Page 15 - Suncor 360 - September 2014 - English

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SOME EXTERNAL MARKET FORCES – AND HOW WE ADAPT
SEPTEMBER 2014
360
Market access: For Canadian oil sands companies, the ability to get oil to higher-priced world markets affects

share prices. Our integrated business model and good market access help maintain investor conidence.

Commodity prices: While no oil company’s cash low is immune to oil price luctuations, our integrated model
and full spectrum of product quality help buffer the impacts of lower prices.

Currency exchange: Most Suncor costs are in Canadian dollars and most revenues are in U.S. dollars.
The Canadian dollar tends to weaken when crude prices weaken (and vice versa), and this offset mitigates

some of the luctuation – a notable advantage over U.S. producers.

Stakeholder expectations and regulatory changes: The performance of our company and
industry is heavily scrutinized. The work we do on the sustainability front helps position us well for
changing regulations and the evolving expectations of our stakeholders.

Royalty regimes: Royalty rates create an economic threshold that inluences the pace of resource

extraction. Because of our size and integrated model, our threshold is higher than other companies.
but royalty rates remain a material factor in evaluating a project’s viability.

prices luctuate. That’s the beauty of our ADAPTABILITY IS IN OUR DNA
performance and safety of our assets.
tightly integrated operations.”
Finding ways to reduce costs, improve
Each time a chameleon enters a new
safety, enhance reliability and grow
Does this mean Suncor is immune to the environment, it doesn’t pause and ponder production without signiicant capital
whether it should change colour or what
ebbs and lows of oil prices?
investment – the hallmarks of operational
colour it should change. It changes the excellence – make us a better performing
“Not usually,” says Mark. “No oil producer right colour, the right way, every time.
company no matter what’s happening in
is. If oil prices fall, it inevitably affects our
cash low. But the same can be true if oil Sound familiar?
the marketplace.

prices get too high.”
“That’s something that resonates very well
It should. ‘Doing the right thing, the right
way, every time‘ is the spirit of operational with our investors.
Maybe you’re thinking, ‘Wait a minute! We
sell oil. The higher the price, the better.’
discipline – those ive fundamental “Something else that resonates is the
behaviours that are vital in our pursuit of
strength of our mission, vision and values
“Actually.no,” says Mark. “There’s a operational excellence. (See P. 20) And as and their consistency even in the face of
‘sweet spot’ for oil prices, and right now it’s we continue to operate and grow in a
changing market conditions. That’s another
around $90 to $110 a barrel. Lower prices dynamic, often unpredictable industry,
erode our margins, but higher prices tend to operational discipline and the Operational way Suncor is chameleon-like. We adapt to
our environment, but the fundamentals of
stress the resources of our customers. We Excellence Management System will be key
don’t want to destroy demand, but that’s to our journey.
who we are never change.”

exactly what happens if prices are higher
every time a customer shows up at the “After market access,” Mark explains,

pumps. Once oil prices start to inch beyond “the biggest questions on investors’ minds
relate to our cash low and the reliability,
$110 or $120 a barrel, we have seen in the
past a discernable slowdown in demand.

“It’s important to note that the real source
of demand growth is in emerging markets

where personal incomes are much lower
than ours, and that makes the price

balance especially crucial.

“Rather than counting on higher oil prices
to boost our proitability, the ideal is to

achieve higher margins by lowering costs
and improving reliability” – the essence of

another key competitive advantage that
offers a strong defence against market

forces and luctuations.