Exhibit 99.1​

MANAGEMENT’S DISCUSSION AND ANALYSIS

May 8, 2023

Suncor Energy Inc. (Suncor or the company) is an integrated energy company headquartered in Calgary, Alberta, Canada. Suncor’s operations include oil sands development, production and upgrading; offshore oil and gas; petroleum refining in Canada and the U.S.; and the company’s Petro-Canada™ retail and wholesale distribution networks (including Canada’s Electric Highway™, a coast-to-coast network of fast-charging electric vehicle stations). Suncor is developing petroleum resources while advancing the transition to a low-emissions future through investments in power, renewable fuels and hydrogen. Suncor also conducts energy trading activities focused principally on marketing and trading crude oil, natural gas, byproducts, refined products and power. Suncor has been recognized for its performance and transparent reporting on the Dow Jones Sustainability World Index, FTSE4Good Index and CDP. Suncor’s common shares (symbol: SU) are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

For a description of Suncor’s segments, refer to Suncor’s Management’s Discussion and Analysis (MD&A) for the year ended December 31, 2022, dated March 6, 2023 (the 2022 annual MD&A).

This MD&A, for the three months ended March 31, 2023, should be read in conjunction with Suncor’s unaudited interim Consolidated Financial Statements for the three months ended March 31, 2023, Suncor’s audited Consolidated Financial Statements for the year ended December 31, 2022, and the 2022 annual MD&A.

Additional information about Suncor filed with Canadian securities regulatory authorities and the United States Securities and Exchange Commission (SEC), including quarterly and annual reports and Suncor’s Annual Information Form dated March 6, 2023 (the 2022 AIF), which is also filed with the SEC under cover of Form 40-F, is available online at www.sedar.com, www.sec.gov and on our website at www.suncor.com. Information contained in or otherwise accessible through our website does not form part of this MD&A, and is not incorporated into this document by reference.

Suncor Energy Inc. has numerous direct and indirect subsidiaries, partnerships and joint arrangements (collectively, affiliates), which own and operate assets and conduct activities in different jurisdictions. The terms “we”, “our”, “Suncor”, or “the company” are used herein for simplicity of communication and only mean there is an affiliation with Suncor Energy Inc., without necessarily identifying the specific nature of the affiliation. The use of such terms in any statement herein does not mean they apply to Suncor Energy Inc. or any particular affiliate, and does not waive the corporate separateness of any affiliate. For further clarity, Suncor Energy Inc. does not directly operate or own assets in the U.S.

Table of Contents

2023 First Quarter   Suncor Energy Inc.   7

MANAGEMENT’S DISCUSSION AND ANALYSIS

1. ADVISORIES

Basis of Presentation

Unless otherwise noted, all financial information is derived from the company’s condensed consolidated financial statements which are based on Canadian generally accepted accounting principles (GAAP), specifically International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), and are prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

All financial information is reported in Canadian dollars, unless otherwise noted. Production volumes are presented on a working-interest basis, before royalties, except for production volumes from the company’s Libya operations, which are presented on an economic basis.

References to Oil Sands operations exclude Suncor’s interests in Fort Hills and Syncrude.

Non-GAAP and Other Financial Measures

Certain financial measures in this MD&A – namely adjusted operating earnings (loss), adjusted funds from (used in) operations, measures contained in return on capital employed (ROCE) and ROCE excluding impairments and impairment reversals, price realizations, Oil Sands operations cash operating costs, Fort Hills cash operating costs, Syncrude cash operating costs, refining and marketing gross margin, refining operating expense, free funds flow, net debt, total debt, last-in, first-out (LIFO) inventory valuation methodology and related per share or per barrel amounts or metrics that contain such measures − are not prescribed by GAAP. Adjusted operating earnings (loss) is defined in the Non-GAAP and Other Financial Measures Advisory section of this MD&A and reconciled to the most directly comparable GAAP measures in the Consolidated Financial Information and Segment Results and Analysis sections of this MD&A. Oil Sands operations cash operating costs, Fort Hills cash operating costs, Syncrude cash operating costs and LIFO inventory valuation methodology are defined in the Non-GAAP and Other Financial Measures Advisory section of this MD&A and reconciled to the most directly comparable GAAP measures in the Segment Results and Analysis section of this MD&A. Adjusted funds from (used in) operations, ROCE, ROCE excluding impairments and impairment reversals, price realizations, free funds flow, net debt, total debt, refining and marketing gross margin, and refining operating expense are defined and reconciled, where applicable, to the most directly comparable GAAP measures in the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

Risk Factors and Forward-Looking Information

The company’s business, reserves, financial condition and results of operations may be affected by a number of factors, including, but not limited to, the factors described within the Forward-Looking Information section of this MD&A. This MD&A contains certain forward-looking statements and forward-looking information (collectively, forward-looking statements) based on Suncor’s current expectations, estimates, projections and assumptions. Forward-looking statements are subject to a number of risks and uncertainties, including those discussed in this MD&A, the 2022 annual MD&A and Suncor’s other disclosure documents filed with Canadian securities regulatory authorities and the SEC, many of which are beyond the company’s control. Users of this information are cautioned that actual results may differ materially from those expressed or implied by forward-looking statements. Refer to the Forward-Looking Information section of this MD&A for information on the material risk factors and assumptions underlying our forward-looking statements contained in this MD&A.

Measurement Conversions

Certain crude oil and natural gas liquids volumes have been converted to mcfe on the basis of one bbl to six mcf. Also, certain natural gas volumes have been converted to boe or mboe on the same basis. Any figure presented in mcfe, boe or mboe may be misleading, particularly if used in isolation. A conversion ratio of one bbl of crude oil or natural gas liquids to six mcf of natural gas is based on an energy-equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, conversion on a 6:1 basis may be misleading as an indication of value.

Common Abbreviations

For a list of abbreviations that may be used in this MD&A, refer to the Common Abbreviations section of this MD&A.

8   2023 First Quarter   Suncor Energy Inc.

2. FIRST QUARTER HIGHLIGHTS

•

First quarter financial results

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•

Suncor’s adjusted operating earnings(1) were $1.809 billion ($1.36 per common share) in the first quarter of 2023, compared to $2.755 billion ($1.92 per common share) in the prior year quarter, primarily due to decreased crude oil realizations, increased operating expenses and lower upstream production and refinery throughput, partially offset by increased refined product realizations, decreased royalties and income taxes. Adjusted operating earnings were also impacted by a weakening in crude oil benchmark pricing during the current quarter, compared to a strengthening in benchmark pricing in the prior year quarter, resulting in a first-in, first-out (FIFO) inventory valuation loss in the first quarter of 2023, compared to a significant gain in the prior year quarter.

