Suncor Energy's CEO Hosts Annual General Meeting of the Shareholders (Transcript)

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Suncor Energy Inc. (NYSE:SU) Annual General Meeting of the Shareholders May 1, 2012 12:30 PM ET


John T. Ferguson - Chairman

Mark Illing -

Janice B. Odegaard - Senior Vice President, General Counsel and Corporate Secretary

Richard L. George - Chief Executive Officer and Non Independent Management Director

Bart W. Demosky - Chief Financial Officer

Steven W. Williams - President, Chief Operating Officer and Director

John T. Ferguson

We've now reached 10:30 a.m., and I'd ask that the meeting come to order. My name is John Ferguson, and I'm Chairman of Suncor Energy. On the platform is Steve Williams, the company's President and newly appointed Chief Executive Officer; Bart Demosky, Chief Financial Officer; Janice Odegaard, Senior Vice President, General Counsel and Corporate Secretary; and Rick George, who will formally retire from his position as Chief Executive Officer this morning.

On behalf of Suncor's directors and management, it is my pleasure to welcome you to the Annual General Meeting of the Shareholders of Suncor Energy.

There are several matters on the informal agenda this morning. To save time for your questions at the end of the meeting, a number of shareholders have agreed to make and second these formal motions. We've opened our meeting to members of the media and other guests. However, only shareholders and proxy holders may participate by voting at the meeting.

If there are any questions, comments from the floor relating to today's formal business, please stand, tell us your name and confirm whether you are a shareholder or a proxy holder. If you have any general questions, please hold them until the end of the meeting.

For those shareholders joining us by webcast, you are invited to submit your questions at the time using the question box on the webcast display. We will be more than happy to respond to them during the question-and-answer period at the end of the meeting.

Let's proceed with the business of the meeting, starting with the appointment of scrutineers. Computershare Trust Company of Canada is the transfer agent and registrar of the company, and is represented here today by Connor Doyle and Maureen Conway. If there's no objection, I will appoint them to act as scrutineers for the meeting, to report on the number and percentage of shares represented at this meeting and to record and report on the votes cast on any poll that may be taken.

You have all received the notice calling the meeting. I will now call on Janice Odegaard, Senior Vice President, General Counsel and Corporate Secretary, to report on the mailing of the notice.

Mark Illing

The notice calling this meeting of shareholders was mailed to all shareholders of record at the close of business on March 5, 2012, to each director and to the auditors of the company on March 28, 2012.

John T. Ferguson

A copy of the notice and proof of mailing will be filed with the minutes of this meeting. I'm advised that the scrutineers’ report has been completed, and a quorum is present. I ask that the Corporate Secretary read the scrutineers’ report, which indicates the number of shares represented in person and by proxy.

Janice B. Odegaard

Mr. Chairman, the scrutineers’ report shows 23 shareholders in person, representing 172,735 shares; 738 shareholders represented by proxy, representing 1,055,279,495 shares, for a total of 761 shareholders holding 1,000 -- 1,055,452,230 shares. That represents 67.51% of the issued and outstanding shares of Suncor.

John T. Ferguson

Thank you, Janice. I now declare the meeting regularly called and properly constituted for the transaction of business. I propose to take votes by ballot for the election of directors and for the resolution on Suncor's approach to executive compensation.

I propose to take votes by a show of hands for the appointment of auditors. Based on the proxies received prior to the meeting, if we held a ballot vote on the appointment of auditors, less than 1% of the votes would be cast against the motion.

I will now ask that the 2011 annual report, which includes financial statements for the year ended December 31, 2011, and the auditors' report be tabled. We have a copy up here.

The annual report was mailed to shareholders requesting the report and copies are available here today. We'd be happy to answer any questions concerning the annual report during the question-and-answer session following the formal part of the meeting.

The next item of business is the election of directors. Suncor's bylaws state that the number of directors to be elected at any meeting of shareholders shall be the number of directors then in office or such other number as has been determined by the board.

There are currently 14 directors in office. The Board has determined that 12 directors will be elected at the meeting. Brian MacNeill will be retiring to the board this year, and is not standing for reelection. Mr. MacNeill has provided significant contribution to Petro-Canada and Suncor's success through his sound business acumen and dedication during his tenure. Brian joined Suncor board at the time of the merger in 2009 after serving as Chairman of the Board of Petro-Canada for several years. Since the merger, he has served as Chairman of Suncor's Governance Committee and Audit Committee. On behalf of the board and the senior management team, I wish to thank Brian MacNeill for his service to Suncor and its shareholders.

