CALGARY, Jan. 29 /PRNewswire-FirstCall/ -- Suncor Energy reports today it has reached an agreement with the Province of Alberta to transition to the rates announced by the government in its New Royalty Framework for the generic oil sands royalty regime. The transition agreement could result in Suncor paying up to 20% more in oil sands royalties than it would have paid under the previous terms.
Beginning January 1, 2010 through to January 1, 2016, the agreement provides that Suncor will pay between 25% and 30% of net profits (depending on oil prices) on the bitumen derived from its oil sands mining operations. In 2016, the company's royalty rates for oil sands mining will reflect the new generic royalty regime. (This agreement is applicable to Suncor's oil sands mining operations only. Suncor's in-situ operation is already subject to the new generic royalty regime, including previously announced royalty rate increases.)
In return, the government has provided Suncor certainty until January 1, 2016, for various matters, including bitumen valuation methodology, allowed costs, royalty in-kind and certain taxes.
"We have reached a deal that provides a fair return to Albertans as owners of the resource, while also giving Suncor the certainty we need to plan for the future growth of our business," said Rick George, president and chief executive officer.
Anticipated Royalty Expense Based on Certain Assumptions --------------------------------------------------------
The table below shows the potential royalty payment at various WTI crude prices, for both mining and in-situ operations, as a percentage of gross revenues.
Oil Sands Mining and In-situ Royalties ------------------------------------------------------------------------- WTI Price/bbl US$ 70 80 90 ------------------------------------------------------------------------- Natural gas price per mcf at Henry Hub US$ 6.73 8.26 8.89 ------------------------------------------------------------------------- Light/heavy oil differential of WTI at Cushing less Maya at the U.S. Gulf Coast US$ 15.89 18.72 20.86 ------------------------------------------------------------------------- CDN$/US$ exchange rate 0.95 1.00 1.05 ------------------------------------------------------------------------- Crown Royalty Expense 2010 to 2012 (based on percentage of total Oil Sands Revenue) % 8.0-9.5 8.5-10.5 9.5-11 -------------------------------------------------------------------------
The foregoing table contains forward-looking information and users of this information are cautioned that actual royalty rates may vary from the rates and ranges disclosed in the table. The royalty rates and ranges disclosed in the table were developed using the following assumptions: current forecasts of production, capital and operating costs, and the commodity prices and exchange rates described in the table. If WTI prices rise beyond $90, Suncor anticipates in-situ royalties may be higher than disclosed in the table.
The following material risk factors could cause actual royalty rates to differ materially from the rates contained in the foregoing table: changes in crude oil and natural gas pricing, production volumes, foreign exchange rates, and capital and operating costs for each oil sands project; changes to the royalty regime by the Government of Alberta; changes in other legislation and the occurrence of unexpected events. The forward-looking information in the preceding paragraphs and table should not be taken as an estimate, forecast or prediction of future events or circumstances.
This news release also contains other forward-looking statements that address goals, expectations or projections about the future. These statements are based on Suncor's current goals, expectations, estimates, projections and assumptions, as well as current budgets and plans for capital expenditures. Some of the forward-looking statements may be identified by the words "could", "potential", "anticipated" and similar expressions. These statements are not guarantees of future performance. Actual results could differ materially, as a result of factors, risks and uncertainties, known and unknown, to which Suncor's business is subject. Further discussion of the risks, uncertainties and other factors that could affect these plans, and any actual results, is included in Suncor's annual report to shareholders and other documents filed with regulatory authorities.
Suncor Energy Inc. is an integrated energy company headquartered in Calgary, Alberta. Suncor's oil sands business, located near Fort McMurray, Alberta, extracts and upgrades oil sands and markets refinery feedstock and diesel fuel, while operations throughout western Canada produce natural gas. Suncor operates a refining and marketing business in Ontario with retail distribution under the Sunoco brand. U.S.A. downstream assets include pipeline and refining operations in Colorado and Wyoming and retail sales in the Denver area under the Phillips 66(R) brand. Suncor's common shares (symbol: SU) are listed on the Toronto and New York stock exchanges.
Suncor Energy (U.S.A.) Inc. is an authorized licensee of the Phillips 66(R) brand and marks in the state of Colorado. Sunoco in Canada is separate and unrelated to Sunoco in the United States, which is owned by Sunoco, Inc. of Philadelphia.
