Exhibit 99.2​

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 Suncor’s Management Discussion and Analysis (MD&A) dated August 4, 2022. See also the Advisories section of the MD&A. References to Oil Sands operations exclude Suncor’s interests in Fort Hills and Syncrude.

“Driven by a strong business environment, Suncor generated record adjusted funds from operations of approximately $5.3 billion, or $3.80 per common share, in the second quarter of 2022, as we executed planned maintenance across our asset base,” said Kris Smith, interim president and chief executive officer. “Our confidence in our business and expected annual cash flows enabled us to return approximately $3.2 billion of value to our shareholders, which includes both the highest dividend per share and highest rate of share repurchases in the company’s history.”

•

Adjusted funds from operations(1)(2) increased to $5.345 billion ($3.80 per common share) in the second quarter of 2022, compared to $2.362 billion ($1.57 per common share) in the prior year quarter. This was the highest in the company’s history, exceeding the prior per share quarterly record, from the first quarter of 2022, by 33%. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $4.235 billion ($3.01 per common share) in the second quarter of 2022, compared to $2.086 billion ($1.39 per common share) in the prior year quarter.

​

•

Adjusted operating earnings(1)(2) increased to $3.814 billion ($2.71 per common share) in the second quarter of 2022, compared to $722 million ($0.48 per common share) in the prior year quarter. The company’s net earnings increased to $3.996 billion ($2.84 per common share) in the second quarter of 2022, compared to $868 million ($0.58 per common share) in the prior year quarter.

​

•

For the second consecutive quarter, Oil Sands delivered record adjusted funds from operations(3) of  $4.231 billion in the second quarter of 2022, compared to $1.844 billion in the prior year quarter, driven by significantly higher price realizations. Production from the company’s Oil Sands assets increased to 641,500 barrels per day (bbls/d) in the second quarter of 2022, compared to 615,700 bbls/d in the prior year quarter, due to increased production at Syncrude and Fort Hills in the current period, partially offset by the impact of maintenance activities at Oil Sands operations, including the largest turnaround in Firebag history, which was completed subsequent to the quarter.

​

•

Refining and Marketing (R&M) generated record adjusted funds from operations(3) of  $2.127 billion in the second quarter of 2022, compared to $677 million in the prior year quarter. In the second quarter, refinery utilization averaged 84% and crude throughput was 389,300 bbls/d, compared to 70% and 325,300 bbls/d respectively in the prior year quarter. Solid utilizations in the current quarter outside of planned turnaround activities allowed the company to capture significant benchmark crack spreads and refining margins. Following the completion of planned turnaround activities, the company’s refineries exited the quarter with an average refinery utilization of over 100%.

​

•

In the second quarter of 2022, Suncor continued to deliver on its strategy of growing shareholder returns, returning record value to its shareholders of approximately $3.2 billion, through approximately $2.6 billion in share repurchases and the payment of  $657 million of dividends. Both the dividend per common share and the rate of common share repurchases during the quarter are the highest in the company’s history. As at August 2, 2022, since the start of the year, the company has repurchased approximately $3.9 billion of Suncor’s common shares, representing approximately 88.5 million common shares at an average share price of $44.40 per common share, or the equivalent of 6.1% of its common shares as at December 31, 2021.

​

•

In the second quarter of 2022, the company completed an early redemption of its outstanding US$450 million 2.80% notes and US$550 million 3.10% notes originally due in 2023 and 2025, respectively. The company expects to achieve the lower end of its 2025 targeted net debt range during the second half of 2022.

​

•

In the second quarter of 2022, Suncor and the joint venture owners announced the decision to restart the West White Rose Project offshore the east coast of Canada, which is expected to extend the production life of the White Rose field, providing long-term value for the company.

​

•

Subsequent to the second quarter of 2022, the company reached an agreement for the sale of its Exploration and Production (E&P) assets in Norway, pending regulatory approval, for gross proceeds of approximately $410 million (Canadian dollar equivalent), before closing adjustments and other closing costs. The sale is expected to be completed in the fourth quarter of 2022, with an effective date of March 1, 2022.

​

(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.

​

(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.

​

(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 the MD&A for a discussion on income taxes.

​

 

(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.

​

(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 and $36 million in the second quarter of 2022.

​

(3)

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

​

2   2022 Second Quarter   Suncor Energy Inc.

Financial Results

Adjusted Operating Earnings

Suncor’s adjusted operating earnings increased to $3.814 billion ($2.71 per common share) in the second quarter of 2022, compared to $722 million ($0.48 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, combined with higher upstream production and refinery throughput. The increase in adjusted operating earnings was partially offset by an increase in royalties and income taxes and increased operating expenses primarily related to a significant increase in commodity input costs in the current quarter compared to 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 the MD&A.

