Suncor Energy Inc. (SU) Q3 2012 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Suncor Energy Third 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, Sir.

Thank you, operator, and good morning, everyone. Welcome to the Suncor Energy Q3 shareholder call. With me here in Calgary are Steve Williams, our President and CEO; Bart Demosky, our Chief Financial Officer; Jolienne Guillemaud, our Controller; Greg Freidin, our Assistant Controller; and Jenna van Steenbergen, our IR Analyst. Just before I start, legal advisory regarding forward-looking statements. Please note that today's comments contain forward-looking information. Actual results may differ materially from expected results because of various risk factors and assumptions described in our Q3 earnings release, as well as our current AIF, and both of these are available on SEDAR, EDGAR and our website, suncor.com. Certain financial measures referred to in the comments are not prescribed by Canadian generally accepted accounting principles. For a description of these financial measures, please see our Q3 earnings release. After our formal remarks this morning, we will open the call to questions, first from member of the investment community, and then media, if they are on the line. I'll now hand it over to Steve Williams for his comments.

Thanks, Steve, and good morning, everyone. [indiscernible] balance we have a lot of good news to report, and I believe we're making some strong progress in a number of key areas. So let me start with just a few highlights from the past 3 months. First on cash flow. Well, we took advantage of rising Oil Sands production, strong crude prices and favorable refining cracks to generate record cash flow of $2.74 billion. Our Oil Sands operation, meanwhile, achieved record production of over 340,000 barrels a day, and we successfully drove our Oil Sands cash costs below our target of $35 per barrel for the quarter. Our integrated model continued its strong performance as our refineries operated at over 96% capacity, enabling us to capture 94% of crude pricing in the quarter. Our Firebag in-situ project continue to exceed expectations as we reach full Stage 3 capacity production well ahead of schedule. And in addition, we began commissioning the next stage of the Firebag project. Firebag Stage 4 is expected to produce first oil by year end. So clearly, it was a very successful third quarter. So let's have a look at what's driving Suncor's strong results. I look at our business through a lens of operational excellence, continuous improvement and careful tracking of the key metrics that drive performance. A culture of safety is absolutely foundational to performance. Our focus on safety underpins everything we do at Suncor. Over the past few years, we have approached full class levels of safety and we will continue to improve on that performance. Year-to-date in 2012, we further reduced total injuries, recordable injuries and lost time injuries by over 20%. And these improvement set the stage for progress on many other fronts. We need to be the low-cost competitor in the businesses…

Thank you, Steve, and good morning to everyone. As Steve noted in his opening comments, there was certainly a lot of good news this quarter. And despite a heavy maintenance schedule in our E&P and Oil Sands operations, I think it's fair to say that Suncor's integrated model did serve very well as an effective hedge against the volatile North American crude prices we saw and once again achieve -- allowed us to achieve very strong financial results. So let me just touch on those for a moment. Operating earnings came in obviously at $1.3 billion. We had record cash flow of $2.74 billion and our return on capital employed for the quarter was 12.5% excluding our major projects in progress. Now with another strong quarter in the books, our financial metrics continue to look very, very good. And at the end of the quarter, our net debt has now been reduced to just over $5 billion. Our net debt to cash flow ratio now stands at 0.5:1, and we had $5.4 billion of cash on the balance sheet at the end of the quarter. Maintaining a fortuitous balance sheet certainly is a high priority for Suncor and we will continue to exercise discipline in our capital allocation and cost management. As a growth company in a volatile commodity business, it is critical that we maintain the ability to execute on our plans right through the business cycle. And that certainly is a capacity that our balance sheet delivers for our shareholders. Now on the call last quarter, I talked at some length about our efforts to take costs out of the business, and I indicated that we were making good progress towards our $35 per barrel Oil Sands cash cost target and to reduce our 2012 CapEx spend. And…