Rick George, Suncor's long-standing Chief Executive Officer in December of 2011 announced that he would retire at the 2012 Annual General Meeting and would not stand for reelection as director. During his tenure, Mr. George has shown exceptional, strong leadership, helping to transform Suncor from the oil sands pioneer into Canada's largest energy company. The board -- our board deeply appreciates his commitment to Suncor and also his commitment to the industry and his contributions to Alberta and to Canada. Rick, on behalf of all the shareholders, thank you very much.

Of the 12 directors nominated, 11 are independent and 1, Steve Williams, is a member of management. Their backgrounds and experience, including principal occupations are described in the management proxy circular mailed to you. The meeting is now open to receive nominations for election of the Board of Directors.

Cindy Roberts

Good morning. My name is Cindy Roberts. I nominate the following candidates for election as directors. John T. Ferguson, Mel E. Benson, Dominic D'Alessandro, W. Douglas Ford, Paul Haseldonckx, John R. Huff, Jacques Lamarre, Maureen McCaw, Mike W. O'Brien, James W. Simpson, Eira M. Thomas and Steve W. Williams.

John T. Ferguson

Thank you. Are there any further nominations? There being no further nominations, I declare the nominations closed. 12 directors are to be elected at this meeting, and 12 persons have been nominated. I propose that we vote on this matter by ballot. The Corporate Secretary will give instructions on the voting procedure.

Janice B. Odegaard

On this ballot vote, all shares for which proxies in favor of management have been received will be voted in accordance with the instructions of the shareholders giving the proxies. Only proxy holders and shareholders who have not already returned a proxy or who wish to change their previous instructions have to complete a ballot if they wish to vote.

The blue ballot handed out during registration at the beginning of the meeting is the ballot to be used for this vote. If you wish to complete a ballot but you did not receive one when you registered, please raise your hand now.

The ballot lists the 12 nominees named in the management proxy circular. To vote or withhold from voting for each director, please complete the ballot by placing an x in the appropriate spot beside the name of each nominee. When you've completed and signed the ballot, please raise your hand, and it will be collected by an attendant and given to the scrutineers for counting.

John T. Ferguson

Does anyone need more time to complete the ballot?

Okay, while the ballots are being collected in counting, we will proceed with the next item on the agenda.

The next item of business is the appointment of auditors. Management has proposed that PricewaterhouseCoopers be reappointed as the company's auditors. Since auditors are appointed by shareholders, I ask for a motion appointing PricewaterhouseCoopers as auditors.

Unknown Shareholder

Good morning. My name is Andrea Singleton [ph], and I'm a Suncor shareholder. I move that PricewaterhouseCoopers LLP be appointed auditors of Suncor Energy Inc. to hold office until the next annual meeting of shareholders or until a successor is appointed.

John T. Ferguson

Thank you. May we now have a seconder to the motion?

Unknown Shareholder

My name is Mark Gilling [ph], and I am a Suncor Energy shareholder and I second the motion.

John T. Ferguson

Thank you. Any discussion?

You've heard the motion, which has been seconded. Those in favor, please indicate approval by raising your hand.




The motion is carried. The next item of business is the advisory vote on our approach to executive compensation. These types of advisory votes are sometimes called say-on-pay resolutions. The results of these types of votes are considered nonbinding but are a vehicle to allow shareholders to ensure that their views are made known to the board.

As noted in the proxy circular in considering the company's approach to compensation in the future, the board will take into account the results of the vote together with any feedback it receives from shareholders in the course of the board's engagement activities.

The formal motion set out in the management proxy circular follows the recommended best practice of the Canadian Coalition for Good Governance. May I now ask that the motion be made?

Unknown Shareholder

Good morning. My name is Jenaben Steamburgen [ph], and I'm a Suncor shareholder. I move that on an advisory basis and not to diminish the role and responsibilities of the Board of Directors, the shareholders accept the approach to executive compensation disclosed in the management proxy circular of Suncor Energy Inc. delivered in advance of its 2011 annual meeting of shareholders.

John T. Ferguson

Thank you. May we now have a seconder to the motion?

Unknown Shareholder

My name is Mark Gilling [ph]. I'm a Suncor Energy shareholder, and I second the motion.

John T. Ferguson

Thank you. You have heard the motion, which has been seconded. Are there any questions or comments? If there are no -- if there are no questions or comments concerning the advisory vote on the approach to executive compensation, I propose that we now vote on this matter by ballot.