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•

Suncor’s net earnings were $2.052 billion ($1.54 per common share) in the first quarter of 2023, compared to $2.949 billion ($2.06 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, net earnings for the first quarter of 2023 included a $302 million gain on the sale of the company’s wind and solar assets, an $18 million unrealized loss on risk management activities recorded in other income (loss), a $3 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt recorded in financing expenses and a $38 million income tax expense related to the items noted. Net earnings in the prior year quarter included a $146 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $75 million unrealized gain on risk management activities recorded in other income (loss) and a $27 million income tax expense related to the items noted

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•

Adjusted funds from operations(1) were $3.002 billion ($2.26 per common share) in the first quarter of 2023, compared to $4.094 billion ($2.86 per common share) in the prior year quarter. Adjusted funds from operations were influenced by the same factors impacting adjusted operating earnings noted above. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $1.039 billion ($0.78 per common share) in the first quarter of 2023, compared to $3.072 billion ($2.14 per common share) in the prior year quarter. In addition to the factors impacting adjusted funds from operations, cash flow provided by operating activities was impacted by a larger use of cash associated with the company’s working capital balances in the first quarter of 2023 compared to the prior year quarter. The use of cash in the first quarter of 2023 was primarily due to income tax payments made relating to the company’s 2022 income tax expense, and the timing of commodity tax and royalty payments.

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•

Cash flows drive shareholder returns. Suncor returned approximately $1.6 billion of value to shareholders in the first quarter of 2023, through $874 million in share repurchases and the payment of $690 million of dividends.

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Record In Situ production. Total Oil Sands production was 675,100 bbls/d in the first quarter of 2023, which included record quarterly In Situ volumes, compared to 685,700 bbls/d in the prior year quarter, with the decrease due to lower SCO production, partially offset by increased non-upgraded bitumen production.

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Driving fit and focus of asset portfolio. During the first quarter of 2023, the company completed the sale of its wind and solar assets for gross proceeds of $730 million, and the acquisition of an additional 14.65% working interest in Fort Hills for $712 million. Also during the first quarter of 2023, the company reached an agreement for the sale of its U.K. Exploration and Production (E&P) portfolio for gross proceeds of approximately $1.2 billion, including a contingent consideration of approximately $338 million, before closing adjustments and other closing costs. The sale is pending regulatory approval and is expected to close in the second quarter of 2023.

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•

Agreement in place to acquire additional 135,000 bbls/d of bitumen production capacity. Subsequent to the first quarter of 2023, Suncor entered into an agreement to purchase TotalEnergies’ Canadian operations through the acquisition of TotalEnergies EP Canada Ltd. (TotalEnergies Canada), which holds a 31.23% working interest in Fort Hills, a 50% working interest in the Surmont in situ asset (Surmont), as well as certain other associated assets. The acquisition is for cash consideration of $5.5 billion, before closing adjustments and other closing costs, with the potential for additional payments of up to an aggregate maximum of $600 million. The transaction will have an effective date of April 1, 2023, and is anticipated to close in the third quarter of 2023, subject to pre-emptive rights, regulatory approval and other closing conditions.

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New Chief Executive Officer. Effective April 3, 2023, Suncor’s Board of Directors selected Rich Kruger as the company’s new President and Chief Executive Officer. Mr. Kruger also joined the Suncor Board of Directors.

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(1)

Non-GAAP financial measures or contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A and the Adjusted Operating Earnings Reconciliation below for a reconciliation of net earnings to adjusted operating earnings.

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2023 First Quarter   Suncor Energy Inc.   9

MANAGEMENT’S DISCUSSION AND ANALYSIS

3. CONSOLIDATED FINANCIAL INFORMATION

Financial Highlights

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(1)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

Excludes capitalized interest of  $58 million in the first quarter of 2023 and $37 million in the first quarter of 2022.

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(3)

Excludes capital expenditures related to assets held for sale of  $42 million in the first quarter of 2023 and $19 million in the first quarter of 2022.

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10   2023 First Quarter   Suncor Energy Inc.

Operating Highlights

Net Earnings

Suncor’s consolidated net earnings for the first quarter of 2023 were $2.052 billion, compared to $2.949 billion in the prior year quarter. Net earnings were primarily influenced by the same factors that impacted adjusted operating earnings described in this section.

Other items affecting net earnings over these periods included:

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During the first quarter of 2023, the company recorded a gain of $302 million on the sale of its wind and solar assets, which was completed in the first quarter of 2023 and recorded in the Corporate and Eliminations segment.

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•

An unrealized loss on risk management activities of $18 million recorded in other income (loss) in the first quarter of 2023, compared to a gain of $75 million in the first quarter of 2022.

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•

An unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt of $3 million recorded in financing expenses in the Corporate and Eliminations segment in the first quarter of 2023, compared to a gain of $146 million in the first quarter of 2022.

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•

An income tax expense related to the items noted above of $38 million in the first quarter of 2023, compared to $27 million in the first quarter of 2022.

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Adjusted Operating Earnings Reconciliation(1)

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(1)

Non-GAAP financial measure. All reconciling items are presented on a before-tax basis and adjusted for income taxes in the income tax expense excluded from adjusted operating earnings line. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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2023 First Quarter   Suncor Energy Inc.   11

MANAGEMENT’S DISCUSSION AND ANALYSIS

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)

(1)

For an explanation of this bridge analysis, see the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

The bridge factor for Inventory Valuation is comprised of changes in the FIFO inventory valuation and the realized portion of commodity risk management activities reported in the Refining and Marketing (R&M) segment, and changes in the intersegment elimination of profit reported in the Corporate and Eliminations segment.

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Suncor’s adjusted operating earnings were $1.809 billion ($1.36 per common share) in the first quarter of 2023, compared to $2.755 billion ($1.92 per common share) in the prior year quarter, primarily due to decreased crude oil realizations, increased operating expenses and lower upstream production and refinery throughput, partially offset by increased refined product realizations, decreased royalties and income taxes. Adjusted operating earnings were also impacted by a weakening in crude oil benchmark pricing during the current quarter, compared to a strengthening in benchmark pricing in the prior year quarter, resulting in a FIFO inventory valuation loss in the first quarter of 2023, compared to a significant gain in the prior year quarter.