Well thank you, Bart and Steve. I should just reiterate the reference earlier to the 2012 guidance. It has been updated and is available on our website at suncor.com. A couple of other details, the LIFO/FIFO impact this quarter was a $78 million positive, after-tax gain and that equates to a $50 million negative. So a $50 million expense after-tax year-to-date. Stock based compensation is something I should highlight because it did have a significant impact on our results. We had an after-tax expense of $167 million in the quarter and $250 million year-to-date for stock based comp. And the delta versus 2011 for the comparable period is almost $400 million on the quarter and almost $300 million year-to-date. Finally, the exchange impact. FX was an after-tax gain of $252 million in the quarter, and that is $237 million year-to-date. So with that, I'll turn it back to the operator to open the line, but I will note that for detailed questions, the Controllers group and Investor Relations group will be available throughout the day, certainly to deal with any modeling questions you may have. With that, I'll pass along to the operator.

[Operator Instructions] The first question is from Andrew Potter with CIBC.

Just a couple of questions on the in-situ site. I guess the first is in terms of the longer-term growth. Obviously, you've laid out Firebag 5 and 6. What are -- how are you thinking about Lewis and Meadow Creek and those other in-situ projects you have? Is there a possibility of moving those forward or accelerating on that side if you kind of layoff things like Voyageur and Joslyn? Were those still viewed as longer-term assets? And then just a question on Firebag 3. I mean you guys have done a good job ramping up to your stated capacity of 120,000 barrels a day. When we look at primary data on GEOS [ph] code, it seems to show that the well pads associated with Firebag 3 are only producing kind of half -- or I guess half the well, it appears, are on streams. So does that mean that we'll see other -- your higher capacity that you stated or does that contribute to a quicker ramp-up in Firebag 4 as you bring these other well pads on?

Yes, I mean, a complex question there, Andrew, so I'll give the simple version. I mean, in summary, on the investment opportunities around in situ, one of the thing that characterizes Suncor is we have a long list of very attractive in-situ projects. We also have a long list of mining projects. The only bias we have in how we sequence those is largely the returns that are associated with them. So you will see us looking at all of the opportunities we have and making choices. We have -- there are a number of plans on the horizon, and you'll see them on that list of potential projects we can go to. There are further opportunities in Firebag. There is an expansion at MacKay River and then you'll list other opportunities. All of those, we are currently taking a look at. And when we start to get into future announcements around what the long-term plan looks like, we will reference the timing and sequence. Part of the answer to your question, if you actually get into the detail of what you asked on Firebag Stage 3 and 4 as well, one of the flexibilities of Firebag now is we've cross-connected all of the facilities. So if you think of Firebag -- if you think of the in situ as 3 stages: steam generation, the patch themselves, and then the oil/water separation. Then we've connected those across. So we do have flexibility going forward. What you've seen with Firebag Stage 3 is we've been able to take full advantage of the surface facilities, so that's the steam generation and the oil/water separation, more quickly by doing some of the infill wells on Stage 1 and 2. So you will see some further advantage being taken off the cross connections as we go forward. The other opportunity offers us on Firebag, which is to link back to your first question, is now we have those 3 stages slightly out of sync in terms of size. The great opportunity there is that it presents us with lower-than-full-cost investment opportunities to debottleneck Firebag. So you'll see us also talking about those in the future.

Okay, sounds great. And one more question, I guess. You mentioned on Voyageur that light oil fundamentals are making this project more challenged. Maybe if you could give us your review on light oil fundamentals or pricing differentials?

I mean, all I would say is that what we're seeing is, with the tight oil volumes that are coming on, there is an increased volume of effectively light sweet crude. An upgrader is just -- takes advantage of the margin between light crudes and heavy crudes. And so it squeezes the margin on an upgrader. We are in the process -- as part of the work we are doing at the moment, we're in the process of fully assessing what the mid- and long-term consequences of that change in the market are, and our belief is that it does put the Voyageur economics under more pressure than when we initially conceived the project.

The next question is from George Toriola from UBS.

A couple of questions here. The first is on MacKay. How does the expansion of the MacKay in situ sort of fit into your suite of projects right now?