​

(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 first-in, first-out (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

Suncor’s net earnings increased to $3.996 billion ($2.84 per common share) in the second quarter of 2022, compared to $868 million ($0.58 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, net earnings for the second quarter of 2022 included a $352 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt recorded in financing expenses, 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, a $19 million unrealized gain on risk management activities recorded in other income (loss) and a $130 million income tax expense related to the items noted. Net earnings in the prior year quarter included a $174 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $13 million unrealized loss on risk management activities recorded in other income (loss) and a $15 million income tax expense related to the items noted.

2022 Second 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 expense (recovery) on adjusted operating earnings adjustments line. See the Non-GAAP and Other Financial Measures Advisory section of the MD&A.

​

Adjusted Funds from Operations and Cash Flow Provided by Operating Activities

Adjusted funds from operations increased to $5.345 billion ($3.80 per common share) in the second quarter of 2022, compared to $2.362 billion ($1.57 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 $4.235 billion ($3.01 per common share) for the second quarter of 2022, compared to $2.086 billion ($1.39 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 further impacted by a greater use of cash associated with the company’s working capital balances in the second quarter of 2022 compared to the prior year quarter. The use of cash in the second quarter of 2022 was primarily due to an increase in accounts receivable and inventory balances related to the increase in commodity prices through the quarter, partially offset by an increase in accounts payable and accrued liabilities and an increase in taxes payable related to the company’s 2022 income tax expense.

4   2022 Second Quarter   Suncor Energy Inc.

Operating Results

Suncor’s total upstream production was 720,200 barrels of oil equivalent per day (boe/d) in the second quarter of 2022, compared to 699,700 boe/d in the prior year quarter.

The company’s net synthetic crude oil production increased to 483,000 bbls/d in the second quarter of 2022, compared to 437,200 bbls/d in the second quarter of 2021, due to increased production from Syncrude, partially offset by lower volumes from Oil Sands Base which was impacted by planned maintenance activities during the current quarter, including annual coker maintenance at Upgrader 2 and unplanned maintenance. In the prior year, annual planned maintenance activities were deferred to the third quarter to manage COVID-19-related execution risks. At Syncrude, upgrader utilization of 93% in the second quarter of 2022, compared to 55% in the prior year quarter, reflected lower planned maintenance activities in the current period, including the impacts of planned hydrotreater maintenance that was advanced to the first quarter of 2022.

The company’s non-upgraded bitumen production was 158,500 bbls/d in the second quarter of 2022, compared to 178,500 bbls/d in the second quarter of 2021, due to decreased production from the company’s In Situ assets, which was partially offset by increased production at Fort Hills. Decreased production from the company’s In Situ assets was primarily due to the major planned turnaround at Firebag, which commenced during the quarter, and unplanned maintenance at MacKay River, which returned to normal production rates in the third quarter. Production from Fort Hills increased to 87,400 bbls/d, compared to 45,300 bbls/d in the prior year quarter, reflecting two-train operations, partially offset by planned maintenance completed early in the quarter.

Subsequent to the second quarter of 2022, the planned maintenance activities at Oil Sands Base Upgrader 2 and Firebag were completed, and both assets have safely ramped up to normal operating rates.

E&P production during the second quarter of 2022 was 78,700 boe/d, compared to 84,000 boe/d in the prior year quarter. The decrease in production was primarily due to the sale of the company’s working interest in the Golden Eagle Area Development in the fourth quarter of 2021, and natural declines, partially offset by increased production at Buzzard in the current period, as the prior year quarter was impacted by planned turnaround activities.

Refinery crude throughput increased to 389,300 bbls/d and refinery utilization was 84% in the second quarter of 2022, compared to 325,300 bbls/d and 70% in the prior year quarter, reflecting planned turnaround activities in both periods. During the second quarter of 2022, the company completed planned turnaround activities at its Edmonton, Sarnia and Montreal refineries, and unplanned maintenance at its Commerce City refinery, enabling its refineries to exit the quarter with an average refinery utilization of over 100%. Refined product sales in the second quarter of 2022 increased to 561,700 bbls/d, compared to 463,300 bbls/d in the prior year quarter, reflecting improved refined product demand in the current period compared to the prior year quarter, which was impacted by COVID-19-related restrictions. This increased refined product demand was partially met by a planned draw of refined product inventory that the company strategically built in the first quarter of 2022 in anticipation of significant planned turnaround activities in the second quarter.

“In the second quarter of 2022, we successfully executed planned maintenance activities across many of our assets in both the upstream and downstream,” said Smith. “With the annual planned maintenance program completed on our downstream assets, we expect to achieve strong refinery utilizations for the remainder of the year, allowing the company to continue to capture strong forecasted benchmark crack spreads and refining margins.”

The company’s total operating, selling and general expenses were $3.088 billion in the second quarter of 2022, compared to $2.720 billion in the prior year quarter. The increase was mainly due to a significant increase in commodity input costs, primarily natural gas prices, increased share-based compensation expenses 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.

