Exhibit 99.1​

Management’s Discussion and Analysis

November 2, 2022

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).

For a description of Suncor’s segments, refer to 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).

This MD&A, for the three and nine months ended September 30, 2022, should be read in conjunction with Suncor’s unaudited interim Consolidated Financial Statements for the three and nine months ended September 30, 2022, Suncor’s audited Consolidated Financial Statements for the year ended December 31, 2021, and the 2021 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 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 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

2022 Third Quarter   Suncor Energy Inc.   7

Management’s Discussion and Analysis

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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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, 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, 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.

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 restated.

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 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 MD&A, 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 MD&A for information on the material risk factors and assumptions underlying our forward-looking information 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   2022 Third Quarter   Suncor Energy Inc.

2. Third Quarter Highlights

•

Third quarter financial results

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•

Suncor’s adjusted operating earnings(1)(2) increased to $2.565 billion ($1.88 per common share) in the third quarter of 2022, compared to $1.043 billion ($0.71 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. The increase in adjusted operating earnings was partially offset by increased income taxes, royalties and operating expenses in the current quarter. The increase in operating expenses was primarily related to a significant increase in commodity input costs, increased maintenance and higher costs associated with increased Oil Sands production. 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 partially offset by a realization of intersegment profit in the third quarter of 2022, compared to a FIFO inventory valuation gain partially offset by a deferral of intersegment profit in the third quarter of 2021.

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•

The company had a net loss of  $609 million ($0.45 per common share) in the third quarter of 2022, compared to net earnings of  $877 million ($0.59 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, the net loss for the third quarter of 2022 included a non-cash impairment of $3.397 billion against the company’s share of the Fort Hills assets, a $723 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt recorded in financing expenses, the recognition of  $147 million of insurance proceeds related to the company’s assets in Libya recorded in other income (loss), a $65 million foreign exchange loss related to the sale of the company’s share of its Exploration and Production (E&P) assets in Norway, a $7 million unrealized gain on risk management activities recorded in other income (loss) and an $857 million income tax recovery related to the items noted. Net earnings in the prior year quarter included a $282 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a non-cash impairment reversal of $221 million against the company’s share of the Terra Nova assets, an $80 million loss for the early repayment of long-term debt, a $22 million unrealized loss on risk management activities recorded in other income (loss) and a $3 million income tax expense related to the items noted.

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•

Adjusted funds from operations(1)(2) increased to $4.473 billion ($3.28 per common share) in the third quarter of 2022, compared to $2.641 billion ($1.79 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 $4.449 billion ($3.26 per common share) for the third quarter of 2022, compared to $4.718 billion ($3.19 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 use of cash associated with the company’s working capital balances in the third quarter of 2022, compared to a significant source of cash in the prior year quarter. The source of cash in the prior year quarter was primarily due to an increase in accounts payable and accrued liabilities and the receipt of the company’s 2020 federal income tax refund.

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•

Strong Oil Sands cash flows during significant planned maintenance. Oil Sands generated $3.257 billion in adjusted funds from operations(3) in the third quarter of 2022, compared to $1.745 billion in the prior year quarter. Production from the company’s Oil Sands assets was 646,000 bbls/d in the third quarter of 2022, compared to 605,100 bbls/d in the prior year quarter. Production in the current period reflects increased production at Oil Sands Base due to decreased planned maintenance activities in the current quarter, increased production at Fort Hills and the impact of planned turnaround activities at Syncrude.

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•

Reliable downstream operations. In the third quarter of 2022, reliable operations resulted in refinery crude throughput of 466,600 bbls/d and utilization of 100%, compared to 460,300 bbls/d and 99%, respectively, in the prior year quarter. The company leveraged its extensive domestic sales network and export channels to achieve refined product sales of 577,300 bbls/d, compared to 551,500 bbls/d in the prior year quarter. As a result, Refining and Marketing (R&M) generated approximately $1.8 billion in adjusted funds from operations(3), excluding the impacts of a FIFO inventory valuation loss(4) of $585 million, compared to approximately $1.0 billion of adjusted funds from operations in the prior year quarter, excluding the impacts of a $91 million FIFO gain.

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(1)

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

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(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 restated.

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(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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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(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 MD&A.