I mean, what I would say is it's at the early stage of development. So we're looking at MacKay River. We believe we've got some -- the resources are tremendous resource as you know. It has amongst the best in industry steam oil ratios. We are currently at the very early stage of developing expansion options on that. But those are relatively quick projects. So we're at the early stages, optimistic about when that project could come online.

Okay, great. And then the other question is just around your buybacks. I mean, when we look at what you've done so far, year-to-date, I think average price of around $30-and-some in Q2 -- I'm sorry, in Q3, under $33. Where do you -- I mean, we're now probably closer to 10% higher than where you were in Q3. Where do you start to sort of pay back on your buybacks and how do you sort of think about what is -- what would opportunistic buying be from here?

It's Bart here. Good question. We've made a point of emphasizing that we do see value here in the shares and we are value buyers. And I can give you a little bit more color on that. Essentially, the way we look at it is as we take a reasonably conservative long-term view of crude prices and -- to determine a net asset value for the company, and then we take a bit of a conservative view on that to determine up to what kind of limit would we buy shares. Now, of course, we're very firm believers that through time and the execution on our growth and very strong focus on operational excellence and investing in the right projects to drive returns, we're going to continue to drive NAVs for the company higher. But that said, even without that future growth in mind, we're still a buyer here. I think I mentioned in my comments that we're buying now and we expect to continue to be buying. But I can't tell you exactly at what rate.

And then I guess the last question for you would be, would you just continue to build cash on the balance sheet here? I mean, how would you -- what's the outlook as you continue to build cash on the balance sheet here?

Yes, maybe I'll just pick this one off as a strategic level. I mean I think we've clearly stated what our priorities are. So our priorities are we invest in our assets, ensuring safe and reliable operations, and we're seeing the benefits of that clearly coming through in our quarterly performances now. Next, we've got length in very attractive growth projects. And you'll see us focusing through those on cost quality and shareholder value. And then the third phase is, like I've said, is you will see us committed to returning to shareholders. And you've seen us do that through the share buyback. You've seen us do that through a dividend increase. And next year, we will review again with our Board of Directors our policy around dividends, and we'll expect to see some movement there.

Just -- George, it's Bart again. Just one last thing I'd add to Steve's comments is that I think if you look at our return of cash to shareholders over the past year, the dividend growth that Steve mentioned and the opportunistic buybacks, the yield on those 2 has been above 4%, and our 5-year CAGR on dividend growth is over 20% and on an all-in return to shareholders basis is almost 50%. So we're keeping true to what we've been telling to shareholders about delivering that cash back.

The next question is from Greg Pardy with RBC Capital Markets.

So I'm going to hit you with 3 questions. First one is I just want to be clear here. Are you saying that Fort Hills and Joslyn are meeting hurdle rates? Or I think you said you're just getting closer. That's the first question. Second question, really for Steve, is to what extent are you agnostic between mining and in-situ bitumen supply sources or are there unique advantages that the mining projects would provide you? And the last one is really just around Montréal and what the game plan there could be in terms of not into an inland refinery, but also the potential to process your own bitumen production.

Three wide-ranging questions. Fort Hills and Joslyn, we've not been specific about either exactly what our hurdle rate is or where these projects are. But let me try and be a little bit clearer at this stage. Clearly, both of those projects have been worked through joint ventures and we're working very closely with our joint venture partners to make those the best projects they can be. Both of them, as we've gone through this initial review, and that's what I was trying to indicate in my earlier words, are currently looking attractive to us. We've had programs on them, which we've looked extensively at scope, at costs, and are very pleased with the progress we've seen those making. So although we haven't taken our board through those yet, both of those are currently -- have support and are funded through to the next stages in their development and are looking good. What we're saying is that the Voyageur project is slightly -- is more stressed than that. We've talked about the market changes. We've talked about -- we're doing the same type of review in terms of looking at the scope and cost set, and it is struggling versus our hurdle rates. So we're looking very aggressively at what we can do to improve that. We're in the midst of that work so we're not able to give any more details on it. But the partnership is working well and we're working particularly on Voyageur with Total to make progress on that. On your second question on mining and in situ, broadly speaking, we are agnostic. There are some differences that we like in them and we've always talked about. There are very different original capital costs. There are very different sustaining capital costs, and there are very different…

The next question is from Guy Baber with Simmons & Company. Guy A. Baber - Simmons & Company International, Research Division: Obviously, very positive cash cost this quarter and you guys lowered the guidance. I was just wondering, is there anything more specific you all can highlight that contributed to such strong performance this quarter? And then do you have a revised exit rate target for this year that you want to share? And is the goal for 2013 still to kind of hold that rate flat and then eat inflation?