Operating, Selling and General Expenses

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(1)

In the first quarter of 2023, share-based compensation expense of  $101 million included a $39 million expense recorded in the Oil Sands segment, a $2 million expense recorded in the E&P segment, a $16 million expense recorded in the R&M segment and a $44 million expense recorded in the Corporate and Eliminations segment. The first quarter of 2022 share-based compensation expense of  $206 million included a $70 million expense recorded in the Oil Sands segment, a $6 million expense recorded in the E&P segment, a $32 million expense recorded in the R&M segment and a $98 million expense recorded in the Corporate and Eliminations segment. Other primarily includes costs associated with investments in the company’s digital transformation and its net-zero greenhouse gas (GHG) objective.

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The company’s total operating, selling and general (OS&G) expenses were $3.424 billion in the first quarter of 2023, compared to $3.088 billion in the prior year quarter. The increase was primarily due to increased maintenance costs, including the impacts of repair activities at the company’s Commerce City refinery, inflationary impacts, increased mining activity and the company’s additional working interest in Fort Hills, partially offset by a decrease in share-based compensation expense. The company’s exposure to commodity costs within OS&G are partially mitigated by revenue from power sales that are recorded in operating revenues.

12   2023 First Quarter   Suncor Energy Inc.

Business Environment

Commodity prices, refining crack spreads and foreign exchange rates are important factors that affect the results of Suncor’s operations.

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(1)

2-1-1 crack spreads are indicators of the refining margin generated by converting two barrels of WTI into one barrel of gasoline and one barrel of diesel. The crack spreads presented here generally approximate the regions into which the company sells refined products through retail and wholesale channels.

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Commodity market volatility increased during the first quarter of 2023, due to economic concerns regarding rising interest rates, inflationary pressures and future economic growth.

Suncor’s sweet SCO price realizations are influenced primarily by the price of WTI at Cushing and by the supply and demand for sweet SCO from Western Canada. Sweet SCO price realizations in the first quarter of 2023 reflected a decrease in WTI at Cushing, which averaged US$76.10/bbl compared to US$94.40/bbl in the prior year quarter, and also reflected favourable SYN-WTI differentials. Suncor also produces sour SCO, the price of which is influenced by various crude benchmarks, including, but not limited to, MSW at Edmonton and WCS at Hardisty. The price of sour SCO can also be affected by prices negotiated for spot sales. Prices for MSW at Edmonton decreased to $99.05/bbl in the first quarter of 2023 compared to $115.75/bbl in the prior year quarter, and prices for WCS at Hardisty decreased to US$51.35/bbl in the first quarter of 2023, from US$79.80/bbl in the prior year quarter.

Bitumen production that Suncor does not upgrade is blended with diluent or SCO to facilitate delivery through pipeline systems. Net bitumen price realizations are therefore influenced by both prices for Canadian heavy crude oil (WCS at Hardisty is a common reference), prices for diluent (condensate at Edmonton) and SCO. Bitumen price realizations can also be affected by bitumen quality premiums and discounts, as well as spot sales, and the price differential between Hardisty, Alberta, and U.S. Gulf Coast benchmarks.

The company leverages its marketing and logistics business to optimize midstream capacity to the U.S. Gulf Coast and this is reflected in bitumen and sour SCO price realizations. Bitumen prices were unfavourably impacted by the widening of heavy crude oil differentials in the first quarter of 2023.

Suncor’s price realizations for production from E&P Canada and E&P International assets are influenced primarily by the price for Brent crude, which decreased to US$81.25/bbl in the first quarter of 2023 compared to US$101.50/bbl in the prior year quarter.

2023 First Quarter   Suncor Energy Inc.   13

MANAGEMENT’S DISCUSSION AND ANALYSIS

Suncor’s refining and marketing gross margins are primarily influenced by 2-1-1 benchmark crack spreads, which are industry indicators approximating the gross margin on a barrel of crude oil that is refined to produce gasoline and distillates. Market crack spreads are based on quoted near-month contracts for WTI and spot prices for gasoline and diesel and do not necessarily reflect the margins at a specific refinery. Suncor’s realized refining and marketing gross margins are influenced by actual crude oil feedstock costs, refinery configuration, product mix and realized market prices unique to Suncor’s refining and marketing business. In addition, U.S. regulatory renewable blending obligations influence the benchmark cracks, which may increase their volatility, while the cost of regulatory compliance is not deducted in calculating the benchmark cracks.

Suncor has developed an indicative 5-2-2-1 index based on publicly available pricing data to more accurately reflect the company’s realized refining and marketing gross margin. This custom index is a single value representing a notional five barrels of crude oil of varying grades refined to produce two barrels each of gasoline and distillate and one barrel of secondary product to approximate Suncor’s unique set of refinery configurations; overall crude slate and product mix, location, quality and grade differentials, and the benefits of its marketing margins. The custom index is calculated by taking the product value of refined products less the crude value of refinery feedstock excluding the impact of FIFO inventory accounting methodology. The product value incorporates the New York Harbor 2-1-1 crack, Chicago 2-1-1 crack, WTI benchmarks and a seasonal factor. The seasonal factor applies an incremental US$6.50/bbl in the first and fourth quarters and US$5.00/bbl in the second and third quarters and reflects the location, quality and grade differentials for refined products sold in the company’s core markets during the winter and summer months, respectively. The crude value incorporates the SYN, WCS and WTI benchmarks.

Crack spreads are based on current crude feedstock prices, whereas actual earnings are accounted for on a FIFO basis in accordance with IFRS where a delay exists between the time that feedstock is purchased to when it is processed and when products are sold to a third party. A FIFO loss normally reflects a declining price environment for crude oil and finished products, whereas FIFO gains reflect an increasing price environment for crude oil and finished products. The company’s realized refining and marketing gross margins are also presented on a LIFO basis, which is consistent with how industry benchmarks and the Suncor 5-2-2-1 index are calculated and with how management evaluates performance.

In the first quarter of 2023, the New York Harbor 2-1-1 and Chicago 2-1-1 benchmark crack spreads increased compared to the prior year quarter due to increased demand for transportation fuels and declining North American refined product inventory levels, and to compensate for increased costs associated with renewable blending regulatory obligations. The Suncor 5-2-2-1 index was US$42.80/bbl in the first quarter of 2023 compared to US$32.25/bbl in the first quarter of 2022, reflecting the increase in benchmark crack spreads.

The cost of natural gas used in Suncor’s Oil Sands and Refining operations is primarily referenced to Alberta spot prices at AECO. The average AECO benchmark decreased to $3.05/GJ in the first quarter of 2023, from $4.50/GJ in the prior year quarter.

Excess electricity produced at Suncor’s Oil Sands assets is sold to the Alberta Electric System Operator, with the proceeds netted against the applicable cash operating cost per barrel metric. The Alberta power pool price significantly increased to an average of $142.00/MWh in the first quarter of 2023 compared to $90.00/MWh in the prior year quarter.