We have received proxies representing a total of 93.5% of the votes cast on this motion, which direct that they be voted in favor of the approach to executive compensation.

We will now follow the same ballot procedure as described by the Corporate Secretary earlier. The pink ballot, I need the pink ballot, handed out during the registration at the beginning of the meeting is the ballot to be used for this vote. Please mark the ballot with an x either in the box under the words, "for" or in the box under the words, "against." When you have completed and signed a ballot, please raise your hand.


Does anyone need any more -- any additional time? While the ballots are being collected in counting -- are counted, we will proceed to the next item on the agenda.

I'd now like to turn the meeting over to Rick George, who has retired today as President and Chief Executive Officer; Bart Demosky, Suncor's Chief Financial Officer; and Steve Williams, Suncor's President and Chief Executive Officer. Mr. Williams and I will preside over a question-and-answer session at the end of the meeting. If you have any questions for us, I would ask that you raise them at that time. Rick, over to you.

Richard L. George

Thanks, John, and welcome, everybody. Delighted that you're here and with us today. So as you can well imagine, today is kind of a day of mixed emotions for me as I close the book on 21 years as the leader of this great company. And also as I get ready for the next chapter of both my personal life and my professional life. It's going to be hard to leave friends and colleagues here at the company. But I also do it with an amazing and tremendous amount of pride about what we've accomplished over the last 21 years. And also a real sense of excitement about what Steve Williams, as the new CEO and the whole executive leadership team are going to bring to the table and are going to accomplish on a go-forward basis.

I've worked closely with Steve and the entire leadership team that are here today who have been an integral part of this company's great success on a number of fronts, and I know that they're going to lead this company in a way that is going to -- to kind of drive it forward. I can't think of a team and a leader that's better equipped to face both the challenges and the tremendous opportunities that lie ahead. They also have the support of dedicated employees who continue to serve Suncor and its shareholders extremely well.

In a moment, I'm going to turn this over to Bart Demosky, Suncor's Chief Financial Officer, for a review of the 2011 financial results, and then he'll turn over to Steve who's going to talk about what's actually the most important subject of the day, and that is the road ahead.

But first, I actually want to spend some time on something that I rarely take the opportunity to do, and that is glance in the rearview mirror. And I'm sure most of you out there are thinking, "Why would he want to do a 20-year review?" And the real answer is, because I can.

But seriously, I want to take a bit of an exception, and actually kind of -- I think it's useful to reflect on where we've been because I think it actually also helps position you for actually where this company is going in the future. And to give a sense of how far we've come, it's useful to take a look back to 1991, an actual shot here. It was the year that I was appointed as the President and CEO, and the state of our company and our industry at that time.

At that point, oil sands development was plagued by high operating costs and out-of-date technologies. Employee morale and industry confidence were at extreme low points and serious thought was given to shutting down Suncor's oil sands operation entirely.

Around this time, a national newspaper dubbed Suncor, "The unluckiest oil company in Canada." How do you like to wake up to that for breakfast in the morning?

Now, when you take a look at our cash flow on this chart over the last 20 years, I'd say, "Wow, did they ever get that projection wrong." We did take a bold approach. We invested heavily in new technologies to improve and drive down operating costs. We embarked on a strategy of sustainable energy development that continues to guard our business decisions today.

And over the years, Canada's unluckiest oil company has used technology to become one of -- this company's (sic) [country's] most profitable energy companies as demonstrated by Suncor's record earnings and cash flow in 2011.

Consider this, in 1992, which is the year in which this company went public, we produced about 85,000 barrels per day. Our revenues were about $1.5 billion, and the market capitalization was about $1 billion. Beam forward to today, we're producing over 550,000 barrels a day and with revenues of almost $40 billion and a market capitalization of approximately $50 billion. That's an amazing and fun transformation.

There were, of course, plenty of highs and lows along the way, and I'd say our greatest success came when Suncor remained very bold and very, very forward-looking. I'm thinking back to the late 1990s when we opted to expand the oil sands production with our project we call Millennium. Even though world oil prices at that moment were about $15 a barrel, and around that time, the economists also projected on their cover that crude oil would be $5 a barrel on a go-forward basis.

I'm also thinking about events like our 2009 merger with Petro-Canada, which created Canada's largest integrated company at the time when the economy was still reeling from a global credit crisis and a volatile commodity prices.

