All financial figures are unaudited and presented in Canadian dollars unless noted otherwise. Production volumes are presented on a working-interest basis, before royalties, except for production volumes from Suncor Energy Inc.’s (Suncor or the company) Libya operations, which are presented on an economic basis. Certain financial measures in this document are not prescribed by Canadian generally accepted accounting principles (GAAP). For a description of these non-GAAP financial measures, see the Non-GAAP and Other Financial Measures Advisory section of this document. See also the Advisories section of this document. References to Oil Sands operations exclude Suncor’s interests in Fort Hills and Syncrude.

“In 2022, we returned nearly $8 billion of value to our shareholders through dividends and share repurchases, representing approximately 43% of our record adjusted funds from operations of  $18 billion,” said Kris Smith, Interim President and Chief Executive Officer. “We allocated nearly 60% of our excess funds to share buybacks and approximately 40% to debt reduction, and we’re exiting the year with the highest dividend per share in our company’s history, all of which reflect our unwavering commitment to maximizing shareholder returns.”

(1)

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

​

(2)

Excludes capitalized interest for all periods presented. Excludes capital expenditures related to assets held for sale of  $19 million in the first quarter of 2022, $36 million in the second quarter of 2022, $38 million in the third quarter of 2022 and $40 million in the fourth quarter of 2022.

​

(3)

Share repurchases per share are calculated as the total cost of share repurchases divided by the weighted average number of shares outstanding for the applicable period.

​

 

•

Adjusted funds from operations(1)(2) increased to $4.189 billion ($3.11 per common share) in the fourth quarter of 2022, compared to $3.144 billion ($2.17 per common share) in the prior year quarter. Cash flow provided by operating activities, which includes changes in non-cash working capital, increased to $3.924 billion ($2.91 per common share) in the fourth quarter of 2022, compared to $2.615 billion ($1.80 per common share) in the prior year quarter.

​

•

Adjusted operating earnings(1)(2) increased to $2.432 billion ($1.81 per common share) in the fourth quarter of 2022, compared to $1.294 billion ($0.89 per common share) in the prior year quarter. Net earnings increased to $2.741 billion ($2.03 per common share) in the fourth quarter of 2022, compared to $1.553 billion ($1.07 per common share) in the prior year quarter.

​

•

Production from the company’s Oil Sands assets was 688,100 barrels per day (bbls/d) in the fourth quarter of 2022, compared to 665,900 bbls/d in the prior year quarter, with the current period including record quarterly production at Firebag.

​

•

In 2022, Syncrude delivered record annual mine bitumen production, with both strong synthetic crude oil (SCO) production and by capitalizing on the company’s regional integration through transfers on the interconnecting pipelines, all of which helped to achieve Suncor’s second highest annual SCO production of 480,000 bbls/d.

​

•

Refining and Marketing (R&M) generated adjusted funds from operations(3) of  $1.663 billion in the fourth quarter of 2022, or $2.102 billion excluding the impacts of a first-in, first-out (FIFO) inventory valuation loss(4) of  $439 million, compared to $869 million of adjusted funds from operations in the prior year quarter, or $708 million excluding the impacts of a FIFO inventory valuation gain(4) of  $161 million.

​

•

In 2022, Suncor returned over $7.7 billion of value to its shareholders, compared to $3.9 billion in the prior year. Record shareholder returns in 2022 included $2.6 billion of dividends paid and $5.1 billion in share repurchases. In 2022, the company repurchased a record 116.9 million common shares at an average price of  $43.92 per common share, or the equivalent of 8.1% of its common shares as at December 31, 2021.

​

•

In the fourth quarter of 2022, Suncor’s Board of Directors (the Board) approved a quarterly dividend of  $0.52 per share, a 23.8% increase over the fourth quarter of 2021 dividend and the highest quarterly dividend per share in the company’s history.

​

•

Subsequent to the fourth quarter of 2022, the Board approved a renewal of the company’s normal course issuer bid (NCIB) for the repurchase of up to 10% of Suncor’s public float as at February 3, 2023, over a twelve-month period, and concurrently, the Toronto Stock Exchange (TSX) accepted a notice filed by Suncor to renew its NCIB in respect of the repurchase of such shares.

​

•

In support of its net debt reduction and annual capital allocation targets, the company reduced net debt(1) by nearly $1.0 billion in the fourth quarter of 2022, or $745 million excluding the impact of a $200 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt. In 2022, the company reduced net debt by over $2.5 billion, or approximately $3.2 billion excluding the impact of a $729 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt. The significant reduction in debt provides ongoing balance sheet flexibility, reduces long-term financing costs, and demonstrates the company’s confidence in its business and commitment to reducing net debt.

​

•

In the fourth quarter of 2022, as a result of a comprehensive strategic review of its downstream retail business, the company announced that it will retain and continue to improve and optimize the Petro-Canada™ retail business.

​

•

Subsequent to the fourth quarter of 2022, the company completed the sale of its wind and solar assets, and the acquisition of an additional working interest in Fort Hills, bringing the company’s total aggregate working interest in Fort Hills to 68.76%. The sale process for the company’s U.K. E&P portfolio is progressing, with a sale anticipated to close in mid-2023.

​

(1)

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

​

(2)

Beginning in the fourth quarter of 2021, the company revised the label of operating earnings (loss) and funds from (used in) operations to adjusted operating earnings (loss) and adjusted funds from (used in) operations, respectively, to better distinguish these non-GAAP financial measures from their respective comparable GAAP measures and better reflect the purpose of such measures. The composition of these measures remained unchanged and therefore no prior periods were revised.

​

(3)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

(4)

The estimated impact of the last-in, first-out (LIFO) method is a non-GAAP financial measure. FIFO inventory valuation includes the impact of commodity risk management activities. See the Non-GAAP and Other Financial Measures Advisory section of this document.

​

2   2022 Fourth Quarter   Suncor Energy Inc.

Financial Results

Adjusted Operating Earnings

Suncor’s adjusted operating earnings increased to $2.432 billion ($1.81 per common share) in the fourth quarter of 2022, compared to $1.294 billion ($0.89 per common share) in the prior year quarter, primarily due to significantly higher crude oil and refined product realizations, reflecting the improved business environment in the current quarter and higher upstream production, partially offset by increased operating expenses and income taxes. Adjusted operating earnings were also impacted by a weakening in 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 fourth quarter of 2022, compared to a gain in the prior year quarter.

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)(2)

(1)

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

​

(2)

All reconciling items are presented on a before-tax basis and adjusted for income taxes in the Income Tax bridge factor.

​

(3)

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 R&M segment, and changes in the intersegment elimination of profit reported in the Corporate and Eliminations segment.

