Suncor Energy Inc. (SU) Q2 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Suncor Second Quarter 2012 Conference Call and Webcast. I would now like to turn the call over to Mr. Steve Douglas, Vice President, Investor Relations. Mr. Douglas, please go ahead.

Thank you, operator, and welcome to all participants for Suncor's Q2, 2012 call. I'm here in Calgary, along with the controllers team and the Investor Relations team, and joining me by conference call from Fort McMurray is our CEO, Steve Williams; and our CFO, Bart Demosky. Just before we begin, I should make a legal note. You should note that today's comments contain forward-looking information. Actual results may differ materially from expected results because of various factors and assumptions described in our second quarter earnings release and also in our AIF. Both of these are available on SEDAR, EDGAR and our website, suncor.com. Certain financial measures referred to in our comments are not prescribed by Canadian GAAP and for description of these, please see our second quarter earnings release. With that, I will hand over to Steve Williams.

Thanks, Steve. As everyone knows, this was my first quarter as CEO of Suncor and it was certainly an eventful 3 months. We saw crude prices drop by $25 per barrel in the quarter, and large swings in price differentials for our basket of Oil Sands crude. As the markets reacted to the volatile supply and demand dynamics in North America and a very uncertain macroeconomic global situation. Through all of that, I'm pleased to say that Suncor's integrated business model and our focus on operational excellence enabled us to produce strong results once again through the quarter. So despite crude prices that were on average $9 or $10 low in this quarter than in quarter 1, we actually produced very comparable operating earnings and cash flow, and that speaks to the strength of our integrated model as our 3 inland refineries took advantage of the discounted feedstock costs to generate what were exceptionally profitable results. Our overall production remained within the range of our guidance, thanks to the steady ramp-up of Firebag and increased fall-ins from the North Sea and Libya, and we were able to complete a substantial amount of the maintenance at our Oil Sands plant that we expect will position us well for the second half of the year and some reliable production. On the capital project front, Firebag 4 is now over 90% complete and we expect to begin steaming the formation in the fourth quarter, and that will lead to first oil very early next year. We're continuous on our other growth initiatives with a relentless focus on cost and quality rather than on schedule. For the oil sands joint venture projects, that's resulted in timelines extending from the original estimates. However, we are quite comfortable with taking the necessary time upfront to ensure…

Great. Thank you, Steve, and good morning to everyone on the call. As Steve mentioned, this certainly was another quarter where Suncor's integrated model produced excellent results for shareholders. Operating earnings came in at $1.26 billion, cash flow of $2.34 billion and return on capital employed registering in at 14.3%. And I think it's important to note, these are all very significant improvements over the second quarter of 2011. Now our net earnings this quarter were impacted by a one-time $694 million write-down of our Syrian assets. It's an impairment, and that is really due to the extended political unrest in that country and the thing I'd say about it is that while we never like to take an impairment, this was not unexpected and it's important to realize that the Syrian operations do represent a very small part of our overall business, at less than 2% of cash flow. I also wanted to point out as well that $67 million of that write-down or about $0.04 per share was associated with accounts receivable. It did go through our cash flow for the quarter, and that is a one-time item, so it should be taken out of the run rate. With that behind us and another strong quarter in the books, our financial metrics continue to look very good. Net debt on the quarter was down to just over $5.6 billion. Debt-to-cash flow is well below our target range and currently stands at 0.6:1, and we now have almost $5.2 billion of cash on the balance sheet again at the end of the quarter. And we have worked very hard to build a strong balance sheet, and as the company moves forward, we will continue to take a very disciplined approach to managing our balance sheet and allocating our capital…

Well, thank you, Bart and Steve. I would like to just follow-up on Bart's reference to the guidance update. The updated 2012 guidance is available on our website and I should note that the guidance takes into account a significant amount of maintenance, which we have scheduled in the third quarter, primarily in our E&P group, but also Oil Sands space and in situ have scheduled maintenance. All of these are taken into account in our guided production. You can find details on Page 21 of the updated IR deck, and either course is also available as of this morning on our website. A few further notes just before I open the line. I know people are always interested in inventory adjustment related to FIFO accounting. With falling crude prices and product prices, the inventory adjustment in the second quarter was an expense of $135 million and on a year-to-date basis, an expense of $128 million. Stock-based compensation with an after-tax positive in the second quarter of $41 million, but year-to-date an expense of $83 million. And the exchange impact, the FX impact in the quarter a negative or expense of $143 million, year-to-date of $15 million expense. Just as I pass it along now to the operator to open up the lines, I will note that the IR team and controllers will be available throughout the day today to deal with any detailed questions you may have, modeling-type questions. So I'll ask you to keep the questions for Bart and Steve on a little higher level. And with that, operator, I'd ask you to open up the lines.