2022 Second Quarter   Suncor Energy Inc.   5

 

Strategy Update

The company’s ability to operate reliably and efficiently is underpinned by Suncor’s value of safety above all else. Suncor is fully committed to improving its safety and operational performance, a critical task in achieving the company’s operational excellence priorities.

The company is implementing specific safety continuous improvements and is continuously strengthening Suncor’s safety culture, ensuring safe practices are consistently implemented across all of Suncor’s facilities and geographies, and the company is making measured progress to achieve specific milestones. As well, the company has made a number of changes in its senior management team to add to its operating bench strength, including adding experienced mining leaders in critical leadership positions. At the same time, Suncor has also realigned its central support group with experienced management and staff to drive improved safety and operational risk management performance with the business areas.

The company’s safety improvement plans are focused on strengthening its risk management and systems, continuously improving contractor safety management and engaging the front line to deliver safe work with a strong safety culture. In addition, the company is implementing specific actions to continuously improve safety in Suncor’s mine and tailings operations, which have experienced a number of serious safety incidents. This includes implementing technologies, such as collision awareness and driver safety systems, making operational modifications to help improve mobile equipment egress and strengthening controls for high-risk activities. These changes are expected to help prevent incidents and mitigate serious impacts from incidents should they happen.

“Recent events underscore the important work to be done on improving the safety performance of our company,” said Smith. “We must acknowledge where we have fallen short and recognize the critical need to drive our safety improvement work with focus and vigour.”

The company has also made disciplined decisions to adjust and streamline its portfolio to enable a greater focus on its core business, to safely increase the reliability, utilization and integration of its assets while continuing efforts to sustainably reduce controllable costs. In the first six months of 2022, the company announced that it was taking steps to optimize its asset portfolio through the planned divestment of its E&P assets in Norway and its wind and solar assets. Subsequent to the second quarter of 2022, the company reached an agreement for the sale of its Norway assets, pending regulatory approval, for gross proceeds of approximately $410 million (Canadian dollar equivalent), before closing adjustments and other closing costs. The sale is expected to be completed in the fourth quarter of 2022, with an effective date of March 1, 2022. The sale process for the company’s wind and solar assets is progressing, with a sale expected to close early in 2023. Based on interest received in the company’s E&P assets in the U.K., the company has also commenced a sale process for its entire U.K. E&P portfolio.

Suncor will also be undertaking a strategic review of its downstream retail business with the goal of unlocking shareholder value. With the support of external advisors, this review will evaluate and consider a wide range of alternatives, from a potential sale of the business to options to enhance the value of its retail business.

In E&P Canada, 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 for a safe return to operations later in the fourth quarter of 2022. Also, in the second quarter of 2022, Suncor and the joint venture owners announced the decision to restart the West White Rose Project offshore the east coast of Canada. As a result of the restart decision, Suncor has increased its ownership in the White Rose assets by an additional 12.5% to approximately 39%. Production from the West White Rose Project is expected to commence in the first half of 2026 and is expected to provide long-term value for the company by extending the production life of the White Rose field.

The company continues to advance a number of strategic initiatives that are expected to contribute to the company’s incremental free funds flow target through increased revenue and reductions in operating costs, capital expenditures and reclamation spending. The company expects to achieve an additional $400 million of incremental free funds flow(1) by the end of 2022, building on the incremental $465 million achieved in 2021, through the implementation of digital, process and technology initiatives. The operating cost portion of the savings generated from these improvement initiatives is helping to offset inflationary pressures and increased mining costs in the company’s Oil Sands business. The company also continues to optimize transfers on the interconnecting pipelines between Oil Sands Base and Syncrude, capitalizing on the regional strength and flexibility of its Oil Sands assets.

The company continues to progress towards realizing $100 million of annual gross synergies for the Syncrude joint venture owners in 2022, with an additional $200 million of annual gross synergies expected to be realized through 2023-2024.

(1)

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

​

6   2022 Second Quarter   Suncor Energy Inc.

Suncor is committed to allocating excess funds in accordance with its capital allocation framework, maximizing returns to its shareholders and strengthening its balance sheet. In the second quarter of 2022, the company executed on its previously announced annual capital allocation targets, returning record value to its shareholders of approximately $3.2 billion, through approximately $2.6 billion in share repurchases and the payment of  $657 million of dividends. The company repurchased approximately 54 million common shares in the second quarter of 2022, which represents the highest quarterly common share repurchases in the company’s history. As at August 2, 2022, since the start of the year, the company has repurchased approximately 88.5 million common shares, or the equivalent of 6.1% of its common shares as at December 31, 2021. The quarterly dividend of  $0.47 per common share is also the highest dividend in the company’s history.