And, of course, I think also of our 2010 agreement with Total, which was an important element of our post-merger growth plan. The deal brought us stronger partner to the table. It also helped us accelerate the development of our growth portfolio, and in my opinion, derisk our balance sheet by sharing capital investment and in the third Upgrader and in the development of new mining projects.

Now part of what made Suncor pioneer is having that really long-term vision that lets you look out beyond the immediate challenges of a day-to-day, and actually chart a positive course forward. It's also about knowing that when the pack is headed one direction, it's at least worth glancing over your shoulder the other direction to see what opportunities exist for tomorrow.

Today, Suncor enjoys a healthy balance sheet and has embarked on a 10-year growth plan that very, very few companies in our industry can match. And I'm pleased to say that along the journey to this point, we've shown our valued shareholders that there are good reasons to invest and to stay with this great company.

Just to give you a few examples, if you purchase $100 worth of shares in 1992 at the initial IPO and reinvested your dividends, your investment would be worth more than $4,500 today. That contrasts with a net gain of the S&P 500 and you would -- would have been of about $330, a stark contrast.

We've also increased our dividend by some 700% since 1992, so an original share from 1992, which I obviously still own a bunch of, receives nearly 8x the dividend it received 20 years ago.

Suncor has invested almost $50 billion on capital projects since 1992, and that does not include the projected $7.5 billion program for this year.

And with the significant reduction of our debt over the last 2 years and some strong cash flow generation, we've been able to announce a share buyback program that's worth $1.5 billion, which we are over halfway through. We believe that again we'll generate more value for our shareholders.

This track record is what makes me very optimistic about the future of this great company and the industry that Suncor helped found.

I want to show you this picture. And this is a picture of a street sign, that Firebag Group actually named a major road going to Firebag for me, and it was a proud moment. I just have to tell you this one story to connected to this. So the sign was actually put up the day I was there. We were out in the field with the executive team, and so we're taking our photos actually out where the sign was. And Mike MacSween was there with us, and among the executive group.

And so I said at the end of photo-shoot, I said, "Listen, the one thing I expect, every time you guys travel on this road, I sure expect you to salute this sign." And Mike MacSween snapped back at me, said, "Is that a full-hand salute or a single-digit salute?" Yes, I was speechless. That's the only thing I would say, I was speechless.

On a personal level -- listen, I consider myself extremely fortunate to have been a small part of this great journey and to work with literally thousands of great people who have performed their jobs with pride and enthusiasm or as I'd like to say, "Proceed with vigor."

They really are the backbone of this company success. So I want to extend to everyone I've worked with at Suncor over the last 21 years and our current 13,000 employees my sincerest thanks for your support, your talent and your dedication.

I also want to thank Suncor's Board of Directors for their wisdom, their guidance and support that you've given me over those 2-plus decades.

Thank you, all. I'll turn things over to Bart.

Bart W. Demosky

Thanks, Rick, and good morning, everyone. That certainly is a hard act to follow. Before I begin, let me just say, Rick, that you've certainly been a tremendous leader to work with, and it's been an honor. I can say this to sit with you and as a member of Suncor senior leadership team. Hearing your comments today reminded me again of our shared passion and enthusiasm not only for this company, but for our great industry. So thank you very much.

Richard L. George

Thanks, Bart.

Bart W. Demosky

Now as mentioned earlier and by Rick, I'll now spend a few minutes just talking about our results for 2011. And from a financial perspective, 2011 was indeed a great year for Suncor. It was a year that saw the company achieved record results in several areas, including cash flow, earnings and production.

And we have done quite a bit of work in 2010 to strengthen the balance sheet and our financial foundation as we prepared to resume our growth journey. And although 2010 was a solid year, 2011 was certainly beyond our expectations. Now there's no doubt in my mind that Suncor is in absolutely the best position we have ever been to maximize shareholder value going forward.

Driven by higher commodity prices, record oil sands production and strong refining margins, our operating earnings more than doubled in 2011 to a record $5.7 billion. Our cash flow from operations was also the highest ever at nearly $10 billion. And compare that to $6.7 billion in 2010, that's over a 50% increase.

We continued to reduce our debt in 2011 and during the first quarter of this year, and we currently stand at just below $6 billion, achieving a ratio of just about 0.6x net debt to cash flow from operations. And that's down very significantly from the nearly 5x ratio of just 2 short years ago. And that was not that long ago when our net debt was more than $13 billion.

Now those 2 trend lines that I just described, cash flow going up and debt coming down are certainly what CFOs really like to see, and I'm pretty sure that's the view held by our shareholders as well.