[Operator Instructions] Our first question is from Greg Pardy of RBC Capital Markets.

This question, I think, probably dove-tails pretty well with some of your opening comments, but there are really 2. I think it comes back to Joslyn, Fort Hills, interested in how the decision-making process will work and what stage you're at on that. And then secondly is if indeed those projects do not meet your IR objectives, how complicated is it for you to disconnect from those projects given the JV with Total?

Okay, Greg, it's Steve. I'll take that one. First of all, let me just comment on the health of the joint venture. It's going very well, and in order for it to be going well, we would have to test some of the first challenging debates around the group for projects. You know we've been working very hard to make sure we get the best projects we can, so we're reviewing the scope. We're looking at the profitability of those projects as we speak, and both, particularly Total and ourselves are contributing to that, and we're seeing significant progress. I think we talked before about approaching $1 billion of cost reductions on the Joslyn project. So the relationship with partners is very healthy. You did pick up very well on the comments we're making there. These are individual projects, although we've always said there are some benefits also by looking at them together because, obviously, 2 of them are potentially the feet to the upgrade. But for clarify, they will be individual board approvals that we will take the opportunity to also review together, and so in principle, there is the opportunity to not progress those projects. So we look at each of them. We have those conversations with our partners, and at least, in principle, it's possible to withdraw. I won't go into the detail here, maybe next time we're on the road together or we can talk it through with the team in more detail. Each of the contracts are different and have different mechanisms for dilution, but overall, I'd say at the moment, progress is healthy, we're engaged in those debates and pleased with the way the joint venture is working.

Our next question is from Andrew Potter of CIBC.

First, just a follow-up on Greg's question. More specifically, when in 2013 is the decision expected to be made? I think initially, you were saying kind of mid-2013, but just wondering more specifically if that's moved. And then just a question on the [ph], I mean, obviously, you've been producing some pretty strong numbers from there. I just wanted a little bit more color on Montréal and how that's impacted by a potential Line 9 reversal and how that would impact the cash flow profile.

I mean, we have nothing to say in terms of the update. The timing we've advertised is the middle of next year would be the sanctioning date, and if we stick to that plan, then we should have broadly the 3 projects approximately ready to take their reviews. We are heavily involved in these profit improvement reviews at the moment, and the indications are that some of these projects are moving backwards, not forwards, and I'm not worried about that. I'm not worried about them going back, I'm not worried about that review date potentially slipping, as long as we're seeing cost improvements and quality improvements, which lead then to better returns for shareholders. So we've indicated middle of next year, the reviews which I think potentially could impact that. On Montréal, the position is relatively clear. We're in the midst of the Line 9 review now. That process comes to a closure in September. Suncor's objective is to have a share of the Line 9 operation and that will then enable us to get some of the Western Canadian crudes into Montréal and effectively start to lose it towards the economics of the other 3 inland refineries we have, so that's still our plan and that process comes to a conclusion in September.

Any color in what that would mean roughly in terms of margins or overall downstream EBITDA?

Andrew, it's Bart here. I think the way to think about it is that currently, that refinery does source it's crude offshore on a Brent basis, and with a reversal of that line, certainly, we're going to see more of their product being sourced at inland pricing, which is, as you know, quite a volatile spread, but a positive contributor to cash flow, so we would be very positive on it.

Sure. And then just very last question just on the project sequencing. If we are in a scenario where Fort Hills or Joslyn or Voyageur or all the above do get pushed out, I mean, how are you thinking about SAGD? I mean, is there an opportunity to move MacKay or Firebag 5 and 6 sooner? Or is that kind of stuck on the same timeline or are you seeing the same cost pressures there, I guess, that are challenging other projects?