It's Bart here. I'll take the first go at your question. And we are very pleased with the progress we've made on our Oil Sands cash costs. There's several contributing factors to that one, but I'll just highlight a couple of them. First is that if you look at the reliability of our Oil Sands upgraders as well as the steady ramp-up in production from Firebag, the increase volumes have certainly been a big factor in driving costs down. We've had better productivity and mine cost management. There's a specific project there that we've highlighted in the past that's reduced our haul costs, and that was the opening of our North Steepbank Extension mine. And so that has added significant value. As well, lower natural gas prices have contributed to lower costs. Now adding all that up though, our operating costs year-over-year in total are actually down quarter-over-quarter. So with the focus on the discipline around operating those assets and on the ramp-up and growth, has held cost steady while we've had a ramp-up in production volumes. So those 2 things combined put us in a very, very good position. We're looking forward to continued strong performance here as we exit the year. We have not yet, though, come out with any guidance on costs for next year. We do anticipate providing that sometime in the month of December, but we're very positive on the outlook. Guy A. Baber - Simmons & Company International, Research Division: Okay, great. And then I had a follow-up on Firebag. And I think you guys touched on this earlier, but obviously, you've identified Firebag 5 and 6 as potential longer-term expansions, each at around 65,000 barrels a day. But I think you also had mentioned that you might not want to accelerate those projects previously because there might be some operational benefit to seeing how Firebag operates post the Stage 4 ramp-up. So my question there is, how flexible can you be in maybe accelerating Phases 5 and 6 without sacrificing operational performance and efficiencies? And then can you talk a little bit more about the opportunity to potentially pursue Firebag extension to smaller increments than the 65,000-barrel-a-day phases you identified previously?

Yes. I mean I think you've sort of answered the question as you were asking it there. We really meant it, and I hope you've seen it demonstrated, that we're walking the talk. We will focus on laying down our capital expenditure efficiently. That means the focus will be on cost and quality, and we will not destroy value by over-accelerating the projects. There are no doubt -- there is no doubt we've learned a lot from Stages 1 and 2 into Stage 3. There is no doubt that we've learned from Stage 3 into Stage 4, and we're seeing that reflected in a couple of things, reflected in the quality of the assets as they're being handed over and the speed with which we've been able to ramp them up reliably. So we want to continue to learn those lessons and we will not sacrifice those lessons just for speed. However, there are some smaller increment opportunities on Firebag. If you think of, as I said earlier, the 3 stages: raising steam, the wells, and then the oil/water separation facilities. Because you can never get that perfect, we have some real debottleneck opportunities. The economics with those opportunities are very good. Think of the them as the equivalent and in situ as the North Steepbank mine was in mining. You're able to leverage off of the existing assets you have and get higher return projects. So I think the first project you'll see will be those debottleneck projects. The later ones will be 5 and 6 and some of the other in-situ opportunities we have.

The next question is from Paul Cheng with Barclays.

Several quick question. Bart, what is the Firebag 3 steam oil ratio? Is it similar to the average Firebag or should we assume that, that actually is better?

For the Firebag 3 specific pits, it's similar in the low 3s. Of course for the infill wells, it's much better because a lot of the heat is already there.

Steven, on the Firebag, do you have a number you can share? I mean I know that your total Oil Sand cash cost is about in the $33, $34 in this quarter. What is just on the Firebag?