The majority of Suncor’s revenues from the sale of oil and natural gas commodities are based on prices that are determined by or referenced to U.S. dollar benchmark prices, while the majority of Suncor’s expenditures are realized in Canadian dollars. A decrease in the value of the Canadian dollar relative to the U.S. dollar will increase the revenues received from the sale of commodities. An increase in the value of the Canadian dollar relative to the U.S. dollar will decrease revenues received from the sale of commodities. In the first quarter of 2023, the Canadian dollar weakened in relation to the U.S. dollar as the average exchange rate decreased to US$0.74 per one Canadian dollar from US$0.79 per one Canadian dollar in the prior year quarter. This exchange rate decrease had a positive impact on price realizations for the company during the first quarter of 2023 when compared to the prior year quarter.

Suncor also has assets and liabilities, including approximately 70% of the company’s debt, that are denominated in U.S. dollars and translated to Suncor’s reporting currency (Canadian dollars) at each balance sheet date. A decrease in the value of the Canadian dollar, relative to the U.S. dollar, from the previous balance sheet date increases the amount of Canadian dollars required to settle U.S. dollar denominated obligations, while an increase in the value of the Canadian dollar, relative to the U.S. dollar, decreases the amount of Canadian dollars required to settle U.S. dollar denominated obligations. As at March 31, 2023, the Canadian dollar weakened in relation to the U.S. dollar as the exchange rate at the end of the period decreased to US$0.74 per one Canadian dollar from US$0.80 per one Canadian dollar in the prior year quarter. This exchange rate decrease had a negative impact on the company’s debt balances in the first quarter of 2023 compared to the prior year quarter.

14   2023 First Quarter   Suncor Energy Inc.

4. SEGMENT RESULTS AND ANALYSIS

OIL SANDS

Financial Highlights

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(1)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)

(1)

For an explanation of this bridge analysis, see the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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Oil Sands segment adjusted operating earnings were $1.490 billion in the first quarter of 2023, compared to $2.256 billion in the prior year quarter, with the decrease primarily due to lower realized crude oil prices and increased operating expenses, partially offset by decreased royalties.

2023 First Quarter   Suncor Energy Inc.   15

MANAGEMENT’S DISCUSSION AND ANALYSIS

Production Volumes(1)

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(1)

Bitumen production from Oil Sands Base is upgraded, while bitumen production from In Situ operations is either upgraded or sold directly to customers, including Suncor’s own refineries, with SCO and diesel yields of approximately 79% of bitumen feedstock input. Fort Hills bitumen is either sold directly to customers as finished bitumen, including Suncor’s own refineries, or to Oil Sands Base for upgrading. Nearly all of the bitumen produced at Syncrude is upgraded to sweet SCO and a small amount of diesel, at an approximate yield of 85%.

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(2)

Combined upgrader utilization rates are calculated using total upgraded production, inclusive of internally consumed diesel and internal transfers.

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(3)

Both Oil Sands operations and Syncrude produce diesel, which is internally consumed in mining operations, and Fort Hills and Syncrude use internally produced diesel from Oil Sands Base within their mining operations. In the first quarter of 2023, Oil Sands operations production volumes included 10,400 bbls/d of internallyconsumed diesel, of which 5,800 bbls/d was consumed at Oil Sands Base, 2,800 bbls/d was consumed at Fort Hills and 1,800 bbls/d was consumed at Syncrude. Syncrude production volumes included 2,300 bbls/d of internally consumed diesel.

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(4)

Internal feedstock transfers between Oil Sands operations and Syncrude through the interconnecting pipelines are included in gross SCO and bitumen production volumes. In the first quarter of 2023, Oil Sands operations production included 7,100 bbls/d of SCO and 1,800 bbls/d of bitumen that were transferred to Suncor’s share of Syncrude through the interconnecting pipelines. Syncrude production included 5,200 bbls/d of bitumen that was transferred to Oil Sands Base through the interconnecting pipelines.

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(5)

Internal feedstock transfers from Fort Hills to Oil Sands operations through the paraffinic froth treatment hot bitumen transfer piping are included in gross bitumen production volumes. In the first quarter of 2023, Fort Hills production included 5,500 bbls/d of bitumen that was transferred to Oil Sands Base.

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The company’s net SCO production was 497,800 bbls/d in the first quarter of 2023, compared to 515,300 bbls/d in the prior year quarter, driven by combined upgrader utilization of 93% in the first quarter of 2023, reflecting the impact of unplanned maintenance in the quarter, compared to 96% in the prior year quarter. During the first quarter of 2023, the company leveraged its regional integration and asset flexibility, through the use of internal transfers between assets, to mitigate the impacts of maintenance during the period.

The company’s non-upgraded bitumen production increased to 177,300 bbls/d in the first quarter of 2023, compared to 170,400 bbls/d in the prior year quarter, and included a new quarterly production record from the company’s In Situ assets. The increase in non-upgraded bitumen production to market included the impacts of lower bitumen volumes processed at upgrading compared to the prior year quarter. At Fort Hills, production in the first quarter of 2023 was 69,200 bbls/d, compared to 87,500 bbls/d in prior year quarter, reflecting the execution of its mine improvement plan, which is currently on plan. This was partially offset by increased production associated with the company’s acquisition of an additional working interest, which was effective February 2, 2023.

Sales Volumes

SCO and diesel sales volumes were 504,000 bbls/d in the first quarter of 2023, compared to 517,700 bbls/d in the prior year quarter, and were impacted by the same factors that affected production volumes.

Non-upgraded bitumen sales volumes increased to 174,100 bbls/d in the first quarter of 2023, compared to 153,700 bbls/d in the prior year quarter, primarily due to a smaller build of inventory in the first quarter of 2023 compared to the prior year quarter, which was impacted by increased production from Fort Hills being transported to customers extending down the U.S. Gulf Coast, as well as the increase in production volumes in the current quarter.

16   2023 First Quarter   Suncor Energy Inc.

Price Realizations(1)

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(1)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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Oil Sands price realizations decreased in the first quarter of 2023 from the prior year quarter, in line with the decrease in crude oil benchmark prices and the widening of heavy crude oil differentials, partially offset by a weaker Canadian dollar in relation to the U.S. dollar.

Royalties

Royalties for the Oil Sands segment decreased in the first quarter of 2023 compared to the prior year quarter, due to the decrease in crude oil benchmark pricing and the widening of heavy crude oil differentials in the current period compared to the prior year quarter.