At the end of last year, we announced our capital expenditures for 2012 of $7.5 billion. And based on current forward pricing, we fully expect to fund this year's capital plan entirely from internally generated cash flow. And this is really in line with our strategy to manage our growth in a very disciplined manner and to invest our available cash flow where we can maximize return for our shareholders. I'm pleased to note on that point that return on capital employed has been steadily increasing, and this year -- or last year reached 14.8% over the past 12 months.

Now, as we continue to move forward with our growth plan, we also expect to continue to fund capital expenses largely from internally-generated cash flows. And with approximately $2.4 billion in cash flow for the first quarter, we are well on track.

So our key debt metric should remain in very healthy territory from here. In fact, looking beyond 2014, all other things being equal, we expect to see very significant free cash flow.

Now as Rick mentioned, with reduced net debt and excess cash on the balance sheet, Suncor was able to announce a share buyback program worth more than $1.5 billion. We completed $500 million of that share buyback of the company's common shares between September and December of 2011. And earlier this year, we announced that we would continue our share buyback program in 2012 to purchase up to an additional $1 billion worth of our shares.

And in just over 2 months since that announcement, we have invested approximately $315 million and repurchased nearly 10 million Suncor shares. Now we're value-based buyers, and we believe that opportunistic share buyback programs are an attractive investment opportunity and they increase shareholder returns.

As you will recall, we also raised our quarterly dividend by 10% last year to $0.11 per share, right about this time, and we think it was an appropriate and balanced increase that provided immediate rewards while we pursued our strategy to drive future rewards as well. And I'm very pleased to report that our Board of Directors approved a further 18% increase yesterday, raising our quarterly dividend to $0.13 per share and bringing our 5-year compound annual growth rate for our dividend to 21%, one of the best in the business.

This track record, I believe, reflects the board's absolute confidence in the strength of the company and our prospects for the future.

Today, I can tell you that given the clear success of Suncor's integrated model and the great strides we have made in increasing our operational reliability, we are very confident that we can achieve our goal of continuing to increase the value we return to shareholders.

With this latest dividend increase, I think you'll agree that not only are we taking a significant step towards that goal, but we also have reinforced our belief that Suncor is in a unique position to offer shareholders an unmatched combination of both growth and income.

The dividend increases and the share buyback programs are testimonial to our confidence in the long-term strength of this company and our ability to deliver responsible, sustained and profitable growth while steadily increasing total shareholder returns.

So from a financial standpoint, Suncor is in just great shape. And we expect to continue to build on our proven strategy for delivering value for our shareholders. Maintaining a strong balance sheet and exercising rigorous capital discipline will remain key priorities as we go forward.

And on that note, I'll be glad to turn it over to Steve.

Steven W. Williams

Thanks, Bart, and good morning. As with Rick, this is a very special day for me. It was exactly 10 years ago to the day that I started with Suncor. I can remember that day really clearly because we had just over a foot of snow on my way to the office.

I'd also enjoyed, prior to getting here, long and rewarding career with Exxon and Octel. But nothing really could have prepared me for the challenges that lay ahead: First, as Suncor CFO; then as Executive Vice President of Oil Sands, living in Fort McMurray; and then for the past 5 years, as Chief Operating Officer.

Rick and I have marked many milestones together and you have to be impressed when you work with Rick; his steady leadership, his strategic thinking, above all, his long-term vision of what a smart and sustainable energy company can achieve and contribute. Taking the company from $1 billion to $50 billion market cap was increasing efforts production tenfold was truly a transformation.

So my goal is to take Suncor to the next level and deliver the next multiple of success for our shareholders. We have the people, the plan, the resource base, and as Bart says, the balance sheet to do just that. But it will require discipline and foresight to get us there. And that's what I want to talk about today.

2011 was the first full year of Suncor's 10-year growth plan. And as Bart’s comments indicate, we're off to a good start. Our goal is to boost total production to more than 1 million barrels of oil equivalent per day over the next decade. We're targeting average oil sands production growth of about 10% per year and company-wide production growth of about 8% per year to 2020, rates expected to outperform most major oil companies.

One thing I want to stress is that, whilst our growth plan includes goals and targets, we'll not be held captive to time lines if circumstances signal the need for a reassessment. There are lots of choices and decision points on the journey to 1 million barrels per day, and those choices are ones the board still has to exercise.

The guiding light through these choices is going to be generating long-term shareholder value and delivering our growth projects in a responsible and cost-effective way.