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2022 Third Quarter   Suncor Energy Inc.   9

Management’s Discussion and Analysis

•

Returning value to shareholders. In the third quarter of 2022, Suncor continued to deliver on its strategy of growing shareholder returns, returning approximately $1.7 billion of value to its shareholders through approximately $1.0 billion in share repurchases and $638 million of dividends, compared to approximately $1.0 billion in the prior year quarter through $704 million in share repurchases and $309 million of dividends. As at October 31, 2022, since the start of the year, the company has repurchased approximately $4.6 billion of its common shares, representing approximately 104.7 million common shares at an average share price of $44.01 per common share, or the equivalent of 7.3% of its common shares as at December 31, 2021.

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•

Net debt(1) reduction. In support of its debt reduction and annual capital allocation targets, the company reduced net debt by approximately $1.8 billion in the third quarter of 2022, excluding the impact of a $723 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt.

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•

Significant debt repayments subsequent to quarter. Subsequent to the quarter, Suncor executed a debt tender offer and, as a result, repaid approximately $3.6 billion of its various notes below par. This structural reduction of long-term debt was executed during opportunistic market conditions and demonstrates the company’s confidence in its business and commitment to reducing net debt.

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•

Optimizing the company’s portfolio to drive value. In alignment with Suncor’s strategy to maximize value through its core business, the company continues to optimize and streamline its portfolio. In the third quarter of 2022, the company completed the sale of its E&P assets in Norway. Subsequent to the third quarter of 2022, the company reached an agreement for the sale of its wind and solar assets for gross proceeds of approximately $730 million, before closing adjustments and other closing costs, which is expected to be completed in the first quarter of 2023. The sale process for the company’s U.K. E&P portfolio is progressing, with a sale anticipated to close within the next twelve months.

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•

Acquired additional interest in Fort Hills. Subsequent to the third quarter of 2022, Suncor entered into an agreement, subject to regulatory approval and other closing conditions, to acquire Teck Resources Limited (Teck) 21.3% working interest in Fort Hills Energy L.P. (Fort Hills) and its associated sales and logistics agreements for $1.0 billion, before closing adjustments and other closing costs, bringing the total aggregate working interest of Suncor and its affiliate to 75.4%. The transaction meets Suncor’s return objectives and builds upon the company’s strategy to optimize its portfolio around its core assets. The transaction is expected to close in the first quarter of 2023.

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(1)

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

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10   2022 Third Quarter   Suncor Energy Inc.

3. Consolidated Financial Information

Financial Highlights

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(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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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(2)

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

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(3)

Excludes capitalized interest of  $43 million in the third quarter of 2022 and $38 million in the third quarter of 2021.

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(4)

Excludes capital expenditures related to assets held for sale of  $38 million in the third quarter of 2022 and $93 million in the first nine months of 2022.

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2022 Third Quarter   Suncor Energy Inc.   11

Management’s Discussion and Analysis

Operating Highlights

Net Earnings

Suncor’s consolidated net loss for the third quarter of 2022 was $609 million, compared to net earnings of  $877 million in the prior year quarter. Net loss was primarily influenced by the same factors that impacted adjusted operating earnings described subsequently in this section.

Other items affecting net (loss) earnings over these periods included:

•

During the third quarter of 2022, in connection with the company entering into a conditional agreement to acquire Teck’s interest in Fort Hills, the company recorded a non-cash impairment of  $3.397 billion before-tax against its share of the Fort Hills assets.

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•

An unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt of  $723 million recorded in financing expenses in the Corporate and Eliminations segment in the third quarter of 2022, compared to a loss of  $282 million in the third quarter of 2021.

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•

The recognition of  $147 million of insurance proceeds recorded in other income related to the company’s assets in Libya in the E&P segment.

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•

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.

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•

An unrealized gain on risk management activities of  $7 million recorded in other income (loss) in the third quarter of 2022, compared to a loss of  $22 million in the third quarter of 2021.

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•

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.

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•

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

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•

An income tax recovery related to the items noted above of  $857 million in the third quarter of 2022, compared to an expense of  $3 million in the third quarter of 2021.

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12   2022 Third Quarter   Suncor Energy Inc.

Adjusted Operating Earnings Reconciliation(1)

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(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 on adjusted operating earnings adjustments line. 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)(2)

(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)

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

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(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.