Expenses and Other Factors

Total Oil Sands operating expenses increased in the first quarter of 2023 compared to the prior year quarter, primarily due to increased maintenance costs, inflationary impacts, increased mining activity and the company’s additional working interest in Fort Hills, partially offset by a decrease in share-based compensation expense. See the Cash Operating Costs section for additional details regarding cash operating costs and a breakdown of non-production costs by asset.

In the first quarter of 2023, DD&A expense was higher compared to the prior year quarter, primarily due to increased depreciation related to the company’s asset retirement obligation asset.

2023 First Quarter   Suncor Energy Inc.   17

MANAGEMENT’S DISCUSSION AND ANALYSIS

Cash Operating Costs

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(1)

Beginning in the second quarter of 2022, the company revised the presentation of its cash operating costs reconciliation to present Oil Sands inventory changes and internal transfers on an aggregate basis. Oil Sands inventory changes and internal transfers reflect: i) the impacts of changes in inventory levels and valuations, such that the company is able to present cost information based on production volumes and ii) adjustments for internal diesel sales between assets. Comparative periods have been updated to reflect this change, with no impact to total Oil Sands operations, Fort Hills or Syncrude cash operating costs or cash operating costs per barrel. In the first quarter of 2023, Oil Sands OS&G includes ($51) million of inventory changes and internal transfers. In the first quarter of 2022, Oil Sands OS&G includes ($42) million of inventory changes and internal transfers.

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(2)

Non-GAAP financial measures. Related per barrel amounts contain non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(3)

Significant non-production costs include, but are not limited to, share-based compensation adjustments, research costs, project startup costs and adjustments to reflect the cost of internal transfers in the receiving asset at the cost of production versus the cost of purchase, such as transfers on the interconnecting pipelines. Non-production costs at Fort Hills and Syncrude also include, but are not limited to, excess power revenue from cogeneration units that is recorded in operating revenue, and an adjustment to reflect internally produced diesel from Oil Sands operations at the cost of production.

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(4)

Oil Sands operations excess power capacity and other includes, but is not limited to, the operational revenue impacts of excess power from cogeneration units and the natural gas expense recorded as part of a non-monetary arrangement involving a third-party processor.

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Oil Sands operations cash operating costs per barrel(1) were $29.60 in the first quarter of 2023, compared to $28.70 in the prior year quarter, primarily due to increased maintenance costs, partially offset by an increase in excess power revenues, resulting from significantly higher power prices, and increased production.

Fort Hills cash operating costs per barrel(1) were $41.40 in the first quarter of 2023, compared to $29.00 in the prior year quarter, due to decreased production and higher costs associated with increased mining activity, partially offset by an increase in excess power revenues resulting from higher power prices.

Syncrude cash operating costs per barrel(1) were $40.25 in the first quarter of 2023, compared to $34.70 in the prior year quarter, primarily due to increased maintenance costs and commodity prices, partially offset by increased production.

(1)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

18   2023 First Quarter   Suncor Energy Inc.

Planned Maintenance Update

The company has commenced planned turnaround activities at Syncrude, which are expected to be completed in the second quarter of 2023. Subsequent to the first quarter, the company commenced and completed planned maintenance at Fort Hills. Planned annual coker maintenance at Oil Sands Base Upgrader 1 is also scheduled to be completed in the second quarter of 2023. The anticipated impact of these maintenance events has been reflected in the company’s 2023 guidance.

Asset Transactions

On February 2, 2023, the company completed the acquisition of an additional 14.65% working interest in Fort Hills for $712 million, bringing the company’s and its affiliate’s total aggregate working interest in Fort Hills to 68.76%.

Subsequent to the first quarter of 2023, Suncor entered into an agreement to purchase TotalEnergies’ Canadian operations through the acquisition of TotalEnergies Canada, which holds a 31.23% working interest in Fort Hills, a 50% working interest in Surmont, located in the Fort McMurray region, as well as certain other associated assets. The acquisition is for cash consideration of $5.5 billion, before closing adjustments and other closing costs, with the potential for additional payments of up to an aggregate maximum of $600 million, expiring after five years and conditional upon WCS benchmark pricing and certain production targets. The transaction will have an effective date of April 1, 2023, and is anticipated to close in the third quarter of 2023, subject to pre-emptive rights, regulatory approval and other closing conditions.

2023 First Quarter   Suncor Energy Inc.   19

MANAGEMENT’S DISCUSSION AND ANALYSIS

EXPLORATION AND PRODUCTION

Financial Highlights

​

(1)

Production from the company’s Libya operations has been presented in the E&P section of this MD&A on an economic basis. Revenue and royalties from the company’s Libya operations are presented under the working-interest basis, which is required for presentation purposes in the company’s financial statements. In the first quarter of 2023, revenue includes a gross-up amount of  $68 million, with an offsetting amount of  $35 million in royalties in the E&P segment and $33 million in income tax expense recorded at the consolidated level. In the first quarter of 2022, revenue includes a gross-up amount of  $138 million, with an offsetting amount of  $60 million in royalties in the E&P segment and $78 million in income tax expense recorded at the consolidated level.

​

(2)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)

(1)

For an explanation of this bridge analysis, see the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

Adjusted operating earnings for the E&P segment in the first quarter of 2023 were $375 million, compared to $645 million in the prior year quarter, with the decrease primarily due to lower realized crude prices and decreased sales volumes.

Volumes

20   2023 First Quarter   Suncor Energy Inc.

Production volumes for E&P Canada were 46,700 bbls/d in the first quarter of 2023, compared to 51,200 bbls/d in the prior year quarter, primarily due to natural declines.

The Terra Nova Floating, Production, Storage and Offloading facility returned to Canada in the first quarter of 2023. The timing of Terra Nova return to production has been delayed as the company has identified additional maintenance and commissioning activities, that are currently ongoing quayside, in order to ensure full confidence in the safety and reliability of the asset before returning to production.

Production volumes for E&P International were 20,300 boe/d in the first quarter of 2023, compared to 29,200 boe/d in the prior year quarter, primarily due to natural declines, the sale of the company’s assets in Norway in the third quarter of 2022 and decreased liftings at the company’s Libya operations in the first quarter of 2023 compared to the prior year quarter.

Total E&P sales volumes were 68,700 boe/d in the first quarter of 2023, compared to 79,500 boe/d in the prior year quarter, primarily due to the same factors that impacted production volumes, discussed above.

Price Realizations(1)

​

(1)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

(2)

E&P International price realizations exclude Libya.