Now having said that, I believe our recent financial performance bodes very well for Suncor's capacity to deliver sustained and profitable growth. Our 10-year plan may be one of the most ambitious of its kinds in the oil industry, but we are uniquely positioned to deliver on that strategy.

Most companies of our size planning a similar level of growth over a number of years would typically be carrying a highly leveraged balance sheet and plenty of inherent risk. As Bart mentioned, Suncor by contrast, is doing it with less than 1x debt-to-cash-flow ratio at the time when our base operations are generating record levels of cash flow to more than fund the growth.

Just as importantly, we've taken great care to plan and stage capital growth in ways we believe will minimize risk and maximize our returns to shareholders. Our strategic partnership with joint venture co-owners to develop 2 key oil sands mining projects and build a third Upgrader is an important part of that strategy to prudently manage and derisk the growth.

So delivering on the plans will be all about execution, execution and execution. Not just in how we manage growth, but in how we operate our existing facilities.

At current levels of production, Suncor is already one of the biggest operating companies in Canada. As important as growth is, the key to our continued success will be delivering safe, reliable, cost-efficient and environmentally responsible operations.

During 2011, we had consecutive quarters of steadily improving operational performance and record-setting production. The mid-March through to mid-April and plant shutdown of our unit 2 Upgrader was a reminder that our journey towards operational excellence is far from over.

While the impact of this temporary shutdown did not change our 2012 production guidance, be absolutely assured that we will learn from this experience as we continue on our journey to operational excellence.

We continue to face a different kind of challenge on the international front. As you know, we've begun a gradual return to our Libyan operations following a change in the political regime and the lifting of international sanctions in that country.

In Syria, our operations remain suspended, in compliance with the sanctions announced in December.

In both cases, we responded by working through a number of safety and security protocols whilst maintaining a strong focus on corporate social responsibility. And we have been consistent in our position that we will not operate in either country unless we can do so safely, responsibly and in compliance with all applicable laws and regulations.

Political unrest is a good example of something that's beyond the control of any energy company; world commodity prices are another example. None of us can predict the future. What we can say for certain is that volatility is always a possibility, but here's a key point: In a volatile world, companies with the greatest spend strength, the greatest operational and financial flexibility are the ones poised not only to survive, but to thrive. And that's where Suncor’s integrated business model gives us a clear, competitive advantage.

Thanks to the business model, we have unmatched capacity and flexibility to produce mined or in-situ bitumen to ship to market in various forms and even to integrate oil sand streams into Suncor's own Refining and Marketing operations, which are consistently the most profitable refining and marketing network in North America. And that helps us to capitalize on all the links in the value chain while softening the impact of the market volatility and the other factors, which are beyond our control.

We've heard the market's concerns about cost inflation. We're responding to those concerns with a series of steps to contain and manage costs in areas where we can exercise control. By focusing more on costs and quality and less on schedules and by carefully phasing our capital projects, we are working to smooth out some of the peaks and valleys of labor, materials and service demands.

As we grow, Suncor will remain true to our long-standing commitment to triple bottom line that says energy resources should be produced and used in a way that generates economic growth, promote social well-being and protects the environment.

We continue to invest in technologies to improve reliability, reduce costs and enhance environmental performance. We will also continue our investments in renewable energy, an area where Suncor has long been an industry leader. Suncor will also remain a leader when it comes to improving industry-wide environmental performance through collaboration.

I recognize that this industry impacts our shared environment, and I listened closely to the concerns stakeholders raised about these impacts. Addressing those concerns is a key priority. This spring, I was pleased to join 11 other oil sands leaders to announce the formation of the Oil Sands Innovation Alliance, or COSIA for short.

COSIA is focused on performance improvements on the 4 main environmental challenges: tailings, water, land and greenhouse gas emissions.

Member companies have agreed to break down the barriers of funding, intellectual property and human resources that sometimes impede breakthroughs in these areas. I believe that COSIA is the next step in meeting stakeholder expectations and ensuring oil sands development can make a positive contribution to our shared energy future.

One of the most exciting aspects of Suncor's business is that it's not about energy production for the next 5 or 10 years, but for the next century and potentially beyond. If we do think right, we have the opportunity to deliver value to our shareholders, business partners and customers for generations to come.

Now some of you may know, I'm an avid runner, including the occasional half marathon and I'm normally several paces behind my daughter who is leading the way. In some ways, that helps prepare me for this new job because the oil sands business is the ultimate marathon; requires fitness, endurance, strategic pacing and discipline, and Suncor embodies all of those strength and more.

