, kind of West Texas and into the mid-continent, find ways to move product towards markets that had historically been supplied by California refiners. We see that as constructive for Commerce City margins over time as those as those opportunities present themselves. We've also started our own ability to move product out of the region. We started rail-loading gasoline, and we can move that to other markets outside. And with that, we're seeing, you know, Rich mentioned we've seen Commerce City turn around performance. The first couple years was really focused on safety and reliability. We had to get that right. And then in recent months, we've been focused on profitability. I'm pleased to say we set a record all-time rate at Commerce City back in June, and we think we beat that again in July. So Commerce City is looking like a pretty good asset at the moment. Thanks, Dave.

Thanks to you both. I'll turn it back.

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

Good morning. It's great to see that despite all the weather challenges that were thrown at you, you did not change your upstream guidance. And given your track record in the last two or three years, then most likely you'll still come in at the top end of the guide. So help us understand a little bit. Should we model a very strong rebound in upstream volumes for the third quarter, given that you did not change your guide at all?

Our second half is typically, when you get outside of turnarounds, the strongest time of the year. And there's a host of reasons. Major maintenance tends to get behind us. So we expect a much stronger second half than first half. That's built into our plans. And in terms of guidance and stuff, I'm a broken down old athlete. At halftime, I've never given up on anything. And there's no reason that we should... Well, we fully expect that we will meet our guidance this year. And you noted the last few years on the higher end of it, we have high expectations. So we expect a very strong second half.

We are absolutely confident you will hit the top end. My second question is, I always appreciate your outlook on the refining macro. In the North America, you report strongest margins because you have an integrated business model. So can you help us understand what you're seeing in terms of refining macro out there and the sustainability of these cracks and how Suncor benefits from them?

Go ahead, Dave.

Thanks, Manav. You know, you've mentioned sustainability. We've seen record cracks. We've seen sustained cracks. And we're seeing the refined product market really be much more resilient than the crude market to geopolitical news. It's largely a distillate story, diesel and jet. We've talked about how we've sold diesel and jet to markets around the world. Hormuz is a big piece of that, but also Russia. We're seeing Ukraine is continuing to be very proficient at taking out Russian infrastructure, and Russian refineries are at greater than 20-year lows in output, and they took about $1.2 million Barrows Per Day of diesel off the market with an export ban. So we'd see that continuing to be resilient for at least the medium term. For Suncor, our downstream business, we're designed to win in any environment, but we sure like good diesel cracks. This is set up for our success. Our integrated model, as we talked about, can deliver the full value all the way to the customer. and we continue to grow diesel production preferentially over gasoline, which is also a good fit in this market. So we'll continue to leverage our trading platform to be flexible and sell globally around the world as well as domestically and we're not done yet.

Thank you so much and we appreciate you raising the buyback again this year. Investors really appreciate that. Thank you. Thanks, Manal.

Thank you. One moment for our next question. and that will come from the line of Doug Leggett with Wolf Research. Your line is open.

Thank you. Good morning. Rich, I got two things perhaps that some of one topic has already been hit already, which is growth. But if I tried to frame it like this, some of your peers appear to be at least considering an acceleration in growth projects. You've obviously laid out your 100,000 barrel a day organic thesis through 2028. But I guess my question is not so much about individual projects or your appetite, but it's really more about the reinvestment rate. When you think about the appropriate level of sustaining capital and growth capital on top of that, how should we think about the reinvestment rate as the macro environment changes perhaps over time?

On growth, Doug, the way I would describe the things we're doing, because of this resource base we've described, because of our design one, build multiple strategy, We're doing preparatory work, whether that's shooting seismic, drilling delineation wells, so we have optionality. We were doing that, candidly, before the market disruptions of this spring. We were just doing that because we think that's good business. When it gets then to capital allocation, I hope we've increasingly demonstrated that we very much believe in a measure once, cut twice. We're not only frugal, but very thoughtful on what we spend. In the model we've described, how we see ourselves when we look in the mirror, this industrial machine-like that has incredible resilience in kind of any and all business environments. The ability to deliver so you can become a foundational part of an investment portfolio. That's who we are. So it's hard to see us maneuvering around reinvestment rates or capital year to year to chase a rabbit. We don't see that. We look longer term. You're talking to our... There's a few people that will hear this that I don't mean this. What it is, you're talking to our corporate planning department right here. We look at oil prices over the last 25 years. They've averaged about $65 a barrel. We say, what are they going to average the next 25? 65 sounds like a reasonable number. We plan our business on that. If we have more than that, we certainly enjoy it. We share it with shareholders. If we have less than that, which we do, we're strong, resilient, and we don't have to slam on the brakes. We really spend a lot of time thinking about the business we're in and not trying to overreact or pursue the flavor of the day. Not sure if I got at your question a little bit, Doug, but I think it's important that when you think about capital allocation, you understand how we see our business. because there'll be a direct correlation between that vision and capital allocation.

