SU » Topics » Oil Sands Crown Royalties

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

Oil Sands Crown Royalties

For a description of the Alberta Crown royalty regimes in effect for our operated oil sands assets, see page 15 of our 2008 Annual Report.

The following table sets forth an estimation of royalties on our oil sands operations (excluding Syncrude) in the years 2009 and 2010 for three price scenarios, and certain assumptions on which we have based our estimates for those price scenarios.

 
   
   
   
   
 

WTI Price/bbl US$ (1)

    60     70     80    
 

Natural gas (Alberta spot) Cdn$/mcf at AECO

    5.50     6.00     6.50    
 

Light/heavy oil differential of WTI at Cushing less Maya at the U.S. Gulf Coast US$

    6.00     9.00     11.50    
 

Differential of Maya at the U.S. Gulf Coast less Western Canadian Select at Hardisty, Alberta US$

    3.00     3.00     3.00    
 

US$/Cdn$ exchange rate

    0.85     0.90     0.95    
 

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

                     

2009 – Bitumen (mining old rates – 25% and 1% min; in-situ new rates)

    7-8     7-9     8-9    

2010 – Bitumen (new rates – with limits for mining only)

    5-6     7-9     8-10    
 
(1)
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 Alberta, royalty rates and other changes enacted effective January 1, 2009 by the government of Alberta, 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:

(i)
The government enacted new Bitumen Valuation Methodology (Ministerial) Regulations as part of the implementation of the New Royalty Framework effective January 1, 2009. These interim regulations determine the valuation of bitumen for 2009. The final regulations are being developed by the Crown that will establish the bitumen valuation methodology for 2010 and future years. For Suncor's mining operations, the bitumen valuation methodology is based on the terms of Suncor's January 2008 Royalty Amending Agreement, which we believe places certain limitations on the interim bitumen valuation methodology as recently enacted. For the first nine months of 2009, royalties payable to the Crown for our mining operations have been determined in accordance with the interim bitumen valuation methodology. We continue discussions with the Crown to calculate this royalty based on the provisions of our Royalty Amending Agreement, which we currently believe would reduce the royalties payable to the Crown for 2009.

(ii)
The government enacted the new Oil Sands Allowed Costs (Ministerial) Regulations as part of the implementation of the New Royalty Framework effective January 1, 2009. Further clarification of some Allowed Cost business rules is still expected. The terms of Suncor's January 2008 Royalty Amending Agreement determine the royalty obligation through 2015 for the mining operations. In addition, since our in-situ operations are forecast to remain in pre-payout royalty for the near term, the changes in the Allowed Cost regulations will not have a near term impact on royalty payments. However, potential changes and the

             Suncor Energy Inc.
012    2009 Third Quarter                                                                    For more information about Suncor Energy, visit our website www.suncor.com


    interpretation of the Allowed Cost regulations could, over time, have a significant impact on the amount of royalties payable.

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

For further information on risk factors related to royalty rates, please see page 42 of Suncor's AIF dated March 2, 2009.

This excerpt taken from the SU 6-K filed Jul 22, 2009.

Oil Sands Crown Royalties

For a description of the Alberta Crown royalty regimes and rates in effect for our oil sands operations, see page 15 of our 2008 Annual Report.

The following table sets forth an estimation of royalties in the years 2009 through 2013 for three price scenarios, and certain assumptions on which we have based our estimates for those price scenarios.

 
   
   
   
   
 

WTI Price/bbl (US$)

    40     60     80    
 

Natural gas (Alberta spot) Cdn$/mcf at AECO

    6.50     8.00     9.50    
 

Light/heavy oil differential of WTI at Cushing less Maya at the U.S. Gulf Coast US$

    6.50     10.00     13.00    
 

Differential of Maya at the US Gulf Coast less Western Canadian Select at Hardisty, Alberta US$

    4.00     4.00     4.00    
 

US$/Cdn$ exchange rate

    0.75     0.85     0.95    
 

Crown Royalty Expense (based on percentage of total oil sands revenue) %

                     

2009 – Bitumen (mining old rates – 25% and 1% min; in-situ new rates) (1)

    3-4     4-5     6-7    

2010 to 2013 – Bitumen (new rates – with limits for mining only)

    1     3-6     6-10    
 
(1)
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 Alberta, royalty rates and other changes enacted effective January 1, 2009 by the government of Alberta, current forecasts of production, capital and operating costs, and the forward estimates of commodity prices and exchange rates described in the table.