Aligned with the company’s annual capital allocation targets, in the second quarter of 2022, the company completed an early redemption, at par, of its outstanding US$450 million 2.80% notes and US$550 million 3.10% notes, originally due in 2023 and 2025, respectively. These actions clear Suncor’s long-term debt maturity runway until 2026. The company also completed a partial redemption of US$10.2 million of its outstanding US$152 million 6.00% notes, due in 2042. With the company’s confidence in its expected cash flows, the current business environment and expected proceeds from the dispositions of assets, the company expects to achieve the lower end of its 2025 targeted net debt range of  $12 billion during the second half of 2022. Once net debt has been reduced to $12 billion, the company expects to allocate 75% of excess funds towards share buybacks and 25% towards debt repayment. Once the company’s net debt balance is at its $9 billion floor, the company expects to allocate excess funds fully towards shareholder returns.

2022 Second Quarter   Suncor Energy Inc.   7

 

Corporate Guidance

Suncor has updated its full-year business environment outlook assumptions for WCS at Hardisty from US$84.00/bbl to US$80.00/bbl, New York Harbor 2-1-1 crack from US$38.00/bbl to US$41.50/bbl and AECO-C Spot from $6.10/GJ to $5.90/GJ due to changes in key forward curve pricing for the remainder of the year.

In addition, the company’s total production range has been revised from 750,000 bbls/d – 790,000 bbls/d to 740,000 bbls/d – 760,000 bbls/d to reflect year to date performance and expected performance for the remainder of the year. As a result, the top of the production ranges for Oil Sands operations have been revised from 435,000 bbls/d to 415,000 bbls/d, Fort Hills from 100,000 bbls/d to 90,000 bbls/d, Syncrude from 190,000 bbls/d to 185,000 bbls/d and E&P from 85,000 bbls/d to 80,000 bbls/d.

The company has also revised its full year outlook for capital expenditures from a single point estimate of  $4.7 billion to a range of  $4.9 billion – $5.2 billion. The increase in capital guidance reflects inflationary pressures across the business, the West White Rose Project restart and the company’s increased working interest in that project, and increased spend during turnarounds and maintenance to improve safety and reliability across the portfolio.

The company has also updated its Fort Hills cash operating costs per barrel guidance range, with the increased range attributed primarily to inflationary pressures, increased commodity costs and reduced production. As a result, Fort Hills cash operating costs per barrel have been updated from $25.00 – $28.00 to $27.00 – $30.00.

As a result of these updates, the full-year current income tax expense range has increased from $4.0 billion – $4.3 billion to $4.4 billion – $4.7 billion.

For further details and advisories regarding Suncor’s 2022 corporate guidance, see www.suncor.com/guidance.

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 the MD&A.

8   2022 Second Quarter   Suncor Energy Inc.

Management’s Discussion and Analysis

August 4, 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 six months ended June 30, 2022, should be read in conjunction with Suncor’s unaudited interim Consolidated Financial Statements for the three and six months ended June 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 our website 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 Second Quarter   Suncor Energy Inc.   9

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.

10   2022 Second Quarter   Suncor Energy Inc.

2. Second Quarter Highlights

•

Second quarter financial results

​

•

Suncor’s adjusted operating earnings(1)(2) increased to $3.814 billion ($2.71 per common share) in the second quarter of 2022, compared to $722 million ($0.48 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, combined with higher upstream production and refinery throughput. The increase in adjusted operating earnings was partially offset by an increase in royalties and income taxes and increased operating expenses primarily related to a significant increase in commodity input costs in the current quarter compared to the prior year quarter.

​

•

Suncor’s net earnings increased to $3.996 billion ($2.84 per common share) in the second quarter of 2022, compared to $868 million ($0.58 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, net earnings for the second quarter of 2022 included a $352 million unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt recorded in financing expenses, 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, a $19 million unrealized gain on risk management activities recorded in other income (loss) and a $130 million income tax expense related to the items noted. Net earnings in the prior year quarter included a $174 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $13 million unrealized loss on risk management activities recorded in other income (loss) and a $15 million income tax expense related to the items noted.

​

•

Adjusted funds from operations(1)(2) increased to $5.345 billion ($3.80 per common share) in the second quarter of 2022, compared to $2.362 billion ($1.57 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 $4.235 billion ($3.01 per common share) for the second quarter of 2022, compared to $2.086 billion ($1.39 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 further impacted by a greater use of cash associated with the company’s working capital balances in the second quarter of 2022 compared to the prior year quarter. The use of cash in the second quarter of 2022 was primarily due to an increase in accounts receivable and inventory balances related to the increase in commodity prices through the quarter, partially offset by an increase in accounts payable and accrued liabilities and an increase in taxes payable related to the company’s 2022 income tax expense.

​

•

Record Oil Sands adjusted funds from operations. For the second consecutive quarter, Oil Sands delivered record adjusted funds from operations(3) of  $4.231 billion in the second quarter of 2022, compared to $1.844 billion in the prior year quarter, driven by significantly higher price realizations. Production from the company’s Oil Sands assets increased to 641,500 barrels per day (bbls/d) in the second quarter of 2022, compared to 615,700 bbls/d in the prior year quarter, due to increased production at Syncrude and Fort Hills in the current period, partially offset by the impact of maintenance activities at Oil Sands operations, including the largest turnaround in Firebag history, which was completed subsequent to the quarter.