​

Price realizations at E&P Canada decreased in the first quarter of 2023 from the prior year quarter, in line with the decrease in benchmark prices for Brent crude, partially offset by weaker foreign exchange rates. Price realizations at E&P International in the first quarter of 2023 were comparable to the prior year quarter, primarily due to the timing of cargo sales.

Royalties

E&P royalties in the first quarter of 2023 were lower compared to the prior year quarter primarily due to the decrease in price realizations.

Expenses and Other Factors

Operating and transportation expenses increased in the first quarter of 2023 compared to the prior year quarter, primarily related to an increase in the company’s working interest in White Rose and increased costs related to the Terra Nova Asset Life Extension Project.

DD&A and exploration expense in the first quarter of 2023 was comparable to the prior year quarter.

Financing expense and other, which includes other income, increased in the first quarter of 2023 compared to the prior year quarter, primarily due to the recognition of contingent consideration in the prior year quarter related to the company’s sale of the Golden Eagle Area Development.

Planned Maintenance Update for Operated Assets

There are no significant planned maintenance events scheduled for the second quarter of 2023.

Asset Transaction

During the first quarter of 2023, the company reached an agreement for the sale of its U.K. portfolio for gross proceeds of approximately $1.2 billion, including a contingent consideration of approximately $338 million, before closing adjustments and other closing costs. The sale is pending regulatory approval and is expected to close in the second quarter of 2023.

2023 First Quarter   Suncor Energy Inc.   21

MANAGEMENT’S DISCUSSION AND ANALYSIS

REFINING AND MARKETING

Financial Highlights

​

(1)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)

(1)

For an explanation of this bridge analysis, see the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

R&M adjusted operating earnings in the first quarter of 2023 was $998 million compared to $1.395 billion in the prior year quarter. The decrease in adjusted operating earnings was primarily due to a FIFO inventory valuation loss of $131 million in the current period, compared to a gain of $729 million in the prior year quarter, decreased refinery production and increased operating and transportation expenses. This was partially offset by an increase in refining and marketing margins as a result of higher benchmark crack spreads in the current period.

22   2023 First Quarter   Suncor Energy Inc.

Volumes

​

(1)

Refinery utilization is the amount of crude oil and natural gas plant liquids run through crude distillation units, expressed as a percentage of the capacity of these units.

​

(2)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

Refinery crude throughput was 367,700 bbls/d and refinery utilization was 79% in the first quarter of 2023, compared to 436,500 bbls/d and 94% in the prior year quarter, with the decrease primarily due to the completion of repairs and subsequent progressive restart activities at the company’s Commerce City refinery, as the asset returned to operations by the end of the quarter. Refinery utilization for the company’s Canadian refineries was 94% in the first quarter of 2023, compared to 98% in the prior year quarter. Refined product sales in the first quarter of 2023 were 514,800 bbls/d, compared to 551,900 bbls/d in the prior year quarter, primarily due to the decrease in refinery crude throughput at the company’s Commerce City refinery in the current quarter.

Refining and Marketing Gross Margins(1)

Refining and marketing gross margins were influenced by the following:

•

On a LIFO(2) basis, Suncor’s refining and marketing gross margin increased to $59.15/bbl in the first quarter of 2023, from $35.95/bbl in the prior year quarter. The increase was due to significantly higher gasoline and distillate benchmark crack spreads reflecting a tight supply-demand balance, which was further supported by strong location and quality differentials from regional benchmarks to the company’s local markets. Other factors included a favourable product mix and the widening of heavy crude oil differentials. On a LIFO basis, Suncor’s refining and marketing gross margin represents 102% margin capture compared to Suncor’s 5-2-2-1 index in the first quarter of 2023.

​

•

On a FIFO basis, Suncor’s refining and marketing gross margin increased to $55.45/bbl in the first quarter of 2023, from $53.20/bbl in the prior year quarter, due to the same factors noted above, in addition to FIFO inventory valuation impacts. In the first quarter of 2023, the FIFO method of inventory valuation, relative to an estimated LIFO(2) accounting method, including the impact of commodity risk management activities, resulted in a loss of $131 million on the decrease in crude oil benchmarks. In the prior year quarter, FIFO, including the impact of commodity risk management activities, resulted in a gain of $729 million, for an unfavourable quarter-over-quarter impact of $860 million.

​

(1)

Contains non-GAAP financial measures. See the non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

(2)

The estimated impact of the LIFO method is a non-GAAP financial measure. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

2023 First Quarter   Suncor Energy Inc.   23

MANAGEMENT’S DISCUSSION AND ANALYSIS

Expenses and Other Factors

Operating and transportation expenses in the first quarter of 2023 increased compared to the prior year quarter, primarily due to unplanned maintenance at the company’s Commerce City refinery, partially offset by a decrease in share-based compensation expense.

Refining operating expense per barrel(1)(2) was $8.15 in the first quarter of 2023, compared to $6.25 in the prior year quarter, primarily due to decreased refinery production.

Planned Maintenance

Planned turnaround maintenance is scheduled at each of the company’s refineries during the second quarter of 2023, with all events expected to be completed within the quarter. The anticipated impact of these maintenance events has been reflected in the company’s 2023 guidance.

   

(1)

Contains non-GAAP financial measures. See the non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

(2)

In the first quarter of 2023, refining operating expense per barrel excludes costs associated with repair activities at the company’s Commerce City refinery, as the repair costs are classified as non-refining costs that do not relate to the production of refined products.

​

24   2023 First Quarter   Suncor Energy Inc.

CORPORATE AND ELIMINATIONS

Financial Highlights

​

(1)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

Corporate and Renewables incurred an adjusted operating loss of $437 million in the first quarter of 2023, compared to $388 million in the prior year quarter. The increased loss was attributable to increased investment in digital technologies and the company’s progress towards its net-zero GHG emissions objective, an increased operational foreign exchange loss in the first quarter of 2023 compared to the prior year quarter, and an unrealized gain on investment recorded in the first quarter of 2022. The increased loss was partially offset by a decrease in share-based compensation expense in the first quarter of 2023 compared to the prior year quarter, and a net decrease in interest expense on debt in the current quarter as a result of debt reductions that occurred throughout 2022. Suncor capitalized $58 million of its borrowing costs in the first quarter of 2023, as part of the cost of major development assets and construction projects in progress, compared to $37 million in the prior year quarter.

