SU » Topics » East Coast Canada Royalties

This excerpt taken from the SU 6-K filed Nov 6, 2009.

East Coast Canada Royalties


WTI Price/bbl (US$) (1)

    60     70     80    

US$/Cdn$ exchange rate

    0.85     0.90     0.95    

Crown Royalty Expense (based on percentage of gross revenue) %


2009 – Crude (tiered royalty rates assessed on gross or net revenue)

    27-29     28-30     29-31    

2010 – Crude (tiered royalty rates assessed on gross or net revenue)

    32-34     33-35     34-36    
For 2009, estimated royalty rates are based on actual year-to-date results plus forward months estimated as per assumptions.

The previous table contains forward-looking information and users of this information are cautioned that actual Crown royalty expense may vary from the percentages disclosed in the table. The percentages disclosed in the table were developed using the following assumptions: current agreements with the Government of Newfoundland and Labrador, current forecasts of production, capital and operating costs, and the forward estimates of commodity prices and exchange rates described in the table.

The following risk factors could cause actual royalty rates to differ materially from the rates contained in the foregoing table:

The government of Newfoundland and Labrador and Suncor are in discussions to resolve several outstanding issues that impact current and prior years. Settlement of these issues could impact royalty payments to the Crown.

Changes in crude oil and natural gas pricing, production volumes, foreign exchange rates, and capital and operating costs for each project; changes resulting from regulatory audits of prior year filings; further changes to applicable royalty regimes by the government of Newfoundland and Labrador; changes in other legislation and the occurrence of unexpected events all have the potential to have an impact on royalties payable to the Crown.

In the third quarter of 2009, East Coast Canada royalties averaged 28% of gross revenue. Terra Nova production was subject to a Tier I royalty of 30% of net revenue and a Tier II royalty of an incremental 12.5% of net revenue. White Rose production was subject to a Tier I royalty of 20% of net revenue and a Tier II royalty of 10% of net revenue. The royalty rate on Hibernia production increased from 5% of gross revenue to 30% of net revenue during 2009 based on the terms of the Hibernia Royalty Agreement and a Memorandum of Understanding. In addition, Hibernia production was subject to a federal government net profits interest of up to 10% of net revenue.

A planned shutdown at our Terra Nova facility commenced in mid September, and was completed ahead of schedule in early October, affecting overall production in the third and fourth quarters of 2009.

A twelve-day shutdown planned for October at the Hibernia facility has been deferred to 2010.

Production from White Rose continued to be impacted during August and September after completion of the planned turnaround, as the South Drill Center remained shut-in until early October for a planned tie-in of the North Amethyst extension, affecting overall production in the third and fourth quarters of 2009.

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