Suncor's ratings are underpinned by the Company's (1) significant size (production of 785,900 barrels (bbls) of oil equivalent per day and refinery throughput of 428,400 bbls per day in Q1 2021), (2) highly integrated upstream and downstream operations, (3) long-life, low-decline oil sands assets, (4) capital flexibility and operational efficiency, and (5) favourable liquidity profile. Suncor's ratings are constrained by its (1) exposure to lower-margin nonupgraded bitumen production, (2) high concentration of oil-producing assets in
The Company's credit metrics weakened significantly in 2020 because of the steep decline in crude oil prices and the significant compression in refined product margins. In previous downturns, Suncor benefitted from its integrated business model, as lower cash flow from the upstream operations was typically counterbalanced by relatively more stable cash flow from the downstream operations. This was not the case in 2020 because of the Coronavirus Disease (COVID-19) pandemic. In response, the Company cut costs, lowered capital expenditures, suspended share buybacks, reduced dividends, and curtailed production at various sites, including the
Although Suncor incurred a free cash flow (FCF) deficit and higher indebtedness in 2020, DBRS Morningstar expects Suncor to generate FCF surpluses through 2023 based on (1) DBRS Morningstar's base-case commodity price assumptions of
If the Company's lease-adjusted debt-to-cash flow ratio is consistently below 1.5 times, DBRS Morningstar may consider a positive rating action. On the other hand, should oil prices and the Company's key credit metrics drop materially below DBRS Morningstar's expectations for an extended period, DBRS Morningstar may take a negative rating action.
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.
Notes:
All figures are in Canadian dollars unless otherwise noted.
The principal methodologies are Rating Companies in the Oil and Gas and
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
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Ratings
Date Issued Debt Rated Action Rating Trend Attributesi
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
15-Jun-21 Issuer Rating Trend Change A (low) Stb CA
15-Jun-21 Issuer Rating Confirmed A (low) Neg CA
15-Jun-21 Debentures and Medium-Term Notes Trend Change A (low) Stb CA
15-Jun-21 Debentures and Medium-Term Notes Confirmed A (low) Neg CA
15-Jun-21 Commercial Paper Trend Change R-1 (low) Stb CA
15-Jun-21 Commercial Paper Confirmed R-1 (low) Neg CA
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