​

•

Solid Refining & Marketing (R&M) performance outside of planned maintenance. R&M generated record adjusted funds from operations(3) of  $2.127 billion in the second quarter of 2022, compared to $677 million in the prior year quarter. In the second quarter, refinery utilization averaged 84% and crude throughput was 389,300 bbls/d, compared to 70% and 325,300 bbls/d respectively in the prior year quarter. Solid utilizations in the current quarter outside of planned turnaround activities allowed the company to capture significant benchmark crack spreads and refining margins. Following the completion of planned turnaround activities, the company’s refineries exited the quarter with an average refinery utilization of over 100%.

​

(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.

​

(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.

​

(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.

​

2022 Second Quarter   Suncor Energy Inc.   11

Management’s Discussion and Analysis

•

Record shareholder returns. In the second quarter of 2022, Suncor continued to deliver on its strategy of growing shareholder returns, returning record value to its shareholders of approximately $3.2 billion, through approximately $2.6 billion in share repurchases and the payment of  $657 million of dividends. Both the dividend per common share and the rate of common share repurchases during the quarter are the highest in the company’s history. As at August 2, 2022, since the start of the year, the company has repurchased approximately $3.9 billion of Suncor’s common shares, representing approximately 88.5 million common shares at an average share price of $44.40 per common share, or the equivalent of 6.1% of its common shares as at December 31, 2021.

​

•

Executed significant early debt repayments. In the second quarter of 2022, the company completed an early redemption of its outstanding US$450 million 2.80% notes and US$550 million 3.10% notes originally due in 2023 and 2025, respectively. The company expects to achieve the lower end of its 2025 targeted net debt range during the second half of 2022.

​

•

Restart of West White Rose Project. In the second quarter of 2022, Suncor and the joint venture owners announced the decision to restart the West White Rose Project offshore the east coast of Canada, which is expected to extend the production life of the White Rose field, providing long-term value for the company.

​

•

Reached agreement for sale of Norway operations. Subsequent to the second quarter of 2022, the company reached an agreement for the sale of its Exploration and Production (E&P) assets in Norway, pending regulatory approval, for gross proceeds of approximately $410 million (Canadian dollar equivalent), before closing adjustments and other closing costs. The sale is expected to be completed in the fourth quarter of 2022, with an effective date of March 1, 2022.

​

12   2022 Second Quarter   Suncor Energy Inc.

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 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.

​

(3)

Excludes capitalized interest of  $44 million in the second quarter of 2022 and $37 million in the second quarter of 2021.

​

(4)

Excludes capital expenditures related to assets held for sale of  $36 million in the second quarter of 2022 and $55 million in the first six months 2022.

​

2022 Second Quarter   Suncor Energy Inc.   13

Management’s Discussion and Analysis

Operating Highlights

Net Earnings

Suncor’s consolidated net earnings for the second quarter of 2022 increased to $3.996 billion, compared to $868 million in the prior year quarter. Net earnings were primarily influenced by the same factors that impacted adjusted operating earnings described subsequently in this section.

Other items affecting net earnings over these periods included:

•

An unrealized foreign exchange loss on the revaluation of U.S. dollar denominated debt of  $352 million recorded in financing expenses in the Corporate and Eliminations segment in the second quarter of 2022, compared to a gain of  $174 million in the second quarter of 2021.

​

•

During 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.

​

•

An unrealized gain on risk management activities of  $19 million recorded in other income (loss) in the second quarter of 2022, compared to a loss of  $13 million in the second quarter of 2021.

​

•

An income tax expense related to the items noted above of  $130 million in the second quarter of 2022, compared to $15 million in the second quarter of 2021.

​

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 expense (recovery) on adjusted operating earnings adjustments line. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

​

14   2022 Second 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 MD&A.

​

(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 first-in, first-out (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 $3.814 billion ($2.71 per common share) in the second quarter of 2022, compared to $722 million ($0.48 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, combined with higher upstream production and refinery throughput. The increase in adjusted operating earnings was partially offset by an increase in royalties and income taxes and increased operating expenses primarily related to a significant increase in commodity input costs in the current quarter compared to the prior year quarter.

Operating, Selling and General Expenses

​

(1)

In the second quarter of 2022, share-based compensation expense of  $140 million included $53 million recorded in the Oil Sands segment, $4 million recorded in the E&P segment, $20 million recorded in the R&M segment and $63 million recorded in the Corporate and Eliminations segment. The second quarter of 2021 share-based compensation expense of  $84 million included $24 million recorded in the Oil Sands segment, $3 million recorded in the E&P segment, $14 million recorded in the R&M segment and $43 million 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 $3.088 billion in the second quarter of 2022, compared to $2.720 billion in the prior year quarter. The increase was mainly due to a significant increase in commodity input costs, primarily natural gas prices, increased share-based compensation expenses 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.