​

Net Earnings

The company had net earnings of  $2.741 billion ($2.03 per common share) in the fourth quarter of 2022, compared to $1.553 billion ($1.07 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, net earnings for the fourth quarter of 2022 included a $200 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $106 million unrealized loss on risk management activities recorded in other income (loss) and a $215 million income tax recovery excluded from adjusted operating earnings. Net earnings in the prior year quarter included a $227 million gain on the sale of the company’s interest in the Golden Eagle Area Development, a $25 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $14 million unrealized gain on risk management activities recorded in other income (loss) and a $7 million income tax expense excluded from adjusted operating earnings.

2022 Fourth Quarter   Suncor Energy Inc.   3

 

Adjusted Operating Earnings Reconciliation(1)

​

(1)

Adjusted operating earnings is a non-GAAP financial measure. All reconciling items are presented on a before-tax basis and adjusted for income taxes in the income tax (recovery) expense excluded from adjusted operating earnings line. See the Non-GAAP and Other Financial Measures Advisory section of this document.

​

(2)

In the second quarter of 2022, as a result of the decision to restart the West White Rose Project, the company recorded a non-cash impairment reversal of  $715 million on its share of the White Rose assets in the E&P segment. Also during the second quarter of 2022, as a result of the company’s expected sale of its E&P assets in Norway, and the subsequently reached agreement for such sale, the company recorded a non-cash impairment of  $70 million against its share of its assets in Norway in the E&P segment. During the third quarter of 2022, in connection with the company entering into a conditional agreement to acquire Teck Resources Limited’s (Teck) interest in Fort Hills, as well as updates to the Fort Hills long-range plan including production and operating cost plans, the company recorded a non-cash impairment of  $3.397 billion against its share of the Fort Hills assets in the Oil Sands segment. During the third quarter of 2021, the company recorded a non-cash impairment reversal of  $221 million against its share of the Terra Nova assets, in the E&P segment, as a result of the Asset Life Extension Project moving forward and the benefit of royalty and financial support from the Government of Newfoundland and Labrador.

​

(3)

During the third quarter of 2022, the company recorded $147 million of property damage insurance proceeds in other income (loss) related to the company’s assets in Libya in the E&P segment.

​

(4)

During the third quarter of 2022, the company incurred a $65 million foreign exchange loss related to the sale of the company’s share of its assets in Norway in the E&P segment.

​

(5)

During the first quarter of 2021, the company recorded a restructuring charge in operating, selling & general (OS&G) expenses related to workforce-reduction plans.

​

(6)

During the third quarter of 2021, the company recorded a loss of  $80 million for the early repayment of long-term debt.

​

(7)

In the fourth quarter of 2022, income tax (recovery) expense excluded from adjusted operating earnings includes a deferred income tax recovery of  $171 million related to the anticipated sale of the company’s U.K. E&P portfolio and a current income tax recovery of  $39 million related to the sale of its wind and solar assets.

​

Adjusted Funds from Operations and Cash Flow Provided by Operating Activities

Adjusted funds from operations increased to $4.189 billion ($3.11 per common share) in the fourth quarter of 2022, compared to $3.144 billion ($2.17 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, increased to $3.924 billion ($2.91 per common share) in the fourth quarter of 2022, compared to $2.615 billion ($1.80 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 smaller use of cash associated with the company’s working capital balances in the fourth quarter of 2022 compared to the prior year quarter.

4   2022 Fourth Quarter   Suncor Energy Inc.

Operating Results

Suncor’s total upstream production increased to 763,100 barrels of oil equivalent per day (boe/d) in the fourth quarter of 2022, compared to 743,300 boe/d in the prior year quarter, primarily driven by increased production from the company’s Oil Sands assets.

The company’s net SCO production was 517,500 bbls/d in the fourth quarter of 2022, comparable to 515,000 bbls/d in the prior year quarter. Increased SCO production at Syncrude, reflecting 99% upgrader utilization in the fourth quarter of 2022, compared to 90% in the prior year quarter, was partially offset by decreased production at Oil Sands Base as the current quarter was impacted by the completion of planned maintenance activities that commenced in the third quarter of 2022.

The company’s non-upgraded bitumen production increased to 170,600 bbls/d in the fourth quarter of 2022, compared to 150,900 bbls/d in the fourth quarter of 2021, primarily due to increased production from Fort Hills and record quarterly production from Firebag.

Non-upgraded bitumen production from the company’s In Situ assets in the fourth quarter of 2022 was higher than the prior year quarter, with an overall increase in bitumen production volumes being partially offset by increased Firebag production being diverted to upgrading in the current period, as the prior year quarter was impacted by maintenance activities at Firebag. During the fourth quarter of 2022, the company also leveraged its asset flexibility and marketing and trading expertise, including its midstream and logistics network, to mitigate third-party pipeline disruptions, resulting in additional non-upgraded bitumen production being sold to market.

E&P production during the fourth quarter of 2022 was 75,000 boe/d, compared to 77,400 boe/d in the prior year quarter. The decrease in production was primarily due to asset sales at E&P International, partially offset by increased production at E&P Canada.

Upstream production in 2023 is expected to be impacted by the disciplined decisions the company has taken to streamline its portfolio to enable greater fit and focus and drive value from its core business. This includes increased production associated with the company’s additional working interest in Fort Hills, partially offset by reduced production reflecting the execution of its 36-month mine improvement plan, continued strong production from the company’s In Situ assets, and the Terra Nova return to production in the second quarter of 2023, partially offset by the anticipated sale of the company’s U.K. E&P business in 2023.

“We achieved combined upgrader utilization of 96% this quarter, delivered record Firebag production, and leveraged our asset and production flexibility as well as our midstream expertise to maximize the value of our barrels. In the downstream, we delivered refinery utilizations of 94%, supporting our ability to maximize margin capture in a robust demand environment,” said Smith. “We have worked hard to mitigate the impacts of the weather-related outage at the Commerce City refinery and, as a result, we anticipate a return to normal production rates by the end of the first quarter. Looking ahead in 2023, we will continue to focus on the delivery of safe and reliable operations across the business.”

Refinery crude throughput was 440,000 bbls/d and refinery utilization was 94% in the fourth quarter of 2022, compared to 447,000 bbls/d and 96% in the prior year quarter, with the decrease due to unplanned maintenance in the current period, including the weather-related event that occurred late in the quarter at the company’s Commerce City refinery. Refined product sales in the fourth quarter of 2022 were 548,200 bbls/d, comparable to 550,100 bbls/d in the prior year quarter.

Progressive restart activities at the company’s Commerce City refinery are currently underway, and the asset is anticipated to return to normal production rates by the end of the first quarter.

The company’s total OS&G expenses were $3.556 billion in the fourth quarter of 2022, compared to $2.978 billion in the prior year quarter. The increase was mainly due to a significant increase in commodity input costs, including higher natural gas prices, increased maintenance, inflationary impacts and increased share-based compensation expense in the fourth quarter of 2022 compared to the prior year quarter. The company’s exposure to higher natural gas costs is partially mitigated by revenue from power sales that is recorded in operating revenues.