At the same time, we're taking the review of a major joint venture projects. We're also taking a review of -- if you remember, in the investor book there, there's that shopping list of projects, which are potentially MacKay River, Firebag, Lewis and a few other in-situ resources we have. We do have some flexibility if we choose to exercise it to move some of those projects forward. The other piece we have, and we're still doing the work to define exactly what it is, we do have some interesting debottleneck projects as well, which are much smaller projects, where as we started to bring the mines up and the upgrader up and Firebag up, we can see some areas where there may be some relatively high-return projects where we can get some volume there, not of the same sort of size, but we do have some projects there.

Our next question is from George Toriola of UBS.

I have a couple of questions. The first is just to follow-on the question around sequencing of projects. To the extent that your projects get moved back, what are you going to do with cash and how would you be deploying the cash that you have? Bart had suggested that your balance sheet is probably where the bet stands is ahead of the metrics that you desire. So just looking for color on how you spend your cash here to the extent that this project gets moved back?

Great question. The first thing I'd say is that having as much cash as we have and as much flexibility in the balance sheet as we've built up is a great problem to have. So now that said, we do believe very strongly, as we've said many times, that our job is to drive shareholder returns. So let me just reiterate the priorities for cash and the first call is against obviously, running the assets very, very well. So we want to make sure that we're investing properly in those assets. The second call is on profitable growth, and by that, I mean the projects that Steve outlined will be the ones that are going to deliver the best overall returns for our shareholders, and that's how we see that playing out. Then, where there's excess cash or cash beyond the targets that we have for holding some cash on the balance sheet, we still plan to work on returning that cash to shareholders, either in the form of dividends or buybacks. And we've been growing our dividends certainly, over the last 5 years, well beyond our production growth and what you'd expect to be growth in cash flow and earnings. We view that as a positive step for shareholders. It's been a CAGR greater than 21%, and as well returning cash back to shareholders through buybacks. And as I mentioned earlier, with our upcoming expiring of our current buyback, we will be taking another recommendation to our board for review at that time.

Okay, that's helpful. The second question I have is on Firebag 3. Could you break out what Firebag 3 pre-reduction is currently and when you expect Firebag 3 to be fully ramped up?

I mean, the simple answer is no, and there's some really simple reasons for it. We've actually crossed-connected plants, so when we started, there was Stage 1 and 2 and then we've added Stage 3 and we're 90% complete on Stage 4 now. The pieces of the plant we've crossed-connected, so currently, we can put steam from many of the stages into any of the other underground facilities, and we can bring the returns from the wells back into any of the oil water separation facilities. So we no longer have discrete stages 1, 2, 3 and we'll have 4. Now, having said that, when you look at the detailed filings we made with ERCB, you can see by individual wells. And of course, what's confusing at the moment is that at the end of the second quarter, we had 9 producing infill wells on. So the infill wells are geographically located on the early stages, but the oil and water separation is being done in Stage 3 because we have the spare capacity there. We've actually moved it up to 10, in fact, 15 are on as we speak today, and we're on our way to 18 by the year end. That program is going very well. Those wells are exceeding our expectations. In fact, they're the best in the industry bar none now in terms of the productivity of those wells. But what it means, George, is there's no easy answer to the question about what Stage 1 is doing, what Stage 3 or 4 are doing, so we're doing a bit of work to simplify that, and we will communicate that until the picture becomes much clear before the year-end. What I will say is Firebag, Stage 3, itself is meeting or exceeding our expectations, and we are very pleased with the progress we've made on the infill wells.

Okay, so just to sort of reiterate that, Firebag 3, the ramp-up on those wells are going as expected though?

Yes. It's going as expected, and if anything, it's slightly exceeding our expectations, and we expect that to factor forward into Stage 4. Everything we're seeing on Stage 4 is very encouraging at the moment. The costs are slightly below our expectations, the schedule is slightly ahead and we're optimistic because it's exactly the same team of people that are going to move over onto starting it up, but it will follow a very similar path to Stage 3.

Okay, thanks, and last question, you talked about full capacity utilization on your Western refineries. Did this just happen? Is there something that happened this quarter that we should expect could repeat itself over the next several quarters?