It's Steve Douglas here. We haven't actually broken out by individual project, but we do, in fact, in our operating results break out the in-situ cost per barrel. And it's about $18 this quarter. And Firebag would be slightly higher than Mackay because, of course, it has a higher steam oil ratio than Mackay. But we put it together at the consolidated in-situ number.

Is there any meaningful technology that currently that you have a pie on the final project you think could substantially reduce the Firebag or that your in-situ cash operating cost?

I'm not going to reference specific technologies, but yes, we have an extensive R&D program going on in our in situ. We currently are working on about 10 projects which are a combination of different types of technology. All of the sorts of things you've heard of around different ways of starting these projects, different ways of using potentially solvents in combination or separately from using steam. So yes, there are lots of projects, but nothing that we would want to talk to at this moment.

So Steve, should we assume that you are not going to see any of this new technology being rolled out in commercial operation within the next 1 or 2 years?

Absolutely. Because those technologies will largely be applied to new projects. So you'll see us talking about those technologies, actually bring either some of the new phases or the debottlenecks or capital investments. But yes, you shouldn't expect to see breakthrough technology, I don't think, in the next 1 to 2 years.

So you actually then -- [indiscernible] commercially in the next 1 or 2 years. Okay. On the capital spending on Voyageur, can you remind us that how much is your capital you already spent? And what was the original budget? I think the original budget is $20 billion, right?

Hey Paul, we haven't talked to the budget since the project was originally sanctioned. But if you like, offline, we can go into the historical numbers.

Okay. Two final questions. One on Montréal. I know that you guys is looking or committed to the Line 9 reversal but you're -- potentially that maybe in 2014. In the meantime, has the company looking at opportunity using well to ship their oil into that facility as a bridge gap or that you think the timeline is too short to mitigate the economic for you to consider that? And then a final one, I'm wondering, Steve or Bart, whether you can give us some direction in terms of the preliminary 2013 CapEx, whether it's going to be flat or up comparing to this year. I think previously, the expectation is $8 billion to $9 billion if we assume the [indiscernible] project go forward. So wondering what is the kind of direction that we should expect now?

Okay. So 2 questions, therefore let me answer them. Line 9 reversal and alternative. Yes, our review is comprehensive. We're looking at all possible alternatives including realm. And, of course, that could be a mixture of material coming across either from Western Canada or up from the U.S. We look at all of those options. And I would anticipate that you will see some developments in Montréal on rail [ph] in the coming year. Your question on 2013, we haven't reviewed our numbers with our board yet. We'll be doing that in a couple of weeks' time. And I would anticipate that leading to capital guidance sometime in September. But just to put it in context, I would expect the numbers to be at/or close to the 2012 original number of $7.5 billion, not in the $8 billion to $9 billion range we're talking about.

The next question is from Mike Dunn with FirstEnergy Capital.

A couple of questions on -- as it relates to your bitumen volumes. First question, folks, I guess as your bitumen volumes and your bitumen sales are going to grow here with Firebag 4 ramping up, you're not going to be processing all of this at your upgraders or at Edmonton. How should we be thinking about your price realizations for bitumen. I mean they're not disclosed specifically and I know historically up north of -- for McMurray with Petro-Canada of the MacKay River, realizations were sort of lower than industry average, et cetera. So just wondering about some color on that? And I think if you could just talk about the Wood Buffalo pipeline in terms of what that project is. I think that relates to -- is it between Firebag and the main upgrading facilities or is it something else?

I'll take the second one first there, Mike. The Wood Buffalo pipeline actually is from the terminal in Fort McMurray down to Edmonton. So it's providing outlet for production. The question on bitumen, what I would say, and you're correct, we don't have a published price if you like realized price. But we do have the flexibility to mix -- either to blend either dilbit or synbit. And we do that opportunistically in order to access the best possible market price. So I'll leave it at that.

The next question is from Brian Dutton with Crédit Suisse. Brian C. Dutton - Crédit Suisse AG, Research Division: This time last year, there was lots of discussion about entering the lean zone in the mine. So I was just wondering if you will tell us where you are in that process. What's the implication for bitumen volumes as you move out of the lean zone for next year coming from the mining side of the business? And then, of course, the implication on cash cost?