Strategy Update

“Our top priority going into 2023 is driving the improved safety and operational performance of our company through our operational excellence principles, which in turn will deliver increased returns to shareholders,” said Smith. “Our goal is to leverage our competitive advantages, including the scale and size of our integrated model, our regional oil sands advantage, and the improved fit and focus of our asset base, to drive cost and capital efficiency and maximize value from every barrel.”

Suncor is laser focused on driving improved safety and operational performance across the company, and ensuring that it delivers competitive and sustainable value to its shareholders. Looking ahead, the company is executing on its clear and accelerated plans to improve its safety performance. This includes a full-scale implementation of collision awareness and fatigue management technologies, with installations occurring on over one thousand pieces of mobile mining equipment. Suncor will be the first oil sands operator to execute a full-scale implementation of these technologies, and the company is on track to go live

2022 Fourth Quarter   Suncor Energy Inc.   5

 

by the end of 2023. The company’s rigorous safety improvement plans also include strengthening its risk management systems, improving its contractor safety management and doubling the safety weighting in its annual incentive program to drive safety across the business.

In the fourth quarter of 2022, Suncor’s Board, with the support of external advisors, completed a comprehensive strategic review of its downstream retail business. As a result of the review, the company announced that it will retain and optimize the Petro-Canada™ retail business, with the goal of further strengthening Suncor’s integrated R&M business and driving increased long-term value for shareholders. The enhancement of Suncor’s retail business will include changing the mix ownership model of the company-owned and controlled, dealer-owned and partnership sites. Economic investment in 2023 is expected to be focused on company-owned and controlled sites, in the most profitable sites and markets, while optimizing the non-company-controlled sites in less densely populated areas, using alternative ownership structures and partnerships to grow the brand’s scale and presence. These activities will also include the continued expansion of strategic partnerships in non-fuel-related businesses such as quick service restaurants, convenience stores, loyalty partnerships and energy transition offerings to provide low-carbon solutions to its customers.

In its Oil Sands business, the company is focused on leveraging its regional scale and standardized processes to drive cost efficiencies and reliability improvements, in addition to leveraging its interconnected asset base, including the interconnecting pipelines between Oil Sands Base and Syncrude, to improve the scope, duration and sequencing of turnarounds. In 2022, the company completed and commissioned the new paraffinic froth treatment (PFT) hot bitumen transfer piping which enables transfers of up to 60,000 bbls/d of PFT from Fort Hills to upgrading at Oil Sands Base, further increasing the company’s regional integration and flexibility. The company continues to progress opportunities to further increase the integration and flexibility of its operations, which allows the company to manage through both internal and external market factors, and to respond to dynamic market conditions.

At Fort Hills, in the fourth quarter of 2022, the company commenced its 36-month mine improvement plan, which includes an accelerated sequence of mine development relative to historical plans, during which time the asset is expected to operate at lower than 90% production rates. During the fourth quarter of 2022, the company entered into an agreement to acquire Teck’s 21.3% interest in the Fort Hills Project (Fort Hills) and its associated sales and logistics agreements for $1.0 billion, subject to working capital and other closing adjustments. Subsequent to the fourth quarter of 2022, TotalEnergies EP Canada Ltd. provided notice of the exercise of its contractual right of first refusal to acquire from Teck a 6.65% interest in Fort Hills, which reduced the amount of working interest available for Suncor to purchase. As a result, on February 2, 2023, Suncor completed the acquisition of an additional 14.65% working interest in Fort Hills for $688 million, before working capital and other closing adjustments, bringing the company’s and its affiliate’s total aggregate working interest in Fort Hills to 68.76%. The acquisition of the additional interest in Fort Hills is a strategic fit with the company’s focus on its core assets, and underscores the company’s confidence in the long-term value of the asset. At Syncrude, operating costs in 2023 are expected to increase as a result of structural mine progression factors that include longer hauling distances and increased tonnage and tailing requirements. Suncor’s primary focus for cost management in 2023 will be to continue efforts to sustainably reduce controllable operating costs to offset inflationary pressures as much as possible, as well as the structural mine factors at Syncrude and Fort Hills, that are anticipated to increase near-term operating costs in its mining business.

By the end of 2022, the company achieved approximately $865 million of incremental free funds flow(1) through the implementation of digital, process and technology initiatives. The operating costs portion of the savings generated from these improvement initiatives is partially offsetting inflationary pressures and increased mining costs in the company’s Oil Sands business. In addition, the company achieved $300 million of annual gross synergies for the Syncrude joint venture owners by the end of 2022, through workforce efficiencies and regional optimization.

The company continues to progress its disciplined decisions to streamline its portfolio to enable greater fit and focus and drive value from its core business. The sale process for the company’s U.K. E&P portfolio is progressing, with a sale anticipated to close in mid-2023. In E&P Canada, investment in the Terra Nova Floating, Production, Storage and Offloading facility related to the Asset Life Extension Project was substantially progressed in 2022, and the asset has returned to Canada, with a safe return to production expected in the second quarter of 2023.

Subsequent to the fourth quarter of 2022, the company completed the sale of its wind and solar assets for gross proceeds of approximately $730 million, before closing adjustments and other closing costs, resulting in an estimated after-tax gain on sale of approximately $260 million. The sale of these assets allows greater focus and investment in hydrogen and renewable fuels, and accelerates the company’s progress towards its net-zero greenhouse gas (GHG) objective with investments that are complementary to its base business and that leverage its existing expertise.

Reducing GHG emissions is a key component of the company’s business strategy and long-term vision. In support of Suncor’s ambition to be net-zero by 2050, the company works collaboratively with industry peers through the Pathways Alliance and also with Federal and Provincial governments. Subsequent to the fourth quarter of 2022, the Pathways Alliance was awarded exploratory rights from the Government of Alberta for the proposed carbon capture and storage hub to safely and permanently store CO2 captured from over 20 oil sands facilities in northern Alberta.

   

(1)

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

​

6   2022 Fourth Quarter   Suncor Energy Inc.

Looking forward, capital expenditures continue to be focused on asset sustainment and maintenance projects designed to support safe and reliable operations. Economic capital spend will be focused on advancing high-return projects and investments that are expected to enhance value within the company’s existing assets base and accelerate the company’s progress towards its net-zero GHG objective. Planned economic investment in 2023 is expected to include expenditures related to the replacement of the coke-fired boilers at Oil Sands Base with a cogeneration facility, which is expected to be in service in late 2024 and substantially contribute to the company’s net-zero GHG objective, the Upgrader 1 coke drum replacement at Oil Sands Base, which is expected to be in service in late 2025, the Mildred Lake West Extension project, which is expected to come online in late 2025, investment in the West White Rose Project, with production expected to commence in the first half of 2026, and economic investment in the optimization of the Petro-Canada™ retail business.