2022 Second Quarter   Suncor Energy Inc.   15

Management’s Discussion and Analysis

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 second 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.

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 second quarter of 2022 reflected an increase in WTI at Cushing, which averaged US$108.40/bbl compared to US$66.05/bbl in the prior year quarter. 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, and which can also be affected by prices negotiated for spot sales. Prices for MSW at Edmonton increased to $137.80/bbl in the second quarter of 2022 compared to $77.25/bbl in the prior year quarter, and prices for WCS at Hardisty increased to US$95.60/bbl in the second quarter of 2022, from US$54.60/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 and 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 second quarter of 2022, but were higher than the prior year quarter on an absolute basis due to the increase in WTI prices.

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$113.75/bbl in the second quarter of 2022 compared to US$68.85/bbl in the prior year quarter.

16   2022 Second Quarter   Suncor Energy Inc.

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, the 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 internal index is a single value calculated based on 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; and the benefit of its location, quality and grade differentials, and marketing margins. The internal 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 seasonal factors. 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 second 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$51.45/bbl in the second quarter of 2022 compared to US$25.65/bbl in the second 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 $6.90/GJ in the second quarter of 2022, from $2.95/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 increased to an average of $122.45/MWh in the second quarter of 2022 compared to $104.50/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 second quarter of 2022, the Canadian dollar weakened in relation to the U.S. dollar as the average exchange rate decreased to US$0.78 per one Canadian dollar from US$0.81 per one Canadian dollar in the prior year quarter. This rate decrease had a positive impact on price realizations for the company during the second quarter of 2022 when compared to the prior year quarter.

Suncor also has assets and liabilities, including approximately 60% 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.

2022 Second Quarter   Suncor Energy Inc.   17

Management’s Discussion and Analysis

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 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.

​

The Oil Sands segment adjusted operating earnings increased to $2.872 billion in the second quarter of 2022, compared to $613 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 an increase in royalties associated with higher price realizations, increased operating expenses, related to higher natural gas input costs and production levels, and higher DD&A expenses.

18   2022 Second 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 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%.

​

(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 second quarter of 2022, Oil Sands operations production volumes included 9,300 bbls/d of internally consumed diesel, of which 6,500 bbls/d was consumed at Oil Sands Base, 1,900 bbls/d was consumed at Fort Hills and 900 bbls/d was consumed at Syncrude. Syncrude production volumes included 2,700 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 second quarter of 2022, Oil Sands operations included 2,000 bbls/d of SCO and 100 bbls/d of bitumen that were transferred to Suncor’s share of Syncrude through the interconnecting pipelines. Syncrude production included 100 bbls/d of SCO and 4,700 bbls/d of bitumen that were transferred to Oil Sands Base through the interconnecting pipelines.

​

The company’s net SCO production increased to 483,000 bbls/d in the second quarter of 2022, compared to 437,200 bbls/d in the second quarter of 2021, due to increased production from Syncrude, partially offset by lower volumes from Oil Sands Base which was impacted by planned maintenance activities during the current quarter, including annual coker maintenance at Upgrader 2 and unplanned maintenance. In the prior year, annual planned maintenance activities were deferred to the third quarter to manage COVID-19-related execution risks. At Syncrude, upgrader utilization of 93% in the second quarter of 2022, compared to 55% in the prior year quarter, reflected lower planned maintenance activities in the current period, including the impacts of planned hydrotreater maintenance that was advanced to the first quarter of 2022.

The company’s non-upgraded bitumen production was 158,500 bbls/d in the second quarter of 2022, compared to 178,500 bbls/d in the second quarter of 2021, due to decreased production from the company’s In Situ assets, which was partially offset by increased production at Fort Hills. Decreased production from the company’s In Situ assets was primarily due to the major planned turnaround at Firebag, which commenced during the quarter, and unplanned maintenance at MacKay River, which returned to normal production rates in the third quarter. Production from Fort Hills increased to 87,400 bbls/d, compared to 45,300 bbls/d in the prior year quarter, reflecting two-train operations, partially offset by planned maintenance completed early in the quarter.

Subsequent to the second quarter of 2022, the planned maintenance activities at Oil Sands Base Upgrader 2 and Firebag were completed, and both assets have safely ramped up to normal operating rates.

Sales Volumes

SCO and diesel sales volumes increased to 489,400 bbls/d in the second quarter of 2022, compared to 433,900 bbls/d in the prior year quarter, consistent with the increase in upgraded production, discussed above, and reflecting a draw of inventory in the second quarter of 2022 compared to a build of inventory in the prior year quarter.