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Suncor’s adjusted operating earnings increased to $2.565 billion ($1.88 per common share) in the third quarter of 2022, compared to $1.043 billion ($0.71 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. The increase in adjusted operating earnings was partially offset by increased income taxes, royalties and operating expenses in the current quarter. The increase in operating expenses was primarily related to a significant increase in commodity input costs, increased maintenance and higher costs associated with increased Oil Sands production. 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 partially offset by a realization of intersegment profit in the third quarter of 2022, compared to a FIFO inventory valuation gain partialy offset by a deferral of intersegment profit in the third quarter of 2021.

2022 Third Quarter   Suncor Energy Inc.   13

Management’s Discussion and Analysis

Operating, Selling and General Expenses

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(1)

In the third quarter of 2022, share-based compensation recovery of  $29 million included a $7 million recovery recorded in the Oil Sands segment, a $1 million recovery recorded in the E&P segment, a $5 million recovery recorded in the R&M segment and a $16 million recovery recorded in the Corporate and Eliminations segment. The third quarter of 2021 share-based compensation expense of  $2 million included a $2 million expense recorded in the Oil Sands segment, nil recorded in the E&P segment, a $1 million expense recorded in the R&M segment and a $1 million recovery recorded in the Corporate and Eliminations segment. Other primarily includes non-recurring costs associated with investments in the company’s digital transformation.

​

The company’s total operating, selling and general expenses were $3.075 billion in the third quarter of 2022, compared to $2.768 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 and higher costs associated with increased Oil Sands production. The company’s exposure to higher natural gas costs is partially mitigated by revenue from power sales that is recorded in operating revenues.

14   2022 Third 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.

​

In the third quarter of 2022, crude oil and crack spread benchmarks significantly 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 third 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 third quarter of 2022 reflected an increase in WTI at Cushing, which averaged US$91.65/bbl compared to US$70.55/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 $116.85/bbl in the third quarter of 2022 compared to $83.75/bbl in the prior year quarter, and prices for WCS at Hardisty increased to US$71.75/bbl in the third quarter of 2022, from US$56.95/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 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 third quarter of 2022, but were higher than the prior year quarter on an absolute basis due to the increase in WTI prices.

2022 Third Quarter   Suncor Energy Inc.   15

Management’s Discussion and Analysis

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$100.95/bbl in the third quarter of 2022 compared to US$73.45/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 third 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$45.45/bbl in the third quarter of 2022 compared to US$27.60/bbl in the third 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 $4.15/GJ in the third quarter of 2022, from $3.40/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  $221.40/MWh in the third quarter of 2022 compared to $100.35/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 third quarter of 2022, the Canadian dollar weakened in relation to the U.S. dollar as the average exchange rate decreased to US$0.77 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 third quarter of 2022 when compared to the prior year quarter.

Suncor also has assets and liabilities, including approximately 65% 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 September 30, 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$0.73 per one Canadian dollar from US$0.78 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 third quarter of 2022 when compared to the prior year quarter.

16   2022 Third Quarter   Suncor Energy Inc.

4. Segment Results and Analysis

Oil Sands

Financial Highlights

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(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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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(2)

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)(2)

(1)

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

​

(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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

​

The Oil Sands segment adjusted operating earnings increased to $2.195 billion in the third quarter of 2022, compared to $635 million in the prior year quarter, primarily due to significantly higher realized crude oil prices and higher production. The increase in adjusted operating earnings was partially offset by increased operating and transportation expenses, related primarily to increased maintenance, commodity input costs, and higher costs associated with increased production, as well as an increase in royalties associated with higher price realizations.

2022 Third Quarter   Suncor Energy Inc.   17

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 finished bitumen is sold directly to customers, including Suncor’s own refineries. 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.

​

(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 third quarter of 2022, Oil Sands operations production volumes included 10,600 bbls/d of internallyconsumed diesel, of which 5,600 bbls/d was consumed at Oil Sands Base, 2,100 bbls/d was consumed at Fort Hills and 2,900 bbls/d was consumed at Syncrude. Syncrude production volumes included 700 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 third quarter of 2022, Oil Sands operations production did not include any transfers of SCO or bitumen to Suncor’s share of Syncrude through the interconnecting pipelines. Syncrude production included 200 bbls/d of SCO and 10,100 bbls/d of bitumen that were transferred to Oil Sands Base through the interconnecting pipelines.