In 2022, the company executed on its capital allocation framework, returning record value to shareholders of over $7.7 billion, while simultaneously reducing net debt by over $2.5 billion, or approximately $3.2 billion excluding the impact of a $729 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt. Record shareholder returns in 2022 included approximately $2.6 billion of dividends paid and approximately $5.1 billion in share repurchases, representing a record rate of share repurchases for the year. Demonstrating management’s confidence in the company’s ability to generate sustainable and increasing cash flows, and its commitment to increasing shareholder returns, the company increased its dividend per share twice in 2022, most recently in the fourth quarter, to $0.52 per share, a 23.8% increase over the fourth quarter of 2021 dividend and the highest quarterly dividend per share in the company’s history.

Looking ahead in 2023, the company will continue to execute on its capital allocation framework. Based on current business plans and commodity pricing, the company expects to increase its share buyback allocation to 75% by the end of the first quarter of 2023, and to continue to progress towards its net debt reduction targets in 2023. The sustainability of, and ability to grow, the company’s dividend is a top focus for Suncor and future dividend growth will continue to be a priority as momentum is demonstrated through reliable operational performance and optimization of the business. As well, as the company executes share buybacks, the lower outstanding share count will allow the company to increase its per-share dividend.

Subsequent to the fourth quarter of 2022, the Board approved a renewal of the company’s NCIB for the repurchase of up to 10% of Suncor’s public float as at February 3, 2023, over a twelve-month period, and concurrently, the TSX accepted a notice filed by Suncor to renew its NCIB in respect of the repurchase of such shares.

Corporate Guidance

Suncor has updated its 2023 Fort Hills production range from 90,000 bbls/d–100,000 bbls/d to 85,000 bbls/d–95,000 bbls/d, to reflect the lower incremental working interest purchased from Teck of 14.65%, with no change to Suncor’s total upstream production range.

For further details and advisories regarding Suncor’s 2023 corporate guidance, see www.suncor.com/guidance.

Normal Course Issuer Bid

Subsequent to the fourth quarter of 2022, 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, New York Stock Exchange 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 of February 3, 2023. On February 3, 2023, Suncor had 1,330,006,760 common shares issued and outstanding.

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.

Pursuant to Suncor’s previous NCIB, as amended on May 9, 2022, Suncor agreed that it would not purchase more than 143,500,000 common shares between February 8, 2022, and February 7, 2023. Between February 8, 2022, and February 7, 2023, and pursuant to Suncor’s previous NCIB (as amended), Suncor repurchased 118,143,500 shares on the open market for approximately $5.248 billion, at a weighted average price of  $44.42 per share.

Subject to the block purchase exemption that is available to Suncor for regular open market purchases under the NCIB, Suncor will limit daily purchases of Suncor common shares on the TSX in connection with the NCIB to no more than 25% (2,696,377 common shares) of the average daily trading volume of Suncor’s common shares on the TSX during the previous six-month period (10,785,510 common shares). Purchases under the NCIB will be made through open market purchases at market price, as well as by other means as may be permitted by securities regulatory authorities. Suncor expects to enter into an automatic share purchase plan in relation to purchases made in connection with the NCIB on February 17, 2023.

Measurement Conversions

Certain natural gas volumes in this document have been converted to boe on the basis of one bbl to six mcf. See the Advisories section of this document.

2022 Fourth Quarter   Suncor Energy Inc.   7

FOURTH QUARTER DISCUSSION

February 14, 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 investment in power, renewable fuels and hydrogen. Suncor also conducts energy trading activities focused principally on the marketing and trading of crude oil, natural gas, byproducts, refined products and power. Suncor has been recognized for its performance and transparent reporting on the Dow Jones Sustainability index, FTSE4Good and CDP. Suncor is also listed on the UN Global Compact 100 stock index. Suncor’s common shares (symbol: SU) are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

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 February 23, 2022 (the 2021 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 document, 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

8   2022 Fourth Quarter   Suncor Energy Inc.

1. ADVISORIES

Basis of Presentation

Unless otherwise noted, all financial information has been prepared in accordance with Canadian generally accepted accounting principles (GAAP), specifically International Accounting Standard (IAS) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB), which is within the framework of International Financial Reporting Standards (IFRS) as issued by the IASB.

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.

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

Non-GAAP and Other Financial Measures

Certain financial measures in this document – 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 document and reconciled to the most directly comparable GAAP measures in the Consolidated Financial Information and Segment Results and Analysis sections of this document. 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 document and reconciled to the most directly comparable GAAP measures in the Segment Results and Analysis section of this document. 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 document.

Beginning in the fourth quarter of 2021, the company changed the label of operating earnings (loss) and funds from (used in) operations to adjusted operating earnings (loss) and adjusted funds from (used in) operations, respectively, to better distinguish these non-GAAP financial measures from their respective comparable GAAP measures and better reflect the purpose of such measures. The composition of these measures remained unchanged and therefore no prior periods were revised.

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 document. This document contains forward-looking information based on Suncor’s current expectations, estimates, projections and assumptions. This information is subject to a number of risks and uncertainties, including those discussed in this document, Suncor’s Management’s Discussion and Analysis (MD&A) for the year ended December 31, 2021, dated February 23, 2022 (the 2021 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. Refer to the Forward-Looking Information section of this document for information on the material risk factors and assumptions underlying our forward-looking information contained in this document.

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 document, refer to the Common Abbreviations section of this document.

2022 Fourth Quarter   Suncor Energy Inc.   9

FOURTH QUARTER DISCUSSION

2. FOURTH QUARTER HIGHLIGHTS

•

Fourth quarter financial results

​

•

Suncor’s adjusted operating earnings(1)(2) increased to $2.432 billion ($1.81 per common share) in the fourth quarter of 2022, compared to $1.294 billion ($0.89 per common share) in the prior year quarter, primarily due to significantly higher crude oil and refined product realizations, reflecting the improved business environment in the current quarter and higher upstream production, partially offset by increased operating expenses and income taxes. Adjusted operating earnings were also impacted by a weakening in 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 fourth quarter of 2022, compared to a gain in the prior year quarter.

​

•

The company had net earnings of  $2.741 billion ($2.03 per common share) in the fourth quarter of 2022, compared to $1.553 billion ($1.07 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, net earnings for the fourth quarter of 2022 included a $200 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $106 million unrealized loss on risk management activities recorded in other income (loss) and a $215 million income tax recovery excluded from adjusted operating earnings. Net earnings in the prior year quarter included a $227 million gain on the sale of the company’s interest in the Golden Eagle Area Development, a $25 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $14 million unrealized gain on risk management activities recorded in other income (loss) and a $7 million income tax expense excluded from adjusted operating earnings.

​

•

Adjusted funds from operations(1)(2) increased to $4.189 billion ($3.11 per common share) in the fourth quarter of 2022, compared to $3.144 billion ($2.17 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, increased to $3.924 billion ($2.91 per common share) in the fourth quarter of 2022, compared to $2.615 billion ($1.80 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 smaller use of cash associated with the company’s working capital balances in the fourth quarter of 2022 compared to the prior year quarter.