As we move forward, I know Suncor will continue to benefit from the expertise of our employees, a talented team of professionals who are always up for the next challenge.

I also welcome the steady guidance and support of Suncor's Board of Directors who oversee all aspects of governance and are outstanding stewards of shareholders' interest.

On that note, I'd also like to add to John's thanks, just to recognize one of our board members, Brian MacNeill. His retiring after 17 years of service on the Board of Directors. Thank you, Brian for your dedication to this company and in particular, to your service as Chairman of Petro-Canada's Board of Directors. Your leadership was instrumental in bringing the 2 great companies together, and we owe you a debt of gratitude. Thank you.

Finally, a big thank you to Rick for his leadership and commitment to Suncor through the past 21 years.

So in closing, I'll just add that when I look at where we are as a company, it's hard for me not to get excited. Suncor has a proud and honorable past; a dynamic present, you've heard about our employees and leadership in the gifts they have; and most important of all, we have the promise of an even brighter future. I feel very privileged to be part of this great organization. And on behalf of Suncor's employees, management and your Board of Directors, I thank you for your continued support.

John T. Ferguson

Well, thank you, Steve, and congratulations on behalf of all of the shareholders on your appointment as the CEO of the company.

Steven W. Williams

Thank you.

John T. Ferguson

It is now time to complete the business of the meeting. We have received the scrutineers’ report on the ballot votes. The Secretary will now give the result of the ballots.

Janice B. Odegaard

Thank you, John. Firstly, I will give the results for election of directors, and I will be providing you with the percentage of votes cast for each of the director nominees.

Mel Benson, 97.63%; Dominic D'Alessandro, 99.31%; John Ferguson, 99.23%; Doug Ford, 97.45%; Paul Haseldonckx, 99.34%; John Huff, 97.66%; Jacques Lamarre, 97.87%; Maureen McCaw, 97.74%; Michael O'Brien, 99.30%; James Simpson, 97.71%; Eira Thomas, 99.47%; and Steve Williams, 99.49%.

Secondly, I will be providing the results for the ballot vote on the advisory resolution on executive compensation. Percentage of votes cast for the motion, 93.58%; percentage of votes cast against the motion, 6.42%. That's my report, Mr. Chairman.

John T. Ferguson

Thank you, Janice. The scrutineers’ report will be incorporated into the minutes of this meeting.

I accept the scrutineers’ report. I declare that the Board of Directors will consist of 12 nominees named in the circular. I also declare that the shareholders have accepted the approach to executive compensation disclosed in Suncor's management proxy circular.

If there are no other matters to be properly brought before this meeting, may I have a motion that the formal part of the meeting can be terminated, following which we can respond to shareholders' questions and comments.

Cindy Roberts

My name is Cindy Roberts. I move that the meeting be terminated.

John T. Ferguson

Thank you. Those in favor the motions, please indicate approval by raising your hand.




Carried. Ladies and gentlemen, I now declare the formal portion of this meeting to be terminated. I'd now like to open the floor to question -- to listen to your -- and respond to your questions.

But before we get started, I'd like to take a moment first to introduce a couple of people here. First, I'd like to introduce somebody who's been a great person, a support of this company for the last 21 years as well, Julie George. Julie can you be recognized. Thank you.

I also want to recognize the future support lady of the company in Mary Williams. Mary, please stand forward. Thank you.

Now this time, I'd like to introduce the executive team. Of course, you've already met our President and Chief Executive Officer, Steve Williams; and our CFO, Bart Demosky; and our Senior Vice President, General Counsel and Corporate Secretary, Janice Odegaard.

Now I'd like to ask the other senior leaders to stand as I introduce them. Eric Axford, Executive Vice President, Business Services; Boris Jackman, Executive Vice President, Refining and Marketing here today from Ontario; Mark Little, Executive Vice President, Oil Sands and In Situ here from Fort McMurray; Mike MacSween, Executive Vice President, Major Projects; Steve Reynish, Executive Vice President, Oil Sands Ventures; Paul Gardner, Senior Vice President, Human Resources; François Langlois, Senior Vice President, Exploration and Production; Kris Smith, Senior Vice President, Supplied, Trading and Corporate Development.

Shareholders, we'll now take your questions from the floor.

Question-and-Answer Session

John T. Ferguson

We'll now take your questions from the floor. Those joining us via the web, you'll see a box just below the slide display where you can submit your questions. With that, we are open to your questions. Steve and I will preside over.