I mean, other than plant turnaround, the refineries have been operating very well and one of the secrets to the integrated operation is we operate those at very high rates, so they operate full all of the time.

Our next question is from Dave McColl of Morningstar.

Two questions for you guys. The first one goes back, I guess, the JV agreement with Total. I'm wondering if there is some sort of a path within that agreement that could allow a tie-in to the Montréal refinery if the Voyageur upgrader is basically scrapped, so kind of can Total get it on the refinery if you use something there? And just the next question, builds off those infill wells, I'm just wondering if you can give any comment on the average production you're getting per well at Firebag and whether you'll be implementing these wells at MacKay River, and if not, are there plans to?

Quite a lot of stuff there. I mean, let me first talk, so the project between the Voyageur upgrader and the connection into Montréal with Line 9, a couple of comments. I mean, I would view them for simplicities, totally separate projects and totally separate debates. So we could make the choice to do the Voyageur upgrader or not do the Voyageur upgrader and similarly, we could make the choice independently to connect into the Montréal refinery, either with synthetic or light crudes, which we source probably from over on the west side of Canada, or not to do it, and those project's independent, will stand on their own merits. The second question?

Oh, production per well.

Oh, production per well. I wouldn't go into the details on production per infill well, but I'll give you a few clues around your question. So they're the highest in the industry. It's not quite appropriate for this call for us to go into that level of detail. The individual wells are registered and it's recorded on the public record what the flow rates from each of those infill wells are, and they're all at different stages, which is why I can't give [indiscernible] simple answer. In general, they are a very high productivity, which is a characteristic of the Firebag resource, and they simply are at the highest producing in infill wells. We have some more opportunity on Firebag. So by the end of this year, we will have put the first 18 in. Next year, we're moving into starting to progress the next Phase and then later, we will put those in on Firebag. There may be some potential in MacKay River, but it is different. The early Firebag Stages 1 and 2 have a big spread between, so the pairs of wells had a big gap between them and that [ph] themselves to infill drilling, so you pick your priorities first. Stage 1 and 2 were the first place to go, and then we will look at the ability to put infill wells through the rest of Firebag and into MacKay River as we progress, so there's a good opportunity there.

Our next question is from Paul Cheng of Barclays.

I have actually 4 questions that, hopefully, all of them are relatively short. First, Steve, when you're looking at the current North American crude [ph] and that your downstream is a natural hedge. As your production increased that hedge it becomes less. So when you're looking at your refining system, is there a relatively low-cost opportunity to expand the capacity?

Yes, think of it, Paul, as effectively we have a spare refinery, which is not integrated. So we have a spare 140,000 barrels a day in Montréal, which we can add to that integration model. So as Bart said, for this quarter, we will [ph] effectively, 96% of our production to Brent price. We have the ability to continue that for some time without any contract or acquisition of further assets outside of our current ownership, but we continue to look how we want to grow that integrated model. So every time an asset on this continent becomes available, we look and see if it will add value to our model.

How about in your existing system, do any low-priced debottleneck type of expansion opportunities exist?

Yes, the biggest one is Montréal.

Outside, Montréal, I'm sorry.

Okay. Yes, we still have some capability. I mean, Edmonton is very highly integrated. There's some scope in Denver and some scope in Sarnia. They're not fully integrated though. So we look at that list and we pick them off with the best returns.

Okay. Second question, on the organizational capability [ph] standpoint, using human resources not financially and both for the company and [indiscernible], Steve and Bart, do you guys have a rule of thumb saying what is your limit that how many different large projects or CapEx or the daily barrel capacity, any kind of matrix that you can share with us that you can handle at one time?

Yes. I mean, labor scales the organization of capacity to progress these projects is a very important consideration for us. Quite clearly, we're very comfortable with what we have at the moment, but what limits our rate of growth going forward is not the availability of capital for us. It's our ability to spend it wisely and end up with a reasonable cost and high-quality projects, so we made that judgment as we make the decision on the portfolio of projects, and what you're seeing is a reflection of that. We believe we're building our joint venture capability and our major projects capability to be able to handle the suite of projects we currently have, and we're comfortable that we have that capacity.