​

The company’s non-upgraded bitumen production increased to 240,900 bbls/d in the third quarter of 2022, compared to 199,600 bbls/d in the third quarter of 2021, primarily due to increased production from Fort Hills. Production from the company’s In Situ assets in the third quarter of 2022 was comparable to the prior year quarter. At Fort Hills, as the company begins the execution of its mine improvement plan, reduced volumes are expected in the fourth quarter of 2022, as well as into the first quarter of 2023.

The company’s net SCO production was 405,100 bbls/d in the third quarter of 2022, comparable to 405,500 bbls/d in the third quarter of 2021. Production at Syncrude in the third quarter of 2022 was impacted by planned turnaround activities, resulting in upgrader utilization of 67%, compared to 91% in the prior year quarter. At Oil Sands Base, upgrader utilization increased to 80%, compared to 66% in the prior year quarter, reflecting lower planned maintenance activities in the current quarter, as the prior year quarter was impacted by a significant planned turnaround at Upgrader 2.

Sales Volumes

SCO and diesel sales volumes were 418,900 bbls/d in the third quarter of 2022, compared to 418,600 bbls/d in the prior year quarter, and were impacted by the same factors that affected production volumes, discussed above.

Non-upgraded bitumen sales volumes increased to 231,200 bbls/d in the third quarter of 2022, compared to 194,400 bbls/d in the prior year quarter, consistent with the increase in production volumes, discussed above, partially offset by a larger build of inventory in the current quarter compared to the prior year quarter.

18   2022 Third 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 MD&A.

​

Oil Sands price realizations increased in the third quarter of 2022 from the prior year quarter, in line with the significantly higher commodity price environment and reflecting the margin enhancement opportunities driven by the company’s sales and marketing organization.

Royalties

Royalties for the Oil Sands segment increased in the third quarter of 2022 compared to the prior year quarter, primarily due to higher crude oil price realizations in the current period compared to the prior year quarter.

Expenses and Other Factors

Total Oil Sands operating and transportation expenses increased in the third 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.

Oil Sands transportation expenses increased in the third quarter of 2022 compared to the prior year quarter, as increased volumes were transported to customers extending down the U.S. Gulf Coast, resulting in higher realized prices.

At Oil Sands operations, operating costs in the third quarter of 2022 increased compared to the prior year quarter, primarily due to higher natural gas and other commodity prices, and increased maintenance costs.

At Fort Hills, operating costs in the third quarter of 2022 increased compared to the prior year quarter, primarily due to increased production levels associated with two-train operations in 2022, and higher commodity prices.

Suncor’s share of Syncrude operating costs in the third quarter of 2022 increased compared with the prior year quarter, primarily due to increased maintenance costs, and higher natural gas and other commodity prices.

In the third quarter of 2022, higher natural gas prices resulted in a $67 million increase in Oil Sands segment operating costs compared to the prior year quarter.

In the third quarter of 2022, DD&A expense, excluding the impacts of impairment, was lower compared to the prior year quarter, primarily due to decreased depreciation related to the company’s asset retirement obligation asset.

2022 Third Quarter   Suncor Energy Inc.   19

Management’s Discussion and Analysis

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 third quarter and first nine months of 2022, Oil Sands OS&G includes $11 million and ($214) million, respectively, of inventory changes and internal transfers. In the third quarter and first nine months of 2021, Oil Sands OS&G includes $26 million and ($26) 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 MD&A.

​

(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 $29.65 in the third quarter of 2022, compared to $29.05 in the prior year quarter, due to higher OS&G expenses, as detailed above, which was offset by increased production. Oil Sands operations non-production costs, which are excluded from cash operating costs, were lower in the current quarter compared to the prior year quarter primarily due to a share-based compensation recovery in the current period, compared to a share-based compensation expense in the prior year quarter, and the prior year quarter including safe-mode and COVID-19 response costs. Excess power capacity and other costs at Oil Sands operations in the third quarter of 2022 were significantly higher than the prior year quarter, due mainly to an increase in excess power revenues resulting from significantly higher power prices, and an increase in non-monetary natural gas costs.

Fort Hills cash operating costs per barrel(1) decreased to $25.65 in the third quarter of 2022, compared to $40.90 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 and volumes for internally sourced diesel, which is adjusted to reflect internally produced diesel from Oil Sands operations at the cost of production.