I guess we'll wait on the strategy update or the investor day later for the year, but it's a great answer. Thank you for that, Rich. My follow-up is, look, there's a lot of plaudits about share buybacks, and we know that share buybacks are a means to an end. What we care quite honestly more about on a business like yours is dividend growth per share. where buybacks obviously play a role. My question really is therefore, when you think about cash returns, you're really targeting that $38 breakeven number by 2028. What's the split in your thinking between the role of buybacks and the potential to raise that dividend more aggressively in the context of cash returns as opposed to just opining on whether buybacks are good or bad?

You know, a fair question, and I'll ask Troy to expand upon it here in a second. When we start, as we went over the last three years from a low to mid $50 a break even to the low to mid $40s, we feel very comfortable where we are now, that we are strong, resilient. The integration gives this level of, you know, less volatility in market conditions. So it becomes less about a specific number targeting. In the investor day, we kept with the same kind of vernacular to describe $2 billion increase in free funds flow, $5 barrel reduction. But we're not wed to we're going to get to 38 or 39. We are wed to creating value in it. So the balance between how we return to shareholders, dividends or buybacks, it's not... It's not like it's absolute, but let me ask Troy to comment, because we talk a lot about this. Troy, you want to offer some additional insight?

Yeah, thanks, Rich. We do talk a lot about it. I mean, our shareholders really have a diverse set of objectives. While the vast majority favor buybacks as their preferred method of receiving shareholder returns, some others have a preference for dividends or a balance of both. Now, my career, I found that keeping the most shareholders happy is generally the best path to success. So you can count on us monitoring both methods of returning cash to shareholders to ensure that each is optimized, including from a competitiveness point of view, so as to create the greatest demand for our stock.

And we like Doug to be happy, too.

Thanks for the answer. I think you know where we stand on this topic, but I appreciate the time. Thanks so much.

Yeah, and I think just one last comment on that. We don't have, we're not governed by hard and fast targets, thresholds, rules. We want to be outstanding operational executives and outstanding financial executives. So we look holistically, we talk holistically, we engage our board And again, this is one of these kind of behind the scenes that you don't see, but it's not, you know, when we get to X, this happens. When we get to Y, that happens. We really, we think we're, you know, we can be better than that. Looking at market conditions, our unique financial position, our competitive strength. And, you know, Troy said it well, we're competitive. We're trying to appeal to a very broad set because we think we can and should be that foundational investment for most any investor.

Again, thanks for the comments, guys. Really appreciate it, Richard. Yeah, thanks, Doug.

Thank you. One moment for our next question. And that will come from the line of Patrick O'Rourke with ATB Coremark Capital. Your line is open.

Hey, good morning, guys, and thanks for taking my questions. Congratulations on the strong quarter there. Just wondering, I guess you have a little bit of turnaround activity in the downstream unit in third quarter here. Obviously, with the second quarter, we saw a bit of a push to strike while the iron's hot, and despite challenging conditions, maximize to the extent possible. Output from the Mines. I'm wondering when you think about the scale and the scope of the turnarounds here in the third quarter and where cracks are presently, what your flexibility around sort of your approach to that is in this environment.

I'll make a comment, then I'm going to look down the table at Dave and Peter. One of the things we have talked about from day one, the importance of safety and operational integrity, and so we We want to do the work we need to do to maintain our assets in the right condition. We don't want to do more, and we certainly don't want to do less. But we're also not looking at, OK, margins are high. Can we slide this a year? Can we slide this six months? That introduces risk that we just don't think is prudent. Are we looking at optimizing things? Certainly, but not any material movements because, wow, the whole crude price is high or cracks are high. We won't change the oil in the Chevy this month. We'll wait until next month. That's just not how we do things. Dave, Peter, comment quickly on the third quarter, particularly in a frame of reference. The work we did in the second quarter, we had some pretty material things. How do you see the third quarter in terms of either scope and or complexity relative to what we just accomplished?