So Steve, maybe I paraphrased it to make sure I understand. So when you're looking at your mixed stack of major projects such as Joslyn, Fort Hills and the Voyageur, you believe that with the joint venture structure and your organizational capability, you and your partner will be able to handle all those 3 project at the same time?

The answer is yes. One of the advantages of the Total partnership and having the 2 mining projects is we're able to seek [ph]. So if you go back a few years, those were competing projects, where you've got the resource within the company, but the contracting labor you'll be using outside, we were competing for. By bundling the projects within the partnership, we're now able to sequence them in a way, so we're able to take the peaks out of the demands for those labors and skills. So at least, in principle, part of the design concept around Joslyn and Fort Hills is that we will duplicate as much as we can from one of the projects to the next one, so that we don't have to keep repeating all of this stuff and that was one of the benefits of the joint venture.

All right, great. Two final questions. One, with the Petro-Canada [ph] have a lot of Western Canadian asset. Do you guys have a lot of opportunity in the shale oil type of oil that the rest of the industry is now chasing? That's one. The second one is that with your new target, your upgraded utilization rate for this year is about 80%, 84%, I think, [ph] Do you have a target for 2013 and 2014?

I'll take the first one, if you like, which was about the shale reserves we have. Simply, no, we don't have a great shale capability that is not being tracked. We do have some conventional resource that we're very happy with. So I mean, obviously, the East Coast, North Sea, Libya, Syria, we have some what I call step-out opportunities around those resources, so to spend some capital funds on maintaining those levels of production at sort of the 10-year type of horizon. So we have some attractive projects there, but no great shale resource and Bart was going to pick up the second one.

Yes, thanks, Paul. One thing I'd just add to Steve's messages is that for us, there's really no need to pursue those kinds of projects. We have many assets in our portfolio, but our focus is on developing the most profitable ones and we see that as being the projects we have identified so far. Paul, I think your second question was on the operating rates for our upgrader so far this year. I'd break it into 2 parts, the answer. I think if you look at the first part of the year when we were running at very high rates, we were well in excess of 90%, and if you look at the better operating refineries around the world, including some of our own, that's the kind of target range that signifies a top quartile asset. We did have one disruption, obviously, the 4-week outage that we had, where we have to take some maintenance activity, but aside from that, the upgraders are operating very well and close to that 90% range. So if I was to look forward and say what do we want to achieve from here outside of our normal plant maintenance activities, it is continuous improvement. We do have plans to continue to drive operational reliability higher. We don't have a specific target, but it would be in line again with the better-run refineries that are out there.

Our next question is from Eric Busslinger of Marrett.

Just to touch back on George's prior question on the ranking of the uses of cash, can you guys or management provide us a thought on whether or not the company can generate a better return on buying back stock versus reinvesting into the internal portfolio and how you contrast the 2 of those levels? And then secondly, given the commentary that leverages well below targets, can you just refresh us on thoughts on where you'd like balance sheet leverage on debt to cash flow, debt to enterprise value or debt to capitalization or any other way you guys look at it?

Sure. Thanks, Eric. It's Bart here. So to address your first question as to where do we see driving better return, I think the answer is both. The way we come at utilizing what we would consider to be excess cash is to look for the best opportunity for it, and we always are looking for the best opportunity of where to invest our shareholders' cash. So today, we're blessed with having more cash than we need to retain a very, very strong balance sheet and to fund our growth projects, and that gives us the luxury of being able to buy back shares as well. Given the current pricing level of the shares, though, we see it as a very high return investment for shareholders. We believe they're well undervalued relative to the net asset value of the company and our prospects going forward. So that's why we're utilizing excess cash to buyback stock today. In terms of our metrics around our balance sheet, yes, I did say that we're under-levered and we are relative to our targets. We do target over the medium to long-term a debt to cash flow multiple of 1 to 1.5x. We're currently at 0.6 and we also target debt to total capitalization of 20% to 25% and we're down around 21% right now, so getting very close to the bottom end of our range there as well. We think those ranges afford us, if we stick with them, a considerable amount of flexibility to be able to sustain our growth programs and our assets and deliver free cash back to shareholders as well.

Our next question is from Darren Campbell of the Alberta Oil Magazine.

This is a question for Steve. Now, you're a couple of months into taking over as CEO for Suncor. I wanted to get some colors and thoughts on how you feel that transition has been going and what your views are on, where do you want to take the company, where do you want to take Suncor in the next few years?

