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Suncor Beats Q2 Cash Flow Estimates, Boosts Share Buybacks as Debt Falls, TPH Says

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Suncor Energy (SU) posted stronger-than-expected Q2 cash flow, buoyed by robust upstream production and lower capital spending, allowing the energy firm to accelerate debt reduction and increase its share repurchase program, TPH Energy strategists said in a note on Wednesday.

Suncor's adjusted funds from operations came in at CA$5.33 billion ($3.80 billion), ahead of the firm's estimate of CA$5.25 billion, while adjusted cash flow per share reached CA$4.52, topping both TPH's forecast of CA$4.45 and the broader market consensus of CA$4.35.

Jeoffrey Lambujon, analyst at TPH Energy, said that the stronger cash generation was driven by Suncor's upstream business, where higher oil sands production and improved product mix offset weaker downstream margin capture.

Oil sands operations generated AFFO of CA$3.82 billion, above TPH's estimate of CA$3.76 billion, while exploration and production contributed CA$652 million, exceeding expectations of CA$579 million.

TPH said the outperformance reflected stronger-than-expected production volumes and an earlier-than-anticipated completion of maintenance at the Firebag oil sands facility.

Total production averaged 761,000 barrels of oil equivalent per day, above TPH's forecast of 755,000 boe/d and broadly in line with market expectations. Oil sands production averaged 690,000 barrels per day, also ahead of estimates.

Downstream earnings were below TPH forecasts despite stronger refinery throughput of 471,000 b/d and a CA$373 million inventory gain, as refining margin capture remained weaker than expected.

Capital spending excluding capitalized interest totaled CA$1.31 billion, below TPH's estimate of CA$1.52 billion and consensus expectations of CA$1.50 billion, contributing to stronger free cash flow generation.

Lambujon said the stronger cash flow enabled Suncor to reduce net debt by CA$2.4 billion during the quarter to CA$4.5 billion, leaving leverage at about 0.3 times net debt-to-AFFO.

The company also increased its monthly share buyback pace to CA$500 million from CA$350 million beginning in August. TPH now projects Suncor will repurchase about CA$4.7 billion of shares during 2026.

Suncor returned CA$1.76 billion to shareholders during the quarter through CA$1.05 billion of share repurchases and its unchanged quarterly base dividend of CA$0.60 per share.

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