Non-upgraded bitumen sales volumes were 162,700 bbls/d in the second quarter of 2022, compared to 183,500 bbls/d in the prior year quarter, and were impacted by the same factors that affected production volumes, discussed above.

2022 Second Quarter   Suncor Energy Inc.   19

Management’s Discussion and Analysis

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 second 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 second quarter of 2022 compared to the prior year quarter, primarily due to higher crude 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 second 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 second quarter of 2022 increased compared to the prior year quarter, primarily due to higher natural gas and other commodity prices.

At Fort Hills, operating costs in the second quarter of 2022 increased when 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 second quarter of 2022 increased when compared with the prior year quarter, primarily due to increased production, higher natural gas and other commodity prices and increased maintenance costs.

In the second quarter of 2022, higher natural gas prices resulted in an increase of Oil Sands segment operating costs by $138 million compared to the prior year quarter.

DD&A expense in the second quarter of 2022 was higher compared to the prior year quarter, due to increased sales volumes and higher derecognition charges of property, plant and equipment in the current period.

20   2022 Second 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 second quarter and first six months of 2022, Oil Sands OS&G includes ($182) million and ($225) million, respectively, of inventory changes and internal transfers. In the second quarter and first six months of 2021, Oil Sands OS&G includes ($2) million and ($52) 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 $33.50 in the second quarter of 2022, compared to $23.85 in the prior year quarter, due to higher operating, selling and general expenses, as detailed above, and decreased production. Oil Sands operations non-production costs, which are excluded from cash operating costs, were higher in the current quarter compared to the prior year quarter primarily due to and an increase in share-based compensation expenses. Excess power capacity and other costs at Oil Sands operating in the second quarter of 2022 were higher than the prior year quarter, due mainly to an increase in non-monetary natural gas costs.

Fort Hills cash operating costs per barrel(1) decreased to $30.20 in the second quarter of 2022, compared to $41.35 in the prior year quarter, reflecting increased production, partially offset by higher operating, selling and general 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.

(1)

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

​

2022 Second Quarter   Suncor Energy Inc.   21

Management’s Discussion and Analysis

Syncrude cash operating costs per barrel(1) decreased to $36.40 in the second quarter of 2022, compared to $50.25 in the prior year quarter, reflecting increased production, due to the timing of planned turnaround activities, partially offset by higher operating, selling and general expenses, as detailed above.

Results for the First Six Months of 2022

Oil Sands earnings before income taxes for the first six months of 2022 increased to $5.201 billion, compared to $1.027 billion in the prior year period. In addition to the factors impacting operating earnings explained below, earnings before income taxes for the first six months of 2022 included a $73 million unrealized gain on risk management activities. Earnings before income taxes for the first six months of 2021 included a $5 million unrealized gain on risk management activities.

Oil Sands adjusted operating earnings(1) for the first six months of 2022 increased to $5.128 billion, compared to $1.022 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 price realizations.

Oil Sands adjusted funds from operations(1) for the first six months of 2022 increased to $7.645 billion, compared to $3.371 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 $30.95 for the first six months of 2022, compared to an average of  $23.60 for the first six months of 2021, with the increase due to increased operating, selling and general expenses, primarily driven by higher natural gas and other commodity input costs, and decreased production.

Fort Hills cash operating costs per barrel(1) averaged $29.60 for the first six months of 2022, a decrease compared to $39.05 in the first six months of 2021, reflecting increased production, partially offset by higher operating, selling and general expenses, primarily due to higher natural gas and other commodity prices and increased production levels associated with two-train operations in 2022.

Syncrude cash operating costs per barrel(1) averaged $35.65 for the first six months of 2022, a decrease compared to $38.95 in the first six months of 2021, primarily due to increased production volumes, partially offset by increased operating, selling and general expenses reflecting increased natural gas and other commodity prices and increased maintenance costs.

Planned Maintenance Update

Subsequent to the second quarter of 2022, the company completed its planned annual coker maintenance at Oil Sands Base Upgrader 2 and its significant planned turnaround activities at Firebag. In the third quarter of 2022, the company plans to commence planned annual coker maintenance at Oil Sands Base Upgrader 1 and planned turnaround activities at Syncrude. 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.

​

22   2022 Second 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 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 second quarter of 2022, revenue includes a gross-up amount of  $114 million, with an offsetting amount of  $88 million in royalties in the E&P segment and $26 million in income tax expense reported at the consolidated level. In the first six 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 reported at the consolidated level. In the second quarter and first six months of 2021, revenue includes a gross-up amount of  $135 million, with an offsetting amount of  $135 million in royalties in the E&P segment.

​

(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)

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 second quarter of 2022 increased to $716 million compared to $340 million in the prior year quarter, with the increase primarily due to significantly higher realized crude prices and lower DD&A, partially offset by lower sales volumes in the second quarter of 2022 compared to the prior year quarter.