Eliminations reflect the deferral or realization of profit or loss on crude oil sales from Oil Sands to Suncor’s refineries. Consolidated profits and losses are only realized when the refined products produced from internal purchases of crude feedstock have been sold to third parties. During the first quarter of 2023, the company realized $7 million of intersegment profit, compared to a deferral of $281 million of intersegment profit in the prior year quarter. The realization of intersegment profit and elimination of unrealized losses in the first quarter of 2023 was driven by the decrease in Oil Sands price realizations over the quarter, as higher margin crude refinery feedstock inventory sourced internally from Oil Sands was sold and replaced by lower margin feedstock inventory, and a decrease in intersegment inventory volumes.

Corporate and Eliminations adjusted funds used in operations were $533 million for the first quarter of 2023, compared to $665 million in the first quarter of 2022, and were influenced by the same factors impacting adjusted operating loss described above, excluding the impact of the unrealized gain on investment recorded in the first quarter of 2022, and share-based compensation expense.

Asset Transaction

During the first quarter of 2023, the company completed the sale of its wind and solar assets for gross proceeds of $730 million, before closing adjustments and other closing costs, resulting in an after-tax gain on sale of approximately $260 million.

2023 First Quarter   Suncor Energy Inc.   25

MANAGEMENT’S DISCUSSION AND ANALYSIS

5. INCOME TAX

The provision for income taxes in the first quarter of 2023 decreased compared to the prior year quarter, primarily due to decreased earnings. In the first quarter of 2023, the company’s effective tax rate on net earnings increased compared to the prior year quarter, primarily due to income earned in foreign jurisdictions with higher statutory tax rates, non-taxable foreign exchange gains and losses on the revaluation of U.S. dollar denominated debt, and other permanent items impacting total tax expense.

26   2023 First Quarter   Suncor Energy Inc.

6. CAPITAL INVESTMENT UPDATE

Capital and Exploration Expenditures by Segment

​

(1)

Excludes capital expenditures related to assets held for sale of  $42 million in the first quarter of 2023 and $19 million in the first quarter of 2022.

​

Capital and Exploration Expenditures by Type, Excluding Capitalized Interest

​

(1)

Asset sustainment and maintenance capital expenditures include capital investments that deliver on existing value by ensuring compliance or maintaining relations with regulators and other stakeholders, maintaining current processing capacity and delivering existing developed reserves.

​

(2)

Economic investment capital expenditures include capital investments that result in an increase in value through adding reserves or improving processing capacity, utilization, cost or margin, including associated infrastructure.

​

(3)

Excludes capital expenditures related to assets held for sale of  $42 million in the first quarter of 2023.

​

During the first quarter of 2023, the company spent $1.028 billion on capital expenditures, excluding capitalized interest, compared to $974 million in the prior year quarter. The increase in capital expenditures in the current quarter was primarily due to increased asset sustainment and maintenance capital expenditures at Syncrude, increased economic investment capital expenditures in E&P, primarily due to the ramp up of development work at the West White Rose Project in the current period, which was partially offset by decreased economic investment capital expenditures at Corporate.

Activity in the first quarter of 2023 is summarized by business unit below.

Oil Sands

Oil Sands Base capital expenditures were $302 million in the first quarter of 2023, and were primarily focused on asset sustainment and maintenance activities focused on ensuring safe, reliable and efficient operations, and tailings development. Economic investment expenditures were primarily focused on progressing the investment in low-carbon power cogeneration by replacing the coke-fired boilers with a new cogeneration facility.

In Situ capital expenditures were $126 million in the first quarter of 2023, and were primarily directed towards economic investment activities, which focused on the ongoing design and construction of well pads to develop additional reserves that are expected to maintain existing production levels from existing well pad declines.

2023 First Quarter   Suncor Energy Inc.   27

MANAGEMENT’S DISCUSSION AND ANALYSIS

Fort Hills capital expenditures were $90 million in the first quarter of 2023, and were directed towards asset sustainment and maintenance activities related to mine and tailings development to support ongoing operations, including spend aligned with the execution of its mine improvement plan, which includes an accelerated sequence of mine development relative to historical plans.

Syncrude capital expenditures were $240 million in the first quarter of 2023, the majority of which were for asset sustainment and maintenance expenditures that focused on improving asset reliability, including the preparation and commencement of planned turnaround activities during the quarter, and mine equipment replacements. Economic investment during the quarter was directed towards progressing the Mildred Lake West Extension mining project.

Exploration and Production

E&P capital and exploration expenditures were $132 million in the first quarter of 2023, and were related to economic investment projects, primarily development work on the West White Rose Project and the Terra Nova Asset Life Extension Project.

Refining and Marketing

R&M capital expenditures were $125 million in the first quarter of 2023, and were primarily related to asset sustainment and maintenance activities that focused on the ongoing sustainment and enhancement of refinery and retail operations. Economic investment capital expenditures in the first quarter of 2023 were focused on enhancing the company’s sales and marketing business, including the optimization of its retail operations.

Corporate and Eliminations

Corporate and Eliminations capital expenditures were $13 million in the first quarter of 2023, and were primarily directed towards investment in digital technologies.

28   2023 First Quarter   Suncor Energy Inc.

7. FINANCIAL CONDITION AND LIQUIDITY

Indicators

​

(1)

Non-GAAP financial measures or contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

(2)

ROCE would have been 21.6% for the twelve months ended March 31, 2023, excluding the impact of the impairment reversal of  $715 million ($542 million after-tax) and impairment of  $70 million ($47 million after-tax) in the second quarter of 2022, and the impact of the impairment of $3.397 billion ($2.586 billion after-tax) in the third quarter of 2022. ROCE would have been 12.4% for the twelve months ended March 31, 2022, excluding the impact of the impairment reversal of  $221 million ($168 million after-tax) in the third quarter of 2021.

​

Capital Resources

Suncor’s capital resources consist primarily of cash flow provided by operating activities, cash and cash equivalents, and available lines of credit. Suncor’s management believes the company will have the capital resources to fund its planned 2023 capital spending program of $5.4 billion to $5.8 billion, the acquisition and sustaining capital cost requirements associated with the potential acquisition of TotalEnergies Canada, and to meet current and future working capital requirements, through cash and cash equivalents balances, cash flow provided by operating activities, available committed credit facilities, issuing commercial paper and, if needed, accessing capital markets through the issuance of long-term notes or debentures. The company’s cash flow provided by operating activities depends on a number of factors, including commodity prices, production and sales volumes, refining and marketing gross margins, operating expenses, taxes, royalties and foreign exchange rates. The company intends to fund the potential acquisition of TotalEnergies Canada primarily through debt issuances. If additional capital is required, Suncor’s management believes adequate additional financing will be available in debt capital markets at commercial terms and rates.