​

•

Record Firebag production. Production from the company’s Oil Sands assets was 688,100 bbls/d in the fourth quarter of 2022, compared to 665,900 bbls/d in the prior year quarter, with the current period including record quarterly production at Firebag.

​

•

Syncrude record annual performance. In 2022, Syncrude delivered record annual mine bitumen production, with both strong SCO production and by capitalizing on the company’s regional integration through transfers on the interconnecting pipelines, all of which helped to achieve Suncor’s second highest annual SCO production of 480,000 bbls/d.

​

•

Strong Refining and Marketing (R&M) cash flows. R&M generated adjusted funds from operations(3) of  $1.663 billion in the fourth quarter of 2022, or $2.102 billion excluding the impacts of a FIFO inventory valuation loss(4) of  $439 million, compared to $869 million of adjusted funds from operations in the prior year quarter, or $708 million excluding the impacts of a FIFO inventory valuation gain(4) of  $161 million.

​

(1)

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

​

(2)

Beginning in the fourth quarter of 2021, the company revised the label of operating earnings (loss) and funds from (used in) operations to adjusted operating earnings (loss) and adjusted funds from (used in) operations, respectively, to better distinguish these non-GAAP financial measures from their respective comparable GAAP measures and better reflect the purpose of such measures. The composition of these measures remained unchanged and therefore no prior periods were revised.

​

(3)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

(4)

The estimated impact of the last-in, first-out (LIFO) method is a non-GAAP financial measure. FIFO inventory valuation includes the impact of commodity risk management activities. See the Non-GAAP and Other Financial Measures Advisory section of this document.

​

10   2022 Fourth Quarter   Suncor Energy Inc.

•

Record annual shareholder returns. In 2022, Suncor returned over $7.7 billion of value to its shareholders, compared to $3.9 billion in the prior year. Record shareholder returns in 2022 included $2.6 billion of dividends paid and $5.1 billion in share repurchases. In 2022, the company repurchased a record 116.9 million common shares at an average price of  $43.92 per common share, or the equivalent of 8.1% of its common shares as at December 31, 2021.

​

•

Dividend increase. In the fourth quarter of 2022, Suncor’s Board of Directors (the Board) approved a quarterly dividend of $0.52 per share, a 23.8% increase over the fourth quarter of 2021 dividend and the highest quarterly dividend per share in the company’s history.

​

•

Renewal of share repurchase program. Subsequent to the fourth quarter of 2022, the Board approved a renewal of the company’s normal course issuer bid (NCIB) for the repurchase of up to 10% of Suncor’s public float as at February 3, 2023, over a twelve-month period, and concurrently, the Toronto Stock Exchange (TSX) accepted a notice filed by Suncor to renew its NCIB in respect of the repurchase of such shares.

​

•

Significant debt reduction. In support of its net debt reduction and annual capital allocation targets, the company reduced net debt(1) by nearly $1.0 billion in the fourth quarter of 2022, or $745 million excluding the impact of a $200 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt. In 2022, the company reduced net debt by over $2.5 billion, or approximately $3.2 billion excluding the impact of a $729 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt. The significant reduction in debt provides ongoing balance sheet flexibility, reduces long-term financing costs, and demonstrates the company’s confidence in its business and commitment to reducing net debt.

​

•

Results of retail review. In the fourth quarter of 2022, as a result of a comprehensive strategic review of its downstream retail business, the company announced that it will retain and continue to improve and optimize the Petro-Canada™ retail business.

​

•

Driving fit and focus of asset portfolio. Subsequent to the fourth quarter of 2022, the company completed the sale of its wind and solar assets, and the acquisition of an additional working interest in Fort Hills, bringing the company’s total aggregate working interest in Fort Hills to 68.76%. The sale process for the company’s U.K. E&P portfolio is progressing, with a sale anticipated to close in mid-2023.

​

(1)

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

​

2022 Fourth Quarter   Suncor Energy Inc.   11

FOURTH QUARTER DISCUSSION

3.

CONSOLIDATED FINANCIAL INFORMATION

​

Financial Highlights

​

(1)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

(2)

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

​

(3)

Excludes capitalized interest of  $44 million in the fourth quarter of 2022 and $38 million in the fourth quarter of 2021.

​

(4)

Excludes capital expenditures related to assets held for sale of  $40 million in the fourth quarter of 2022 and $133 million for the twelve months ended December 31, 2022.

​

12   2022 Fourth Quarter   Suncor Energy Inc.

Operating Highlights

Net Earnings

Suncor’s consolidated net earnings for the fourth quarter of 2022 were $2.741 billion, compared to $1.553 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:

•

An unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt of  $200 million recorded in financing expenses in the Corporate and Eliminations segment in the fourth quarter of 2022, compared to a gain of  $25 million in the fourth quarter of 2021.

​

•

An unrealized loss on risk management activities of  $106 million recorded in other income (loss) in the fourth quarter of 2022, compared to a gain of  $14 million in the fourth quarter of 2021.

​

•

During the fourth quarter of 2021, the company recorded a gain of  $227 million on the sale of the company’s interest in the Golden Eagle Area Development, which was completed early in the fourth quarter of 2021 and recorded in the E&P segment.

​

•

An income tax recovery excluded from adjusted operating earnings of  $215 million in the fourth quarter of 2022, compared to an expense of  $7 million in the fourth quarter of 2021.

​

2022 Fourth Quarter   Suncor Energy Inc.   13

FOURTH QUARTER DISCUSSION

Adjusted Operating Earnings Reconciliation(1)

​

(1)

Adjusted operating earnings is a non-GAAP financial measure. All reconciling items are presented on a before-tax basis and adjusted for income taxes in the income tax (recovery) expense excluded from adjusted operating earnings line. See the Non-GAAP and Other Financial Measures Advisory section of this document.

​

(2)

In the second quarter of 2022, as a result of the decision to restart the West White Rose Project, the company recorded a non-cash impairment reversal of  $715 million on its share of the White Rose assets in the E&P segment. Also during the second quarter of 2022, as a result of the company’s expected sale of its E&P assets in Norway, and the subsequently reached agreement for such sale, the company recorded a non-cash impairment of  $70 million against its share of its assets in Norway in the E&P segment. During the third quarter of 2022, in connection with the company entering into a conditional agreement to acquire Teck Resources Limited’s (Teck) interest in Fort Hills, as well as updates to the Fort Hills long-range plan including production and operating cost plans, the company recorded a non-cash impairment of  $3.397 billion against its share of the Fort Hills assets in the Oil Sands segment. During the third quarter of 2021, the company recorded a non-cash impairment reversal of  $221 million against its share of the Terra Nova assets, in the E&P segment, as a result of the Asset Life Extension Project moving forward and the benefit of royalty and financial support from the Government of Newfoundland and Labrador.

