To my eye, the highlights were good operating cost performance, and decent refining even after backing out the inventory valuation gain.
One of the opportunities in the years ahead is to deliver operating efficiencies at Syncrude, using best practices from Oil Sands.
The other good thing, in addition to reducing $1.1 billion in debt, is they termed out $1.25 billion in debt to 2051 at sub-4% interest rate.
The shareholder return split of 50% dividends/50% share repurchase is a nice balance.
The two main caveats in the report are that the balance sheet shows a reduction of $123 million in cash, so net debt was only down ~$1 billion. And it looks like Q1 was the capex nadir and the run rate will rise by a few hundred million a quarter going forward. That means at the Q1 price deck of $60.85 Brent, SU is delivering closer to $700 mm in sustainable quarterly debt reduction above its $637mm in div/buybacks. Will be interesting to see if analysts agree after the call.
- In the first quarter of 2021, Oil Sands operations cash operating costs per barrel decreased by approximately 20% to $23.30 and Syncrude cash operating costs per barrel decreased by approximately 10% to $32.25 compared to the prior year quarter due to a combination of increased production and improved cost performance. Further cost reductions are anticipated via the implementation of digital technologies, which are currently underway, and the assumption of Syncrude operatorship on September 30, 2021.
- Refining and Marketing delivered funds from operations of $962 million, which included a FIFO inventory valuation gain of $373 million after-tax
- The company also issued US$750 million of 3.75% senior unsecured notes and $500 million of 3.95% senior unsecured medium term notes, both due in 2051. The company reduced total debt by $1.1 billion in the first quarter of 2021.
- The company increased shareholder returns with $319 million in dividends paid and $318 million in shares repurchased, representing approximately 12 million shares, or approximately 1% of the total common shares outstanding.