Okay, Brian. I'll take that one. Yes, we did talk about entering the lean zone of the mine. We're still in the lean zone of the mine, which makes the results on current cash costs even more exciting. Do have to just -- and I know you're very familiar, we just have to remind everyone that we did bring on the North Steepbank mine and so we've been able now to optimize the 2. The consequence of that means we'll be moving through the lean zone a little bit slower. We are starting to come out of the worst of the lean zone and actually, we're seeing a slow and steady improvement. The consequence of that is directionally, you've got to look at all of the other costs to drive this as well. That will continue to help us reduce cash costs through the next year. Brian C. Dutton - Crédit Suisse AG, Research Division: And a second question and you've touched a little bit here on -- in your various answers on debottleneck opportunities. But in your operational excellence program, have you a chance to really get under the hood of the operations and see what debottleneck opportunities exist in both Oil Sands and the refining businesses?

I mean the short version is yes, we are. Part of our review and part of our capital program that we're looking at in detail at the moment is looking at the debottleneck opportunities I talked earlier about at Firebag and MacKay River. But also, we are looking now at the base plant as well. So we're having a detailed look around mining to see if there are any optimizations within our existing mines. We're also looking at extraction where there are some potential opportunities as well. So again, I'm optimistic we will find some debottleneck opportunities. As the plant becomes more reliable, it's much easier to see where the opportunities for these laser-focused, debottleneck, high-return projects are. So I think you'll see us including of few returns as we present our budget for next year.

The next question is from Andrei Sardo with Hart Energy.

Could you talk briefly about any plans you may have regarding the Montney Shale gas formation?

I mean actually, no. We have a good quality resource there. We're currently looking at our strategy for development of that, but we have nothing to say at the moment. Clearly, with gas prices coming up, with lots of discussions in this sector of our business, particularly around potential LNG opportunities revealing in the light of that what we think the best plan is for Montney. But we haven't announced anything yet. I'll talk about those in future conferences.

Next question is from Menno Hulshof with TD Securities.

I have a couple of easy ones, I believe. So the first relates to the U2 turnaround in 2013. How long are you expecting that to last? And then what can you tell us about the turnaround schedule for the coming year in general? And then the second point relates to Buzzard. I understand that you're not the operator there, but can you comment at all on where things stand in terms of the ramp-up process?

It's Steve here. We will include a full maintenance schedule when we release our guidance for 2013. But the U1 turnaround will be scheduled in the same kind of timeline as last year's U2, but should be a little shorter. And of course, it's much smaller. It's the smaller in the 2 upgraders. So a much smaller impact. The other question was on Buzzard.

Just -- Buzzard, I mean, as you say, we're not the operator there. We are in daily contact with the operator, but nothing much to add to what they've been saying. The facility is in start-up as we speak. As you know they've had some electrical issues with the generators there. But I don't think it's appropriate for me to offer minute-to-minute or day-to-day updates on that. That's up to the operator.

The next question is from Paul Cheng with Barclays.

Just 2 quick follow-ups. On the bitumen, as you're warming up your production, have you looked at the option of welding the bitumen out and not even branded with condensate or Syncrude? And whether that may look like an economic [indiscernible] or an attractive opportunity for you? And secondly there, when the talked about the debottleneck, have you also looked at whether there's any debottleneck opportunity in the upgrader that could be done very cost-effectively?

The answers are really simple, Paul. Yes and yes. So we've looked at and we do look at railing bitumen out. And we do the comparative effect. And so generally for significant volumes, the rail have struggled to be very competitive with the pipeline. We continue to review that because, of course, those economics change just depending on a number of assumptions. And yes, the upgraders are included. We do look at the possibility with the existing plants to act below full cost, expand their capacity, and that's part of our review as well.

[Operator Instructions] The next question is from Jeremy van Loon with Bloomberg News.

I just wonder with the improved cash flow as well as the reduction in CapEx spending, what your plans for leverages -- I mean do you see issuing less debt going forward and do you sort of aim to reduce debt?