​

(3)

During the third quarter of 2022, the company recorded $147 million of property damage insurance proceeds in other income (loss) related to the company’s assets in Libya in the E&P segment.

​

(4)

During the third quarter of 2022, the company incurred a $65 million foreign exchange loss related to the sale of the company’s share of its assets in Norway in the E&P segment.

​

(5)

During the first quarter of 2021, the company recorded a restructuring charge in operating, selling & general (OS&G) expenses related to workforce-reduction plans.

​

(6)

During the third quarter of 2021, the company recorded a loss of  $80 million for the early repayment of long-term debt.

​

(7)

In the fourth quarter of 2022, income tax (recovery) expense excluded from adjusted operating earnings includes a deferred income tax recovery of  $171 million related to the anticipated sale of the company’s U.K. E&P portfolio and a current income tax recovery of  $39 million related to the sale of its wind and solar assets.

​

14   2022 Fourth Quarter   Suncor Energy Inc.

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)(2)

(1)

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

​

(2)

All reconciling items are presented on a before-tax basis and adjusted for income taxes in the Income Tax bridge factor.

​

(3)

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

​

Suncor’s adjusted operating earnings increased to $2.432 billion ($1.81 per common share) in the fourth quarter of 2022, compared to $1.294 billion ($0.89 per common share) in the prior year quarter, primarily due to significantly higher crude oil and refined product realizations, reflecting the improved business environment in the current quarter and higher upstream production, partially offset by increased operating expenses and income taxes. Adjusted operating earnings were also impacted by a weakening in 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 fourth quarter of 2022, compared to a gain in the prior year quarter.

Operating, Selling and General Expenses

​

(1)

In the fourth quarter of 2022, share-based compensation expense of  $183 million included a $76 million expense recorded in the Oil Sands segment, a $5 million expense recorded in the E&P segment, a $28 million expense recorded in the R&M segment and a $74 million expense recorded in the Corporate and Eliminations segment. The fourth quarter of 2021 share-based compensation expense of  $126 million included a $36 million expense recorded in the Oil Sands segment, a $4 million expense recorded in the E&P segment, a $21 million expense recorded in the R&M segment and a $65 million expense recorded in the Corporate and Eliminations segment. Other primarily includes non-recurring costs associated with investments in the company’s digital transformation and its net-zero greenhouse gas (GHG) objective.

​

The company’s total OS&G expenses were $3.556 billion in the fourth quarter of 2022, compared to $2.978 billion in the prior year quarter. The increase was mainly due to a significant increase in commodity input costs, including higher natural gas prices, increased maintenance, inflationary impacts and increased share-based compensation expense in the fourth quarter of 2022 compared to the prior year quarter. The company’s exposure to higher natural gas costs is partially mitigated by revenue from power sales that is recorded in operating revenues.

2022 Fourth Quarter   Suncor Energy Inc.   15

FOURTH QUARTER DISCUSSION

Business Environment

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

​

(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.

​

In the fourth quarter of 2022, crude oil and crack spread benchmarks improved compared to the prior year quarter and were impacted by increased demand in addition to supply uncertainty related to the current geopolitical conflict. Commodity market volatility increased during the fourth quarter of 2022, 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 fourth quarter of 2022 reflected an increase in WTI at Cushing, which averaged US$82.65/bbl compared to US$77.15/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 increased to $110.05/bbl in the fourth quarter of 2022 compared to $93.25/bbl in the prior year quarter, and prices for WCS at Hardisty decreased to US$57.00/bbl in the fourth quarter of 2022, from US$62.50/bbl in the prior year quarter. The prices for WCS at Hardisty were also negatively impacted in the fourth quarter of 2022 as a result of pipeline disruptions extending down the U.S. Gulf Coast.

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 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 the expertise of 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 fourth quarter of 2022.

16   2022 Fourth Quarter   Suncor Energy Inc.

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 increased to US$88.65/bbl in the fourth quarter of 2022 compared to US$79.70/bbl in the prior year quarter.

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 Suncor’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 and 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 fourth quarter of 2022, 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$51.90/bbl in the fourth quarter of 2022 compared to US$28.05/bbl in the fourth quarter of 2021, reflecting the significant 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 increased to $4.90/GJ in the fourth quarter of 2022, from $4.45/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  $213.95/MWh in the fourth quarter of 2022 compared to $107.30/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. In the fourth quarter of 2022, 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 rate decrease had a positive impact on price realizations for the company during the fourth quarter of 2022 when compared to the prior year quarter.

Suncor also has assets and liabilities, including approximately 75% 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 December 31, 2022, 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$0.79 per one Canadian dollar in the prior year quarter. This rate decrease had a larger negative impact on the company’s debt balances in the fourth quarter of 2022 when compared to the prior year quarter.

2022 Fourth Quarter   Suncor Energy Inc.   17

FOURTH QUARTER DISCUSSION

4. SEGMENT RESULTS AND ANALYSIS

OIL SANDS

Financial Highlights

​

(1)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

(2)

During the third quarter of 2022, in connection with the company entering into a conditional agreement to acquire Teck's interest in Fort Hills, as well as updates to the Fort Hills long-range plan including production and operating cost plans, the company recorded a non-cash impairment of $3.397 billion against its share of the Fort Hills assets.

​

(3)

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

​

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)(2)

(1)

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

​

(2)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated adjusted operating earnings (loss). Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

The Oil Sands segment adjusted operating earnings increased to $1.719 billion in the fourth quarter of 2022, compared to $1.172 billion in the prior year quarter, primarily due to higher realized crude oil prices, lower DD&A, and higher sales. The increase in adjusted operating earnings was partially offset by increased operating expenses, related primarily to increased commodity input costs and maintenance.

18   2022 Fourth Quarter   Suncor Energy Inc.

Production Volumes(1)

​

(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%.

​

(2)

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

​

(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 fourth quarter of 2022, Oil Sands operations production volumes included 10,700 bbls/d of internally consumed diesel, of which 7,000 bbls/d was consumed at Oil Sands Base, 2,200 bbls/d was consumed at Fort Hills and 1,500 bbls/d was consumed at Syncrude. Syncrude production volumes included 2,500 bbls/d of internally consumed diesel.

​

(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 fourth quarter of 2022, Oil Sands operations production included 2,500 bbls/d of bitumen that was transferred to Suncor’s share of Syncrude through the interconnecting pipelines. Syncrude production included 400 bbls/d of SCO and 4,500 bbls/d of bitumen that were transferred to Oil Sands Base through the interconnecting pipelines.

​

(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 fourth quarter of 2022, Fort Hills production included 900 bbls/d of bitumen that was transferred to Oil Sands Base.

​

The company’s net SCO production was 517,500 bbls/d in the fourth quarter of 2022, comparable to 515,000 bbls/d in the prior year quarter. Increased SCO production at Syncrude, reflecting 99% upgrader utilization in the fourth quarter of 2022, compared to 90% in the prior year quarter, was partially offset by decreased production at Oil Sands Base as the current quarter was impacted by the completion of planned maintenance activities that commenced in the third quarter of 2022.