Syncrude cash operating costs per barrel(1) were $42.40 in the third quarter of 2022, compared to $31.05 in the prior year quarter, reflecting decreased production, due to the timing of planned turnaround activities, and higher OS&G expenses, as

   

(1)

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

​

20   2022 Third Quarter   Suncor Energy Inc.

detailed above. In the third quarter of 2022, non-production costs were higher compared to the prior year quarter primarily due to the increased price and volumes for internally sourced diesel, which is adjusted to reflect internally produced diesel from Oil Sands operations at the cost of production.

Acquisition of Additional Ownership Interest in Fort Hills and Non-Cash Asset Impairment

During the third quarter of 2022, the company was in commercial discussions to acquire Teck’s 21.3% working interest in Fort Hills. Subsequent to the quarter, the company entered into an agreement, subject to regulatory approval and other closing conditions, to acquire Teck’s interest in Fort Hills and its associated sales and logistics agreements for $1.0 billion, before closing adjustments and other closing costs. In connection with the company entering into the agreement to acquire Teck’s interest in Fort Hills, the company recorded a non-cash impairment of  $3.397 billion before-tax against its share of the Fort Hills assets in the third quarter of 2022.

Results for the First Nine Months of 2022

Oil Sands earnings before income taxes for the first nine months of 2022 increased to $4.008 billion, compared to $1.656 billion in the prior year period. In addition to the factors impacting operating earnings explained below, earnings before income taxes for the first nine months of 2022 included a non-cash impairment of  $3.397 billion before-tax against the company’s share of the Fort Hills assets and an $82 million unrealized gain on risk management activities. Earnings before income taxes for the first nine months of 2021 included a $1 million unrealized loss on risk management activities.

Oil Sands adjusted operating earnings(1) for the first nine months of 2022 increased to $7.323 billion, compared to $1.657 billion in the prior year period. The increase was primarily due to significantly higher realized crude prices and increased production, partially offset by higher royalties associated with higher crude oil price realizations, and increased operating expenses, related to higher natural gas and other commodity prices, higher costs associated with increased production, and increased maintenance.

Oil Sands adjusted funds from operations(1) for the first nine months of 2022 increased to $10.902 billion, compared to $5.116 billion in the prior year period, with the increase primarily due to the same factors that influenced operating earnings noted above.

Oil Sands operations cash operating costs per barrel(1) averaged $30.50 for the first nine months of 2022, compared to an average of  $25.20 for the first nine months of 2021, with the increase due to increased OS&G expenses, primarily driven by higher natural gas and other commodity input costs, and decreased production. Excess power capacity and other costs at Oil Sands operations in the first nine months of 2022 were significantly higher than the prior year period, due mainly to an increase in excess power revenues resulting from significantly higher power prices, and an increase in non-monetary natural gas costs.

Fort Hills cash operating costs per barrel(1) averaged $28.20 for the first nine months of 2022, a decrease compared to $39.70 in the first nine months of 2021, reflecting increased production associated with two-train operations, partially offset by higher OS&G expenses, primarily due to higher natural gas and other commodity prices and increased production levels.

Syncrude cash operating costs per barrel(1) averaged $37.50 for the first nine months of 2022, an increase compared to $35.90 in the first nine months of 2021, primarily due to increased OS&G expenses reflecting increased natural gas and other commodity prices and increased maintenance costs, partially offset by increased production volumes.

Planned Maintenance Update

Subsequent to the third quarter of 2022, the company completed its planned annual coker maintenance at Oil Sands Base Upgrader 1 and planned turnaround activities at Syncrude. Subsequent to the third quarter of 2022, the company commenced and completed planned maintenance activities at Fort Hills. The impact of these maintenance events has been reflected in the company’s 2022 guidance.

   

(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.

​

2022 Third Quarter   Suncor Energy Inc.   21

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 third quarter of 2022, there were no Libya sales included in production, revenue or royalties. In the first nine months of 2022, revenue includes a gross-up amount of  $252 million, with an offsetting amount of  $148 million in royalties in the E&P segment and $104 million in income tax expense recorded at the consolidated level. In the third quarter of 2021, revenue includes a gross-up amount of $101 million, with an offsetting amount of  $53 million in royalties in the E&P segment and $48 million in income tax expense recorded at the consolidated level. In the first nine months of 2021, revenue includes a gross-up amount of  $236 million, with an offsetting amount of  $188 million in royalties in the E&P segment and $48 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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

​

(3)

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 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.