Unknown Shareholder

Can you tell us a little bit about some of the things you're doing in mining and in situ to deal with the cost per barrel that we face to help reduce it?

Steven W. Williams

Yes, I'll start. This is the first part of the hand over that Rick gave me, that when you get really difficult questions, you can hand them off to your team. Clearly, the place we want to be on operating costs is the lowest cost operator. The driving force is for cost in oil sands versus in situ are quite different. The majority of the cost in the mine is labor resource. The majority of the cost in situ is energy -- is energy cost. We're in a really good time at the moment because labor inflation has been relatively controlled now, for 4 or 5 years since the 2008 recession and in terms of energy, gas is the majority of the resource we use and of course, with prices low, it's been a very good time. So we've seen some downward pressure on operating costs. We've seen them move down towards the mid-30s, and we're still optimistic we can get them further than that. Technology plays a huge part, so I'll start and then I'll ask Mark if he wants to add to it. But technology in both areas is a key. So if we look at mining, the technology tends to be around, what I would call the lean engineering or the manufacturing process. We've been able to get 20%, nearly 30% more oil [ph] at that mine with the same number of people and the same number of trucks, and that's about how you just do things more efficiently. On the in-situ side, much more about technology. So we have more than 10 technology projects in progress at the moment. And those are -- a lot of those are aimed at how we start these facilities up, how we get lesser -- less steam-oil ratios and then how we operate those facilities more efficiently. I don't know, Mark, if you want to add?

Mark Illing


Steven W. Williams


John T. Ferguson

We’ve got a question here on the web. "With the Suncor stocks currently sitting at undervalued for so long, will there be an increase in dividend payments to make the stock more attractive?"

Well first, I'll just comment that as Bart referred to in his comments that yesterday, the board announced for an increase of 18% in the dividend, increasing it up to $0.13 a share on a quarterly basis. Now just to take everybody, put it in a perspective on this aspect is we've been going through as a company, the whole integration with the merger of Petro-Canada, putting that into place, getting that behind us and building up a very strong tight cash flow and earnings basis, which we have and got in place at this time. So we're really in that spot now of transitioning the company, of Suncor, from being solely, what I'd call, as a growth company to both the aspect of making it both a growth company and also a dividend growth company. And we're going through that whole transition at this point in time. We’ll have, as an indication, by the increase in the dividend to this year. And we're going to continue to focus on the dividend and as we move forward. But we're also, I guess, as you could see, as it -- as we all know, we’re in these volatile markets that are out there and we think it's prudent for us to stage the dividends, stage it as we go forward rather than taking any kind of leaping jumps at this point in time.

Other questions?

Next question, "Does Suncor Energy have plans to expand its total refinery capacity as bitumen production increases?" That's number one. Two, "Out of total refining capacity of 455,000 barrels per day, how many barrels of bitumen feedstock can be processed into refined products? Can you describe the positive impacts on the reversal of Line 9?" Finally, congratulations to Rick George on an epic career and all the best in the future. I'm just going to go back over to you, Steve.

Steven W. Williams

Yes, so let me talk about refining capacity. We're in a really enviable position. It's been part of Suncor's strategy to have a balance of downstream operations. And through this period, where there's been a lot of volatility between the differentials of crudes and then the quality of heavier -- heavy materials we move, we've seen downward pressure on the oil sands’ value. And almost all of that, about 90% of that value has been picked up because of our integrated refineries. So broadly speaking today, we're in balance with the inter-connectivity we have, and we effectively have a spare refinery that we haven't integrated. And that's the Montréal refinery. So we have the ability ahead of us as our volumes increase through the next 10 years to integrate the Montréal refinery. And that's where the Line 9 connection comes in. The line currently runs from Montréal, so that it's possible to get international crudes into Sarnia. The plan is to reverse that line, and we are supporters of that plan to reverse the line. What that then gives us the opportunity is 2 things: One, to get the crudes to Montréal and use some of our oil sands material there; also to put it to the East Coast and get that crude onto the ocean, if that suits our needs. So we're in a great position now, and we have within our ownership, the opportunity to expand. And we'll keep our eye on that strategy. We watch it as all of the assets on this continent become available. If it's appropriate, we'll look out for further plans, but we have no further plans to acquire downstream assets as we speak.

John T. Ferguson

Are there any further questions?

If there are no more questions, I'd like to thank everyone for coming. We certainly appreciate your interest, and look forward to connecting with you again soon, certainly next year. Thank you very much.

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