The company’s non-upgraded bitumen production increased to 170,600 bbls/d in the fourth quarter of 2022, compared to 150,900 bbls/d in the fourth quarter of 2021, primarily due to increased production from Fort Hills and record quarterly production from Firebag.

Non-upgraded bitumen production from the company’s In Situ assets in the fourth quarter of 2022 was higher than the prior year quarter, with an overall increase in bitumen production volumes being partially offset by increased Firebag production being diverted to upgrading in the current period, as the prior year quarter was impacted by maintenance activities at Firebag. During the fourth quarter of 2022, the company also leveraged its asset flexibility and marketing and trading expertise, including its midstream and logistics network, to mitigate third-party pipeline disruptions, resulting in additional non-upgraded bitumen production being sold to market.

Sales Volumes

SCO and diesel sales volumes increased to 505,300 bbls/d in the fourth quarter of 2022, compared to 496,100 bbls/d in the prior year quarter, and were impacted by a smaller build of inventory in the current quarter compared to the prior year quarter, as well as the same factors that affected production volumes, discussed above.

2022 Fourth Quarter   Suncor Energy Inc.   19

FOURTH QUARTER DISCUSSION

Non-upgraded bitumen sales volumes were 174,500 bbls/d in the fourth quarter of 2022, compared to 176,700 bbls/d in the prior year quarter, and were impacted by a larger draw of inventory in the prior year quarter, which was partially offset by the increase in production volumes in the current quarter, discussed above.

Price Realizations(1)

​

(1)

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

​

Oil Sands price realizations increased in the fourth quarter of 2022 from the prior year quarter, in line with the higher commodity price environment.

Royalties

Royalties for the Oil Sands segment increased in the fourth quarter of 2022 compared to the prior year quarter, due to the increase in sales volumes, partially offset by the widening of heavy crude oil differentials.

Expenses and Other Factors

Total Oil Sands operating expenses increased in the fourth quarter of 2022 compared to the prior year quarter. See the reconciliation in the Cash Operating Costs section below for further details regarding cash operating costs and a breakdown of non-production costs by asset.

At Oil Sands operations, operating costs in the fourth quarter of 2022 increased compared to the prior year quarter, primarily due to increased maintenance costs.

At Fort Hills, operating costs in the fourth quarter of 2022 increased compared to the prior year quarter, primarily due to increased mining activity and higher production levels.

At Syncrude, operating costs in the fourth quarter of 2022 increased compared to the prior year quarter, primarily due to higher production levels and increased natural gas and other commodity prices.

In the fourth quarter of 2022, higher natural gas prices resulted in a $56 million increase in Oil Sands segment operating costs compared to the prior year quarter.

In the fourth quarter of 2022, DD&A expense was lower compared to the prior year quarter, as the prior year quarter included higher derecognition charges of property, plant and equipment.

20   2022 Fourth Quarter   Suncor Energy Inc.

Cash Operating Costs

​

(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 fourth quarter of 2022 and twelve months ended December 31, 2022, Oil Sands OS&G includes ($49) million and ($263) million, respectively, of inventory changes and internal transfers. In the fourth quarter of 2021 and twelve months ended December 31, 2021, Oil Sands OS&G includes ($89) million and ($115) million, respectively, of inventory changes and internal transfers.

​

(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 document.

​

(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. In addition, non-production costs include safe-mode costs associated with the deferral of capital projects and additional costs incurred in response to the COVID-19 pandemic. Non-production costs at Fort Hills and Syncrude also include, but are not limited to, excess power revenue from cogeneration units and an adjustment to reflect internally produced diesel from Oil Sands operations at the cost of production.

​

(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.

​

Oil Sands operations cash operating costs per barrel(1) were $28.35 in the fourth quarter of 2022, compared to $28.10 in the prior year quarter, due to higher OS&G expenses, as detailed above, and decreased production. Excess power capacity and other costs at Oil Sands operations in the fourth quarter of 2022 were significantly higher than the prior year quarter, mainly due to an increase in excess power revenues resulting from significantly higher power prices, and an increase in non-monetary natural gas costs.

   

(1)

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

​

2022 Fourth Quarter   Suncor Energy Inc.   21

FOURTH QUARTER DISCUSSION

Fort Hills cash operating costs per barrel(1) decreased to $37.10 in the fourth quarter of 2022, compared to $45.55 in the prior year quarter, reflecting increased production, partially offset by higher OS&G expenses, as detailed above. Fort Hills non-production costs were higher in the current quarter compared to the prior year quarter mainly due to the increased price for internally sourced diesel, which is adjusted to reflect internally produced diesel from Oil Sands operations at the cost of production, and an increase in excess power revenues resulting from higher power prices.

Syncrude cash operating costs per barrel(1) were $34.60 in the fourth quarter of 2022, compared to $33.50 in the prior year quarter, reflecting higher OS&G expenses, as detailed above, partially offset by increased production. In the fourth quarter of 2022, non-production costs were higher compared to the prior year quarter primarily due to a larger share-based compensation expense in the current quarter, and the increased price for internally sourced diesel, which is adjusted to reflect internally produced diesel from Oil Sands operations at the cost of production.

Subsequent Event

During the fourth quarter of 2022, the company entered into an agreement to acquire Teck’s 21.3% interest in the Fort Hills Project (Fort Hills) and its associated sales and logistics agreements for $1.0 billion, subject to working capital and other closing adjustments. Subsequent to the fourth quarter of 2022, TotalEnergies EP Canada Ltd. provided notice of the exercise of its contractual right of first refusal to acquire from Teck a 6.65% interest in Fort Hills, which reduced the amount of working interest available for Suncor to purchase. As a result, on February 2, 2023, Suncor completed the acquisition of an additional 14.65% working interest in Fort Hills for $688 million, before working capital and other closing adjustments, bringing the company’s and its affiliate’s total aggregate working interest in Fort Hills to 68.76%.

Planned Maintenance Update

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

   

(1)

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

​

22   2022 Fourth Quarter   Suncor Energy Inc.

EXPLORATION AND PRODUCTION

Financial Highlights

​

(1)

Production from the company’s Libya operations has been presented in the E&P section of this document 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 fourth quarter of 2022, revenue includes a gross-up amount of  $234 million, with an offsetting amount of $118 million in royalties in the E&P segment and $116 million in income tax expense recorded at the consolidated level. In the twelve months ended December 31, 2022, revenue includes a gross-up amount of  $486 million, with an offsetting amount of  $266 million in royalties in the E&P segment and $220 million in income tax expense recorded at the consolidated level. In the fourth quarter of 2021, revenue includes a gross-up amount of  $109 million, with an offsetting amount of  $53 million in royalties in the E&P segment and $56 million in income tax expense recorded at the consolidated level. In the twelve months ended December 31, 2021, revenue includes a gross-up amount of  $345 million, with an offsetting amount of  $241 million in royalties in the E&P segment and $104 million in income tax expense recorded at the consolidated level.