I'm sure I can start. Dave here. For the downstream, we have two turnaround plans. Montreal has some We would expect that to be a fairly minor scope of work, pretty typical turnaround activity, and I'd expect to do that in less duration than prior events, and we would set ourselves up for longer intervals going forward. On the Edmonton turnaround, that's a catcracker turnaround. Those are typically fairly complex turnarounds, but the team is well prepared. They've Smith, their turnaround planning milestones well ahead of schedule and have been optimizing that plan for the last six months. So we're in pretty good shape to execute that. We're going for flawless on that one.

Peter? Yeah, on the upstream, we have one major event left in the third quarter, and that is the synchroed coca outage. I characterize it as a routine outage plan to start here. August 20th, planned for 50 days, and it's an extremely well-planned event. All of our turnaround preparations have been going on for many months now, so we're confident that we're ready to execute that, and the team's obviously got some stretch targets that they're shooting for in that event, so looking forward to that.

More work to do in the third quarter, less overall than the second quarter. All confidence in our preparation and expectations on execution and success are extremely high and that positions us for what we believe will be a sprint in the second half of the year to deliver outstanding results.

Okay, great. Thanks. And then maybe this is a broader strategic question. You kind of touched on this a little bit, but In terms of the growth opportunity, the MOU, the trilateral MOU, what needs to happen there? And then if this opens an opportunity, whether you need to underwrite a pipeline to access growth or something of that nature, how prepared would you be to sort of push forward or accelerate some of this future growth if it's sort of a window of opportunity there for Suncorf?

For those that aren't as familiar here, a month or so ago, five oil sands companies, the alliance, we signed this non-binding MOU with the federal and provincial government. It outlined kind of shared ambitions around carbon policy, expanded market access, and the fiscal and regulatory conditions that would be required to attract capital and incent growth. There's a lot of work to do to turn this non-binding set of ambitions into definitive agreements. As I said earlier, it's a very different mood and tenure today than it has been in the past, so we're encouraged by that. But in terms of how it has or may affect our plans, that's still to be determined. I would just echo Patrick a little bit of some of the comments I said before is we look at the business long term. We want to be very thoughtful on long term commitments. and Capital Allocation. If there's opportunity for selective high quality globally competitive growth, our shareholders value it, we see it, we have the ability to pursue it, but our position today isn't materially different than it would have been six months ago on the outlook. We're still in the, well let's just see where things go.

Okay, thank you very much.

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

Hey, Rich and team, thanks for taking the time. The offshore results were really good this quarter, Rich, and it's not something we tend to spend a lot of time on on these calls, talking about the E&P business, but I'm just curious on your thoughts around the sustainability of that strength in production, and you've got West White Rose kicking in. Anything that stands out to you and the E&P side.

Certainly, you've seen the benefit from the market environments. Those assets generally are pretty, as an aggregate, are relatively low cost overall, certainly Hebron and Hibernia. You've seen, much like the Commerce City story, you've seen tremendous turnaround in our performance at Terra Nova. and the contribution that it has. So they have been a big part on a relative volume basis. They've been a big part of the contribution. We expect that to continue. At West White Rose, there's still drilling activity and what the resulting production is to be determined on it. But although they're a smaller part of our We've been quite pleased with how that East Coast, that overall set of assets, has delivered, particularly in the current business environment.

Thanks, Richard. The other one is just on Petro Canada.

I know there's a retail growth focus here as we think about other economic investment in your capital budget.

Update on how you're thinking about that business. How would you characterize it as something that has synergies with the rest of the company? And how do you see it scaling over time?

Several years ago, the plan was put together for the retail side. And we believe in delivering on commitments when we establish plans. So Dave and I rigorously steward that plan. And that team has been delivering on it. And one of the things I'm excited about is they have been delivering on it in the last particularly about a year, year and a half at lower capital than we originally had envisioned. They're just finding new and creative ways to deliver value through partnerships, other people's money. And as we've asked the entire organization, to bring about more capital discipline and rigor focus on things. They've been subject to the same scrutiny. Nobody gets blank checks around here just because it's been put in place at a point in time. In the market we've seen this year in particular, the The ability to run our facilities at full capacities, knowing in the vast majority of scenarios we have comfortable homes for those volumes, whether those are retail. Our retail now, David, remind me, it's above the pre-COVID levels. Our retail sales, that is our most profitable product. So they are, you know, they're in that family photo. I got my wife on one side, my grandson Tommy on the other. You know, Petro Canada is pretty clearly in that photo. And as long as they keep delivering, they'll be right there with their, you know, big grin and smile. Good.

Thank you. I appreciate it.

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

Thank you everyone for joining our call this morning.

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