Yes, I mean, I would say reference my opening words, I've been an architect of the strategy, so you're not going to see major turns. We will be concentrating very hard on the base business to make sure we're absolutely the best-in-class in terms of operating and sweating the current assets and every indication is we're making significant progress against that. And then just to generalize on the major projects going forward, you will see an increased focus on making sure we get the returns for shareholders as high as they can possibly be, so you'll see us working hard on costs and the quality of those projects and I'm less interested in the hedging schedules for schedules' sake. The transition, of course, I'm interested in other people's comments on that as well. From my perspective, it's gone very, very well. It was well-advertised, well-planned, has been seamless in terms of our various stakeholder group, so I spent a lot of time with our employees. I've seen 20%-plus of our shareholders in the last 3 months, and I'm delighted with the way the transition has gone and I'm very grateful for Rick as to how he handled it.

Our next question is from Ben Horbratsch of Argus Media.

My question is about the low pricing of Oil Sands crude and bitumen. It was mentioned earlier that the main way in which Suncor is hedging this by sending it to inland refinery operations. I'm wondering if there's any secondary ways that the company has been hedging the low price of Oil Sands crude and bitumen. For example, has Suncor been railing any of it to the Gulf Coast or maybe utilizing the Westridge stock to send it to Brent pricing?

Let me just [ph]. I mean, we have an integrated model, which enables us to take real advantage of the pricing differentials, and we work very hard to make sure we keep that model balanced and keep the right assets operating up through it. Hugely successful, as Bart said, 96% of our production by volume was related to Brent price rather than the WTI price. That's a best-in-class model in terms of integration. We also have an active trading department, so we do look at all of those midstream logistics as well around pipeline, around tanks, and there will be occasions when we trade in that market as well. We really like our position and we wouldn't want to go into too much more detail than that, but we haven't been trading significant volumes to the Gulf.

Our next question is from Guy Baber with Simmons. Guy A. Baber - Simmons & Company International, Research Division: This is Guy Baber with Simmons. I wanted to stick to the whole downstream integration theme, so I had a follow-up on Montréal and the potential Line 9B Reversal, but can you help us think about what type of crude slate you think would be most optimal at that refinery? How much Canadian heavy do you think that, that plant could accommodate and what type of capital investment on a preliminary basis you think might be necessary to make that happen?

I mean, I'll give you a few comments, Guy, and then what I would say, if you want any more details, don't hesitate to follow-up with us later. The answer for the question can be quite complex. We could take material in there right now, and then we have a whole matrix of opportunities in front of us, depending on the quality of product, which is to put in there, and that will depend on the alternatives available and the differential prices on the day. So right now, if we reversed Line 9, we could get light synthetic crude is very high quality, so that's easy to put in there. And then you have varying degrees of heavy, depending on -- first of all, you could potentially put some in there at 0 cost, and then you have a list of investments you can make, which enabled you to increase the proportion of material you put in there. So if we reversed the Line 9 tomorrow, we could already put some volumes in there, and then we are looking at all of the options beyond there. If you want any more detail, give us a call and we'll follow-up with you. Guy A. Baber - Simmons & Company International, Research Division: Okay, great, very helpful. And then my follow-up is capital spending, obviously, through the first half of the year has been trending below the implied run rate from the annual guidance and you all have been emphasizing capital discipline. Is the plan more [ph] this year? Can you comment on some of the key drivers as to why CapEx has been below expectations? I think you touched on them in your prepared remarks, but some elaboration would be appreciated, and then are you going to plan to give any new guidance on 2012 CapEx?

Interesting [ph] a lot of the answers in your question there. The year is slightly asymmetrical, so we're always going to spend a little bit more towards the end of the year than the beginning of the year. But you correctly picked up that we are actually below the run rate even adjusting for that. So we're in the process of doing a detailed CapEx update, and we normally come after the November board meeting with our 2013 capital budget. We will include alongside that an update on how we're doing in terms of the 2012 spend. The sources of underspend are twofold, and it is actually really good news. One is as part of the increased focus on profitability, we're letting some of the hedges slip on these projects and that's a very conscious decision as long as we're improving the economics and the returns for shareholders. So that's one piece of good news. The second piece of good news is, and I think Bart highlighted it, we now have a handful of projects, which are actually coming in below their cost, so we're completing the projects and they're coming in under the numbers we budgeted. So an example would be Steepbank. Another example would be Benzene down in Denver, all indications, and our biggest investment this year, Stage 4 at Firebag is also coming in under its budget, so they're contributing as well. So we're going to do the work in the third quarter, so we can update you when we come out with our numbers.