​

(2)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

(3)

During the third quarter of 2022, the company recorded $147 million of property damage insurance proceeds in other income (loss) related to the company’s assets in Libya.

​

(4)

During the third quarter of 2022, the company incurred a $65 million foreign exchange loss related to the sale of the company’s share of its assets in Norway.

​

(5)

In the second quarter of 2022, as a result of the decision to restart the West White Rose Project, the company recorded a non-cash impairment reversal of  $715 million on its share of the White Rose assets. Also during the second quarter of 2022, as a result of the company’s expected sale of its assets in Norway, and the subsequently reached agreement for such sale, the company recorded a non-cash impairment of  $70 million against its share of its assets in Norway. During the third quarter of 2021, the company recorded a non-cash impairment reversal of  $221 million against its share of the Terra Nova assets as a result of the Asset Life Extension Project moving forward and the benefit of royalty and financial support from the Government of Newfoundland and Labrador.

​

(6)

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

​

2022 Fourth Quarter   Suncor Energy Inc.   23

FOURTH QUARTER DISCUSSION

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)(2)

(1)

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

​

(2)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated adjusted operating earnings (loss). Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

Adjusted operating earnings for the E&P segment in the fourth quarter of 2022 increased to $578 million compared to $376 million in the prior year quarter, with the increase primarily due to significantly higher realized crude prices and higher sales volumes in the fourth quarter of 2022, partially offset by increased operating and transportation expenses.

Volumes

Production volumes for E&P Canada were 49,100 bbls/d in the fourth quarter of 2022, compared to 47,600 bbls/d in the prior year quarter, primarily due to increased production related to the company’s additional working interest in White Rose and strong production at Hebron, partially offset by the impact of planned turnaround activities at Hibernia in the fourth quarter of 2022.

In E&P Canada, investment in the Terra Nova Floating, Production, Storage and Offloading facility related to the Asset Life Extension Project was substantially progressed in 2022, and the asset has returned to Canada, with a safe return to production expected in the second quarter of 2023.

E&P International production was 25,900 boe/d in the fourth quarter of 2022, compared to 29,800 boe/d in the prior year quarter, primarily due to the sale of the company’s assets in Norway in the third quarter of 2022 and the Golden Eagle Area Development in the fourth quarter of 2021, and natural declines, partially offset by increased liftings at Libya in the fourth quarter of 2022 compared to the prior year quarter.

Total E&P sales volumes were 75,100 boe/d in the fourth quarter of 2022, compared to 67,200 boe/d in the prior year quarter, primarily due to a draw of inventory at E&P international in the current quarter, and a build of inventory at E&P Canada in both periods, associated with the timing of cargo sales at year-end.

24   2022 Fourth Quarter   Suncor Energy Inc.

Price Realizations(1)

​

(1)

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

​

(2)

E&P International price realizations exclude Libya.

​

Price realizations at E&P Canada and E&P International increased in the fourth quarter of 2022 from the prior year quarter, in line with the higher commodity price environment.

Royalties

E&P royalties in the fourth quarter of 2022 were comparable to the prior year quarter, with the increase in price realizations being offset by lower royalty rates associated with production mix.

Expenses and Other Factors

Operating and transportation expenses increased in the fourth quarter of 2022 compared to the prior year quarter, primarily due to a one-time transportation provision recorded in the fourth quarter of 2022 and increased costs at E&P Canada related to the Terra Nova Asset Life Extension Project and an increase in the company’s working interest in White Rose.

DD&A and exploration expense in the fourth quarter of 2022 was comparable to the prior year quarter.

Financing expense and other increased in the fourth quarter of 2022 compared to the prior year quarter, primarily due to the impact of insurance settlements.

Planned Maintenance Update for Operated Assets

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

2022 Fourth Quarter   Suncor Energy Inc.   25

FOURTH QUARTER DISCUSSION

REFINING AND MARKETING

Financial Highlights

​

(1)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

(2)

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

​

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)(2)

(1)

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

​

(2)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated adjusted operating earnings (loss). Comparative periods have been revised to reflect this change. See the Income Tax section of this document for a discussion on income taxes.

​

R&M adjusted operating earnings in the fourth quarter of 2022 increased to $1.529 billion compared to $582 million in the prior year quarter. The increase in adjusted operating earnings was primarily due to a significant increase in refining and marketing margins as a result of significantly higher benchmark crack spreads in the current period, which was partially offset by a FIFO inventory valuation loss in the current period, compared to a gain in the prior year quarter, and increased operating and transportation expenses, primarily due to increased commodity input costs. In the fourth quarter of 2022, adjusted operating earnings included a before-tax FIFO inventory valuation loss, including the impact of commodity risk management activities, of $439 million on the decrease in crude and refined product benchmarks, compared to a $161 million gain in the prior year quarter.

26   2022 Fourth 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 document.

​

Refinery crude throughput was 440,000 bbls/d and refinery utilization was 94% in the fourth quarter of 2022, compared to 447,000 bbls/d and 96% in the prior year quarter, with the decrease due to unplanned maintenance in the current period, including the weather-related event that occurred late in the quarter at the company’s Commerce City refinery. Refined product sales in the fourth quarter of 2022 were 548,200 bbls/d, comparable to 550,100 bbls/d in the prior year quarter.

Progressive restart activities at the company’s Commerce City refinery are currently underway, and the asset is anticipated to return to normal production rates by the end of the first 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 $69.40/bbl in the fourth quarter of 2022, representing a new quarterly record, from $30.00/bbl in the prior year quarter. The increase was due to significantly higher 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. On a LIFO basis, Suncor’s refining and marketing gross margin represents 99% margin capture compared to Suncor’s 5-2-2-1 index in the fourth quarter of 2022.

​

•

On a FIFO basis, Suncor’s refining and marketing gross margin increased to $59.30/bbl in the fourth quarter of 2022, from $33.60/bbl in the prior year quarter, due to the same factors noted above, in addition to FIFO inventory valuation impacts. In the fourth quarter of 2022, 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  $439 million before-tax. In the prior year quarter, FIFO, including the impact of commodity risk management activities, resulted in a gain of $161 million before-tax, for an unfavourable quarter-over-quarter impact of  $600 million.

​

(1)

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

​

(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 document.

​

2022 Fourth Quarter   Suncor Energy Inc.   27

FOURTH QUARTER DISCUSSION

Expenses and Other Factors

Operating and transportation expenses in the fourth quarter of 2022 increased compared to the prior year quarter, primarily due to increased natural gas and power prices.

Refining operating expense per barrel(1) was $7.90 in the fourth quarter of 2022, compared to $6.10 in the prior year quarter, primarily due to increased commodity input costs, maintenance and decreased production.

Planned Maintenance

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

CORPORATE AND ELIMINATIONS

Financial Highlights