The company has invested cash in short-term financial instruments that are presented as cash and cash equivalents. The objectives of the company’s short-term investment portfolio are to ensure the preservation of capital, maintain adequate liquidity to meet Suncor’s cash flow requirements and deliver competitive returns derived from the quality and diversification of investments within acceptable risk parameters. The maximum weighted average term to maturity of the short-term investment portfolio is not expected to exceed six months, and all investments will be with counterparties with investment grade debt ratings.

Available Sources of Liquidity

For the three months ended March 31, 2023, cash and cash equivalents decreased to $1.128 billion from $1.980 billion at December 31, 2022, due to the company’s capital and exploration expenditures, the repurchase of Suncor’s common shares under its normal course issuer bid (NCIB), the acquisition of an additional 14.65% interest in Fort Hills, the payment of dividends, and income tax, commodity tax and royalty payments, exceeding its cash flow provided by operating activities, increase in short-term indebtedness and proceeds from the sale of its wind and solar assets.

As at March 31, 2023, the weighted average days to maturity of the company’s short-term investment portfolio was approximately 11 days.

As at March 31, 2023, available credit facilities for liquidity purposes were $1.929 billion, compared to $2.900 billion at December 31, 2022. The decrease in available credit facilities was primarily due to an increase in short-term indebtedness.

Financing Activities

Management of debt levels and liquidity continues to be a priority for Suncor given the company’s long-term plans and future expected volatility in the current business environment. Suncor believes a phased and flexible approach to existing and future projects should assist the company in maintaining its ability to manage project costs and debt levels.

Total Debt to Total Debt Plus Shareholders’ Equity

Suncor is subject to financial and operating covenants related to its bank debt and public market debt. Failure to meet the terms of one or more of these covenants may constitute an “event of default” as defined in the respective debt agreements,

2023 First Quarter   Suncor Energy Inc.   29

MANAGEMENT’S DISCUSSION AND ANALYSIS

potentially resulting in accelerated repayment of one or more of the debt obligations. The company is in compliance with its financial covenant that requires total debt to not exceed 65% of its total debt plus shareholders’ equity. At March 31, 2023, total debt to total debt plus shareholders’ equity was 29.7% (December 31, 2022 – 28.4%). The company also continues to be in compliance with all operating covenants under its debt agreements.

Change in Debt

​

(1)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

The company’s total debt increased in the first quarter of 2023 primarily due to an increase in short-term indebtedness and leases entered into, and assumed with the Fort Hills acquisition, during the period, partially offset by principal lease payments made during the first quarter of 2023.

At March 31, 2023, Suncor’s net debt was $15.714 billion, compared to $13.639 billion at December 31, 2022. The change in net debt was primarily due to the factors listed above, and a decrease in cash and cash equivalents.

Common Shares

As at May 5, 2023, the total number of common shares outstanding was 1,309,647,065 and the total number of exercisable and non-exercisable common share options outstanding was 21,379,541. Once vested, each outstanding common share option is exercisable into one common share.

30   2023 First Quarter   Suncor Energy Inc.

Share Repurchases

During the first quarter of 2023, the TSX accepted a notice filed by Suncor to renew its NCIB to purchase the company’s common shares through the facilities of the TSX, NYSE and/or alternative trading systems. The notice provides that, beginning February 17, 2023, and ending February 16, 2024, Suncor may purchase for cancellation up to 132,900,000 common shares, which is equal to approximately 10% of Suncor’s public float (as defined in the TSX Company Manual) as at February 3, 2023. On February 3, 2023, Suncor had 1,330,006,760 common shares issued and outstanding.

Between February 17, 2023, and May 5, 2023, pursuant to Suncor’s NCIB, Suncor repurchased 20,373,835 common shares on the open market, representing the equivalent of 1.5% of its common shares as at February 3, 2023, for $878 million, at a weighted average price of $43.10 per share.

The actual number of common shares that may be purchased under the NCIB and the timing of any such purchases will be determined by Suncor. Suncor believes that, depending on the trading price of its common shares and other relevant factors, purchasing its own shares represents an attractive investment opportunity and is in the best interests of the company and its shareholders. The company does not expect the decision to allocate cash to repurchase shares will affect its long-term strategy.

Contractual Obligations, Commitments, Guarantees and Off-Balance Sheet Arrangements

In the normal course of business, the company is obligated to make future payments, including contractual obligations and non-cancellable commitments. Suncor has included these items in the Financial Condition and Liquidity section of the 2022 annual MD&A. Suncor does not believe it has any guarantees or off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the company’s financial performance or financial condition, results of operations, liquidity or capital expenditures.

During the first quarter of 2023, the company increased its commitments as a result of the acquisition of an additional 14.65% interest in Fort Hills. The acquisition of additional working interest is expected to impact the company’s undiscounted future decommissioning and restoration costs, long-term contracts, pipeline capacity and energy service commitments and its commitments associated with leases.

2023 First Quarter   Suncor Energy Inc.   31

MANAGEMENT’S DISCUSSION AND ANALYSIS

8. QUARTERLY FINANCIAL DATA

Trends in Suncor’s quarterly revenue, earnings and adjusted funds from operations are driven primarily by production volumes, which can be significantly impacted by major maintenance events, changes in commodity prices and crude differentials, refining crack spreads, foreign exchange rates and other significant events impacting operations, such as operational incidents and the impacts of the COVID-19 pandemic.

Financial Summary

​

(1)

The company revised certain gross revenues and purchases of crude oil and products to align with the current period presentation. For the three months ended March 31, 2022, gross revenues and purchases of crude oil and products was decreased by $150 million, with no effect on net earnings.

​

(2)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A. Adjusted operating earnings (loss) for each quarter are defined in the Non-GAAP and Other Financial Measures Advisory section and reconciled to GAAP measures in the Consolidated Financial Information and Segment Results and Analysis sections of each Quarterly Report to Shareholders issued by Suncor (Quarterly Reports) in respect of the relevant quarter. Adjusted funds from operations for each quarter are defined and reconciled to GAAP measures in the Non-GAAP and Other Financial Measures Advisory section of each Quarterly Report in respect of the relevant quarter, with such information being incorporated by reference herein and available on SEDAR at www.sedar.com.

​

(3)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A. Non-GAAP measures included in ROCE and ROCE excluding impairments and impairment reversals are defined and reconciled to GAAP measures in the Non-GAAP and Other Financial Measures Advisory section of each Quarterly Report in respect of the relevant quarter, with such information being incorporated by reference herein and available on SEDAR at www.sedar.com.

​

(4)

Represented on a basic per share basis.

​

32   2023 First Quarter   Suncor Energy Inc.

Business Environment