It's Bart here. I'll maybe just give a bit broader answer than what you asked there, but it will get directly to what you're asking. And it goes back to our priorities for use of cash. We do have a higher cash flow and we have reduced CapEx for this year. But our focus points are first to invest in our assets to drive reliability higher through operational excellence. We have a full suite of growth projects, and Steve has talked about a number of them that we've announced, plus a number of potential opportunities that we have not yet announced. And so investment in high-profitability growth projects is column number 2 for that cash. And then of course return of cash to shareholders is priority number 3, both through dividend growth, regular dividend growth and opportunistic buybacks. Now what I will say about debt and our fixed debt is that it has been coming down over the past couple of years. We've reduced our net debt by almost $9 billion when you include the cash on the balance sheet. We do have a couple of debt maturities in the next couple of years and depending on cash position, if it's above our targets, we'll likely just to pay those off at the time without renewing them.

The next question is from Carrie Tait with The Globe and Mail.

I'm wondering how you plan to deal with the North American tight oil situation. That's not really going to go away anytime soon, so I'm wondering how you figured that out into your business.

I mean just a few comments I would make. I mean, clearly, the volumes of tight oil that are being produced are impressive. What we do is we take a long-term view on the overall market. Our view is that -- still, if you look at the supply-demand balance for the continent, the continent is short. So we think there's a very good place for the title which is coming on and a very healthy Oil Sands business as well. But we do look at how that impacts our project. So we think the resource projects are clearly working and you've heard us say that the bitumen and resource produced in projects of the mines and in situ. It does put the upgrading projects under more stress because they're margin projects which only work because of the difference between the value of light and heavy materials, which we think gets squeezed in a world with more tight oil. So we're fully aware of it and we factor into our investment plans.

That's very helpful. Does this mean that the Fort Hills and Voyageur projects could be split apart rather than developed in parallel?

No, I would want to make that really clear. The 3 big joint venture projects we have: the Voyageur project, which is the upgrader; the Fort Hills project; and the Joslyn mine project, all 3 of those are individual projects and all 3 of them will take individual review. So it is possible for them to go either together as part of a sequence or for them to be split apart and for one to go and one not to go. All of those options are possible.

And now when Petro-Canada and Suncor came together, Suncor was pretty adamant about wanting to remove the Petro-Canada Act. I'm wondering if that's something that's at all on your radar as foreign takeover reviews have really hit the headline?

No. I mean my simple comment would be that I think the Petro-Canada Act has largely been superseded by the broader Competition Act. So federal government has absolutely the opportunity to look at all potential strategic moves for major corporations. The only comment I would make is that in order to fully develop the Oil Sands and where the investment is needed, it's important that the ground rules are very clear for us in terms of how and what companies we can engage with. And I'm pleased that the federal government are working on clarifying those for us.

Do you think there are any Canadian oil and gas companies that should be protected from foreign takeovers?

I think we need to let the government's rules come out so that we can clearly see their intent.

The next question is from Scott Haggett with Reuters.

I want to get your view on refining margins going forward. Do you expect them to remain as wide as they have been in the current quarter? And what's your look over, say, in the next 2 to 3 years?

Scott, you have a very difficult question. I mean these -- as long as we have these differentials that we're seeing, then we'll see these types of refinery margins. I think one of the points I would like to make is it's a very good position for companies like Suncor to be in, where they have an integrated business model, where it's very, very difficult to be precise about how these differentials in markets work. And therefore, to have the benefit to take the profit either in your upstream or in your downstream is a very powerful position. And again, in our third quarter, it's been reflected in our very high refining and marketing earnings, which has made such a great contribution to our performance.

Thank you. There are no further questions registered at this time. I'd like to turn the meeting back over to Mr. Douglas.

Well thank you, operator. And thanks to everyone for the terrific level of participation. Just a reminder, we will be available throughout the day. So please give Jenna van Steenbergen a call if you have further questions or want to get into the financial details. With that, I'll say thank you very much and sign off. Thank you.

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