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

(i)
The government has enacted new Bitumen Valuation Methodology regulations as part of the implementation of the New Royalty Framework effective January 1, 2009. While the interim bitumen valuation methodology in 2009 has been enacted, the permanent valuation methodology has yet to be finalized. For our mining operations, our January 2008 Royalty Amending Agreement also addresses bitumen valuation methodology (together, the "Bitumen Valuation Requirements"). Accordingly, royalties payable to the Crown is based on an initial interpretation of the Bitumen Valuation Requirements and is subject to further review and may change.

(ii)
The government enacted new Allowed Cost regulations as part of the implementation of the New Royalty Framework effective January 1, 2009. Further clarification of some Allowed Cost business rules is still expected. The terms of our January 2008 Royalty Amending Agreement shelter us through 2015 from the impact of many of these changes for our mining operations. In addition, since our in-situ operations are forecast to remain in pre-payout royalty for the near term, the changes in the Allowed Cost regulations will not have a near term impact on our payment of royalties. However, potential changes and the interpretation of the Allowed Cost regulations could, over time, have a significant impact on our calculation of royalties.

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

For further information on risk factors related to royalty rates, please see page 42 of Suncor's AIF dated March 2, 2009.

             Suncor Energy Inc.
008    2009 Second Quarter                                                                    For more information about Suncor Energy, visit our website www.suncor.com


This excerpt taken from the SU 6-K filed Apr 23, 2009.

Oil Sands Crown Royalties

For a description of the Alberta Crown royalty regimes in effect for our oil sands operations, see page 15 of our 2008 Annual Report.

The following table sets forth our estimates of royalties in the years 2009 through 2013, and certain assumptions on which we have based our estimates.

 
   
   
   
   
 

WTI Price/bbl US$

    40     50     60    
 

Natural gas (Alberta spot) Cdn$/mcf at AECO

    6.50     7.00     7.50    
 

Light/heavy oil differential of WTI at Cushing
less Maya at the U.S. Gulf Coast US$

    8.00     9.00     11.00    
 

Differential of Maya at the U.S. Gulf Coast less Western Canadian Select
at Hardisty, Alberta US$

    7.00     7.00     7.00    
 

US$/Cdn$ exchange rate

    0.75     0.80     0.85    
 

Crown Royalty Expense (based on percentage of total oil sands revenue)%

                     

2009 – Bitumen (mining old rates – 25% and 1% min; in-situ new rates (1))

    1     1     1    

2010 to 2013 – Bitumen (new rates – with limits for mining only (1))

    1     1     1-5    
 
(1)
Oil Sands royalty rates – see page 15 of our 2008 Annual Report.

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 Alberta, royalty rates and other changes enacted effective January 1, 2009 by the government of Alberta, current forecasts of production, capital and operating costs, and the forward estimates of commodity prices and exchange rates described in the table.

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

(i)
The government has enacted new Bitumen Valuation Methodology regulations as part of the implementation of the New Royalty Framework effective January 1, 2009. While the interim bitumen valuation methodology in 2009 has been enacted, the permanent valuation methodology for 2010 has yet to be finalized. For our mining operations, the bitumen valuation methodology is based on our interpretation of the terms of our January 2008 Royalty Amending Agreement. That agreement places certain limitations on the bitumen valuation methodology as recently enacted. If our interpretations of these limitations changes, this could impact the royalties payable to the Crown.

(ii)
The government enacted new Allowed Cost regulations as part of the implementation of the New Royalty Framework effective January 1, 2009. Further clarification of some Allowed Cost business rules is still expected. The terms of our January 2008 Royalty Amending Agreement shelter us through 2015 from the impact of many of these changes for our mining operations. In addition, since our in-situ operations are forecast to remain in pre-payout royalty for the near term, the changes in the Allowed Cost regulations will not have a near term impact on our payment of royalties. However, potential changes and the interpretation of the Allowed Cost regulations could, over time, have a significant impact on our calculation of royalties.

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

For further information on risk factors related to royalty rates, please see page 42 of Suncor's AIF dated March 2, 2009.