​

(4)

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)(2)

(1)

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

​

(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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

​

Adjusted operating earnings for the E&P segment in the third quarter of 2022 increased to $555 million compared to $369 million in the prior year quarter, with the increase primarily due to significantly higher realized crude prices and higher sales volumes in the third quarter of 2022, partially offset by increased royalties associated with higher price realizations.

22   2022 Third Quarter   Suncor Energy Inc.

Volumes

Production volumes for E&P Canada were 47,500 bbls/d in the third quarter of 2022, compared to 54,400 bbls/d in the prior year quarter, primarily due to planned turnaround activities at Hibernia in the third quarter of 2022, and natural declines.

Investment in the Terra Nova Floating, Production, Storage and Offloading facility related to the Asset Life Extension Project is ongoing and the asset is anticipated to sail back to Canada later in the fourth quarter of 2022, for a safe return to production in early 2023.

E&P International production was 30,600 boe/d in the third quarter of 2022, compared to 39,100 boe/d in the prior year quarter, primarily due to the sale of the company’s working interest in the Golden Eagle Area Development in the fourth quarter of 2021, and no liftings in Libya in the third quarter of 2022 compared to liftings in the prior year quarter, partially offset by increased production from Norway as a result of new infill wells. During the third quarter of 2022, the company completed the sale of its E&P assets in Norway for gross proceeds of approximately $430 million, before closing adjustments and other closing costs.

Total E&P sales volumes were 81,100 boe/d in the third quarter of 2022, compared to 76,300 boe/d in the prior year quarter, primarily due to a draw of inventory at E&P Canada associated with the timing of cargo sales, compared to a build in the prior year quarter.

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 and E&P International increased in the third quarter of 2022 from the prior year quarter, in line with the significantly higher commodity price environment.

Royalties

E&P royalties in the third quarter of 2022 were higher than the prior year quarter primarily due to the increase in price realizations.

Expenses and Other Factors

Operating and transportation expenses increased in the third quarter of 2022 compared to the prior year quarter, primarily due to a draw of inventory in the current period, and increased costs at E&P Canada, including increased maintenance and an increase in costs related to the company’s additional working interest in White Rose, partially offset by the sale of the Golden Eagle Area Development resulting in lower transportation and operating costs in the current period.

DD&A and exploration expense increased in the third quarter of 2022 compared to the prior year quarter, primarily due to higher sales volumes in the current quarter compared to the prior year quarter.

2022 Third Quarter   Suncor Energy Inc.   23

Management’s Discussion and Analysis

Results for the First Nine Months of 2022

Earnings before income taxes for E&P for the first nine months of 2022 increased to $2.643 billion, compared to $1.188 billion in the prior year period. In addition to the factors impacting operating earnings described below, earnings before income taxes for the first nine months of 2022 included a non-cash impairment reversal of  $715 million on the company’s share of the White Rose assets, a non-cash impairment of  $70 million against the company’s share of its assets in Norway, the recognition of $147 million of insurance proceeds recorded in other income (loss) related to the company’s assets in Libya, and a $65 million foreign exchange loss related to the sale of the company’s share of its assets in Norway. Earnings before income taxes for the first nine months of 2021 included a non-cash impairment reversal of  $221 million against the company’s share of the Terra Nova assets.

Adjusted operating earnings(1) for E&P for the first nine months of 2022 increased to $1.916 billion, compared to $967 million for the first nine months of 2021. The increase was primarily due to significantly higher realized crude prices in the current period compared to the prior year period, partially offset by lower sales volumes and increased royalties due to the increase in price realizations.

Adjusted funds from operations(1) for the first nine months of 2022 increased to $2.459 billion, compared to $1.386 billion for the first nine months of 2021, due to the same reasons noted in operating earnings above. Adjusted funds from operations in the first nine months of 2022 were also impacted by the recognition of  $147 million of insurance proceeds related to the company’s assets in Libya recorded in other income (loss).

Planned Maintenance Update for Operated Assets

There are no significant maintenance events scheduled for the remainder of 2022.

(1)

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

​

24   2022 Third Quarter   Suncor Energy Inc.