Our next question is from Brian Dutton of Credit Suisse. Brian C. Dutton - Crédit Suisse AG, Research Division: Steve, I was wondering if you could revisit for a moment your messaging today on the timelines of your major projects. Are you indirectly saying that Fort Hills, Joslyn and Voyageur are not economically viable in today's market environment? Or are you actually saying you're looking at ways to improve the returns on projects that are already economically viable?

The second case, Brian, is what I'm inferring in my messaging here, which is we're looking as to how we get the best economics for those projects. And if you just take the 2 [ph] I'll just give you a few general principles. To the extent we can replicate the designs from one to another, clearly, that is going to significantly reduce the engineering and construction costs. So it makes sense to make sure you take the full opportunity to get that replication. We're making sure the projects are not schedule driven, and normally scheduled driven means that you incur extra costs in order to hit a day. So, instead of saying hit a very specific date, we guarantee we're going to ramp production. What I'm saying is spend the money in the best way to maximize the returns of those projects, so it's very much about improving the returns on those projects. Brian C. Dutton - Crédit Suisse AG, Research Division: Okay. Along that line as well then, also, what you're thinking, specifically on Voyageur, you've got several billion dollars already sunk there, and again, are you actually thinking or are you actually prepared to walk away or are you looking at ways to improve the returns of the project?

Our first focus is looking at the ways we can make that project very viable. As you rightly say, we're already several billion dollars into the project. Of course, the way we look at it is we look at the best allocation of capital going forward. So we do it on a forward capital spend basis. So we're reviewing very hard the economics of that project. We're reviewing very hard because the world has changed quite significantly since we initially approved it. So together with Total, we're right in the midst now of seeing what we can do to improve the economics of that project because the continental balance has changed. So if you look at when we approved that project a number of years ago, the mid-continent light sweet crudes weren't being produced, so the heavy-light balance was different. So, as I say, jointly with Total, we're right in the midst of revisiting that to see what we can do to increase the returns on that project. Brian C. Dutton - Crédit Suisse AG, Research Division: Is there a hard timeline on Voyageur, given that from an accounting point of view, you're carrying that asset on the book?

No, I mean, we factor it into the economics because the shorter time you can be spending, having that project in flight because of the capital intensity, then the faster you can start it up. Those 2 decisions have the most significant impact on the rates of return of the project, so we factor that in as we look at the economics.

Our next question is from Nathan VanderKlippe of The Globe and Mail.

Steve, just wondering if you could talk a little bit about sort of the motivation for this review on capital cost. Is it a concern about rising costs in future, especially future big capital projects like mines and the upgrader? Or is it more an uncertainty commodity prices going forward or how much of each?

No, neither of those to be honest. It's about making sure we get the best returns for our shareholders. So it's all about how do we manage that mix of cost, quality, and last, schedule, so that we maximize the returns for our shareholders because what we're actually seeing on the ground right now, as I say, is a significant number of our projects, which are being completed, are coming in under budget, so it's not to say there aren't inflationary pressures out there, but right now, we've been able to manage those.

And do you have, with regards to the new mining projects, a sort of ceiling dollars per flowing barrel that you're looking at? Is there a number you're trying to stay away from or...

No, I don't have a number that I would want to use here, but clearly, the cost of the project and the cost per flowing barrel is one of the metrics we use to make our judgments as we give our recommendation to the board.

We have no further questions at this time, sir.

Perfect timing. Thank you very much. So just as we close then, I would remind folks that the IR team, along with the controllers, are available throughout the day and very happy to follow-up with any detailed questions you might have, and with that, I'll thank everybody for taking part and sign off. Thank you.

Thank you. The conference call has now ended. Please disconnect your lines at this time, and we thank you for your participation.