             Suncor Energy Inc.
008    2009 First Quarter                                                                    For more information about Suncor Energy, visit our website www.suncor.com


This excerpt taken from the SU 6-K filed Jul 24, 2008.

Oil Sands Crown Royalties

For a description of the Alberta Crown royalty regimes in effect for our oil sands operations, see page 19 of our 2007 Annual Report and note 11 of our second quarter 2008 financial statements.

In the second quarter of 2008, we recorded a pretax royalty estimate of $130 million, compared to $99 million for the second quarter of 2007. In 2008, the estimation process for calculating the quarterly royalty provision was changed from being based on an annual royalty estimate to being based on the actual eligible revenues and costs recorded in the period. If the annualized approach was used for 2008, pretax royalties would have been $85 million higher for the first six months of 2008.

The following table sets forth our estimates of royalties in the years 2008 through 2012, and certain assumptions on which we have based our estimates.

This excerpt taken from the SU 6-K filed Apr 24, 2008.

Oil Sands Crown Royalties

For a description of the Alberta Crown royalty regimes in effect for our oil sands operations, see page 19 of our 2007 Annual Report and page 34 of our first quarter report to shareholders.

In the first quarter of 2008, we recorded a pretax royalty estimate of $282 million, compared to $157 million for the first quarter of 2007. The increase was due mainly to higher revenues as a result of strong WTI crude pricing. This increase was partially offset by the impact of higher operating expenses and higher eligible capital expenditures.

In 2008, the estimation process for calculating the quarterly royalty provision was changed from being based on an annual estimate to being based on the actual eligible revenues and costs recorded in the period. If the annualized approach was used for 2008, pretax royalties would have been $17 million higher for the first quarter.

The following table sets forth our estimates of royalties in the years 2008 through 2012, and certain assumptions on which we have based our estimates.

This excerpt taken from the SU 6-K filed Oct 25, 2007.

Oil Sands Crown Royalties

 

On September 18, 2007, the Alberta Royalty Review Panel released its report recommending broad changes to the current royalty regime for both conventional and oil sands resource development. In its report, the panel recommends a significant increase in the royalty rate applicable to oil sands projects and the implementation of additional taxes. Although the government has indicated plans to make changes to the Alberta Crown Royalty regime in response to this report, we do not have sufficient information to determine the impact of changes the government may implement. Future royalties and taxes payable, as well as the determination of net mining and in-situ reserves, may be affected.

 

In the third quarter of 2007, we recorded a pretax royalty estimate of $145 million ($105 million after tax) compared to $119 million ($81 million after tax) for the third quarter of 2006.

 

We estimate 2007 annualized oil sands Crown royalties under current legislation to be approximately $600 million ($435 million after tax), compared to actual 2006 oil sands Crown royalties of $911 million ($619 million after tax). The decrease in the oil sands Crown royalties estimate is due primarily to an increase in allowable capital expenditures claimed and the absence of net insurance proceeds (relating to the January 2005 fire). This estimate is based on nine months of actual results and the balance of the year estimated on 2007 forward crude pricing of US$78.50 as at September 30, 2007, current forecasts of production, eligible capital and operating costs for the remainder of 2007, and a Cdn$/US$ foreign exchange rate of $1.01. Accordingly, actual results will differ, and these differences may be material.

 

This excerpt taken from the SU 6-K filed Jul 26, 2007.

Oil Sands Crown Royalties

For a description of the Alberta Crown royalty regimes in effect for our oil sands operations, see page 29 of our 2006 Annual Report.

In the second quarter of 2007, we recorded a pretax royalty estimate of $99 million ($72 million after tax) compared to $278 million ($184 million after tax) for the second quarter of 2006.

We estimate 2007 annualized oil sands Crown royalties to be approximately $590 million ($430 million after tax) compared to actual 2006 oil sands Crown royalties of $911 million ($619 million after tax). This estimate is based on six months of actual results and the balance of the year estimated on 2007 forward crude pricing of US$71.08/bbl

Inquiries John Rogers (403) 269-8670




008  Suncor Energy Inc.

          2007 Second Quarter

 

as at June 30, 2007; current forecasts of production, capital and operating costs for the remainder of 2007; and a Cdn$/US$ exchange rate of $0.94. Accordingly, actual results could differ and these differences may be material.

The following table sets forth our estimates of royalties in the years 2008 through 2012, and certain assumptions on which we have based our estimates.

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