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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

​

(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)(2)

(1)

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

​

(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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

​

R&M adjusted operating earnings in the third quarter of 2022 was $755 million compared to $864 million in the prior year quarter. The decrease in adjusted operating earnings was primarily due to 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, which was partially offset by a significant increase in refining and marketing margins as a result of significantly higher benchmark crack spreads in the current period. In the third quarter of 2022, adjusted operating earnings included a before-tax FIFO inventory valuation loss, including the impact of commodity risk management activities, of  $585 million on the decrease in crude and refined product benchmarks, compared to a $91 million gain in the prior year quarter.

2022 Third Quarter   Suncor Energy Inc.   25

Management’s Discussion and Analysis

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 466,600 bbls/d and refinery utilization was 100% in the third quarter of 2022, compared to 460,300 bbls/d and 99% in the prior year quarter, reflecting strong utilizations across all refineries in both periods. Refined product sales in the third quarter of 2022 increased to 577,300 bbls/d, compared to 551,500 bbls/d in the prior year quarter. The increase in refined product sales reflected increased demand in the current period, combined with the company’s ability to leverage its extensive domestic sales network and export channels.

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 $50.45/bbl in the third quarter of 2022, from $33.80/bbl in the prior year quarter, due to significantly higher benchmark crack spreads resulting from increased demand and declining North American refined product inventories, and the widening of heavy crude oil differentials. These factors were partially offset by an unfavourable crude feedstock mix in the third quarter of 2022, tightened location differentials from regional benchmarks to the company’s local markets and increased environmental compliance costs. On a LIFO basis, Suncor’s refining and marketing gross margin represents 85% margin capture in the third quarter of 2022.

​

•

On a FIFO basis, Suncor’s refining and marketing gross margin increased to $37.45/bbl in the third quarter of 2022, from $35.75/bbl in the prior year quarter, due to the same factors noted above, in addition to FIFO inventory valuation impacts. In the third 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  $585 million before-tax. In the prior year quarter, FIFO, including the impact of commodity risk management activities, resulted in a gain of  $91 million before-tax, for an unfavourable quarter-over-quarter impact of  $676 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.

​

26   2022 Third Quarter   Suncor Energy Inc.

Expenses and Other Factors

Operating and transportation expenses in the third quarter of 2022 increased compared to the prior year quarter, primarily due to increased commodity input costs, primarily higher natural gas and power prices.

Refining operating expense per barrel(1) was $6.80 in the third quarter of 2022, compared to $5.45 in the prior year quarter, primarily due to increased commodity input costs.

Results for the First Nine Months of 2022

R&M’s earnings before income taxes were $4.117 billion for the first nine months of 2022, compared to $2.268 billion in the prior year period. In addition to the factors impacting adjusted operating earnings described below, earnings before income taxes for the first nine months of 2022 included a $19 million unrealized gain on risk management activities, compared to a $7 million unrealized loss on risk management activities in the prior year period.

Adjusted operating earnings(1) for R&M in the first nine months of 2022 increased to $4.158 billion, compared to $2.275 billion in the first nine months of 2021, with the increase primarily due to a significant increase in refining and marketing margins as a result of significantly higher benchmark crack spreads in the current period, and higher crude throughput, which was partially offset by increased operating expenses, primarily due to increased commodity input costs and a decreased FIFO inventory valuation gain in the first nine months of 2022 compared to the prior year period. For the first nine months of 2022, the impact of the FIFO method of inventory valuation, relative to an estimated LIFO method, including the impact of commodity risk management activities, had a positive impact to adjusted operating earnings and adjusted funds from operations of  $669 million, compared to an $811 million impact in the first nine months of 2021.

R&M’s adjusted funds from operations(1) in the first nine months of 2022 increased to $4.898 billion, compared to $2.962 billion in the first nine months of 2021, primarily due to the same factors that influenced adjusted operating earnings described above.

Planned Maintenance

The company has completed all major planned refinery maintenance for 2022.

(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.

​

2022 Third Quarter   Suncor Energy Inc.   27

Management’s Discussion and Analysis

CORPORATE AND ELIMINATIONS

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 restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

​

(2)

During the first quarter of 2021, the company recorded a restructuring charge in OS&G expenses related to workforce reduction plans.

​

(3)

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

​

(4)

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

​

Corporate incurred an adjusted operating loss of  $228 million for the third quarter of 2022, compared to $355 million for the prior year quarter. The decreased loss was attributable to increased costs in the prior year quarter, due to costs associated with digital and technology improvements and the impact of tax settlements, a larger operational foreign exchange gain in the current quarter, and decreased interest expense on long-term debt in the third quarter of 2022 compared to the prior year quarter. The decreased loss was also attributable to a larger share-based compensation recovery in the third quarter of 2022 compared to the prior year quarter. Suncor capitalized $43 million of its borrowing costs in the third quarter of 2022, as part of the cost of major development assets and construction projects in progress, compared to $38 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 third quarter of 2022, the company realized $275 million of intersegment profit, compared to a deferral of  $36 million of intersegment profit in the prior year quarter. The realization of intersegment profit and elimination of unrealized losses in the third quarter of 2022 was driven by a weakening in benchmark pricing in the current period, compared to a strengthening in benchmark pricing in the third quarter of 2021.

Corporate and Eliminations adjusted funds from operations were $100 million for the third quarter of 2022, compared to funds used in operations of  $352 million in the third quarter of 2021, and were influenced by the same factors impacting adjusted operating loss described above, excluding the impact of tax settlements and share-based compensation expense.

Results for the First Nine Months of 2022

Corporate and Eliminations loss before income taxes was $2.050 billion for the first nine months of 2022, compared to $1.596 billion in the prior year period. In addition to the factors impacting adjusted operating loss described below, the loss before income taxes for the first nine months of 2022 included a $929 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt. Corporate and Eliminations loss before income taxes in the prior year period included an $88 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt, a restructuring charge of $168 million related to workforce reduction plans recorded in the first quarter of 2021 and an $80 million loss for early repayment of long-term debt in the third quarter of 2021.

The adjusted operating loss for Corporate and Eliminations for the first nine months of 2022 decreased to $1.121 billion, compared to $1.436 billion in the first nine months of 2021. The decreased loss was attributable to a decrease in interest expense, primarily associated with decreased interest on long-term debt, a decreased elimination of intercompany profit in the current year period, a larger operational foreign exchange gain in the current year period, an unrealized gain on investment recorded in the first quarter of 2022 and increased costs in the prior year period related to costs associated with digital and technology improvements. The decreased loss was partially offset by a larger share-based compensation expense in the first nine months of 2022, compared to the first nine months of 2021. The company capitalized $124 million of its borrowing costs in the first nine months of 2022, compared with $106 million in the first nine months of 2021.

28   2022 Third Quarter   Suncor Energy Inc.

Corporate and Eliminations adjusted funds used in operations for the first nine months of 2022 were $967 million, compared to $1.453 billion in the prior year period, and were influenced by the same factors impacting adjusted operating loss noted above, excluding the impact of share-based compensation expense and the unrealized gain on investment recorded in the first quarter of 2022. Adjusted funds used in operations in the prior year period were impacted by the restructuring charge related to workforce reduction plans recorded in the first quarter of 2021.

Subsequent to the third quarter of 2022, the company reached an agreement for the sale of its wind and solar assets for gross proceeds of approximately $730 million, before closing adjustments and other closing costs. The sale is pending regulatory approval, and is expected to be completed in the first quarter of 2023.

5. INCOME TAX

The provision for income taxes in the third quarter of 2022 decreased compared to the prior year quarter, primarily due to decreased earnings in the current quarter. In the third quarter of 2022, the company’s effective tax rate on net earnings was (27.1%), compared to 33.3% in the prior year quarter. The change in the effective tax rate in the third quarter of 2022 compared to the prior year quarter was primarily due to the impact of 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.

The provision for income taxes in the first nine months of 2022 increased compared to the prior year period, primarily due to increased earnings in the current period. In the first nine months of 2022, the company’s effective tax rate on net earnings was 27.8%, which is comparable to 27.0% in the prior year period.

2022 Third Quarter   Suncor Energy Inc.   29

Management’s Discussion and Analysis

6. CAPITAL INVESTMENT UPDATE

Capital and Exploration Expenditures by Segment

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(1)

Excludes capital expenditures related to assets held for sale of  $7 million in the third quarter of 2022 and $41 million in the first nine months of 2022.

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(2)

Excludes capital expenditures related to assets held for sale of  $31 million in the third quarter of 2022 and $52 million in the first nine months of 2022.

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Capital and Exploration Expenditures by Type, Excluding Capitalized Interest