2022 Second Quarter   Suncor Energy Inc.   23

Management’s Discussion and Analysis

Volumes

Production volumes for E&P Canada were 52,900 bbls/d in the second quarter of 2022, compared to 57,500 bbls/d in the prior year quarter, primarily due to natural declines.

In the second quarter of 2022, Suncor and the joint venture owners announced the decision to restart the West White Rose Project offshore the east coast of Canada. As a result of the restart decision, Suncor has increased its ownership in the White Rose assets by an additional 12.5% to approximately 39%. Production from the West White Rose Project is expected to commence in the first half of 2026, and is expected to provide long-term value for the company by extending the production life of the White Rose field.

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 for a safe return to operations later in the fourth quarter of 2022.

E&P International production was 25,800 boe/d in the second quarter of 2022, compared to 26,500 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 decreased liftings in Libya, partially offset by increased production at Buzzard in the current quarter, as the prior year quarter was impacted by planned turnaround activities. Subsequent to the second quarter of 2022, the company reached an agreement for the sale of its Norway assets, pending regulatory approval, for gross proceeds of approximately $410 million (Canadian dollar equivalent), before closing adjustments and other closing costs. The sale is expected to be completed in the fourth quarter of 2022, with an effective date of March 1, 2022.

Total E&P sales volumes were 86,700 boe/d in the second quarter of 2022, compared to 103,800 boe/d in the prior year quarter, primarily due to a smaller draw of inventory in the current quarter compared to the prior year quarter, as the prior quarter included a large draw of inventory at E&P Canada due to lifting schedules.

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 second quarter of 2022 from the prior year quarter, in line with the significantly higher commodity price environment.

Royalties

E&P royalties in the second 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 second quarter of 2022 compared to the prior year quarter, primarily in 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 a large draw in inventory in the prior year quarter and the sale of the Golden Eagle Area Development resulting in lower transportation and operating costs in the current period.

DD&A and exploration expense decreased in the second quarter of 2022 compared to the prior year quarter, primarily due to lower sales volumes in the current quarter compared to the prior year quarter.

Financing expense and other in the second quarter of 2022 was comparable to the prior year quarter.

24   2022 Second Quarter   Suncor Energy Inc.

Non-Cash Asset Impairment Reversal and Impairment

During 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 before-tax 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 before-tax against its share of the Norway assets.

Results for the First Six Months of 2022

Earnings before income taxes for E&P for the first six months of 2022 increased to $2.006 billion, compared to $598 million in the prior year period. In addition to the factors impacting operating earnings described below, earnings before income taxes for the first six months of 2022 included a non-cash impairment reversal of  $715 million on the company’s share of the White Rose assets and a non-cash impairment of  $70 million against the company’s share of its assets in Norway.

Adjusted operating earnings(1) for E&P for the first six months of 2022 increased to $1.361 billion, compared to $598 million for the first six months of 2021. The increase was primarily due to significantly higher realized crude prices in the current period compared to the prior year period, and the recognition of contingent consideration in the first quarter of 2022, related to the company’s sale of the Golden Eagle Area Development, partially offset by lower sales volumes and increased royalties due to the increase in price realizations.

Adjusted funds from operations(1) for the first six months of 2022 increased to $1.565 billion, compared to $865 million for the first six months of 2021, due to the same reasons noted in operating earnings above.

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.

​

2022 Second Quarter   Suncor Energy Inc.   25

Management’s Discussion and Analysis

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 second quarter of 2022 increased to $2.008 billion from $468 million in the prior year quarter. The increase 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, a larger FIFO inventory valuation gain and higher crude throughput in the second quarter of 2022 compared to the prior year quarter. In the second quarter of 2022, adjusted operating earnings included a before-tax FIFO inventory valuation gain, including the impact of commodity risk management activities, of  $525 million on the increase in crude and refined product benchmarks, compared to a $288 million gain in the prior year quarter. Adjusted operating earnings were unfavourably impacted by increased operating expenses in the second quarter of 2022 compared to the prior year quarter, primarily due to increased commodity input costs and refinery maintenance expenses.

26   2022 Second Quarter   Suncor Energy Inc.

Volumes

​

(1)

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

​

(2)

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

​

Refinery crude throughput increased to 389,300 bbls/d and refinery utilization was 84% in the second quarter of 2022, compared to 325,300 bbls/d and 70% in the prior year quarter, reflecting planned turnaround activities in both periods. During the second quarter of 2022, the company completed planned turnaround activities at its Edmonton, Sarnia and Montreal refineries, and unplanned maintenance at its Commerce City refinery, enabling its refineries to exit the quarter with an average refinery utilization of over 100%. Refined product sales in the second quarter of 2022 increased to 561,700 bbls/d, compared to 463,300 bbls/d in the prior year quarter, reflecting improved refined product demand in the current period compared to the prior year quarter, which was impacted by COVID-19-related restrictions. This increased refined product demand was partially met by a planned draw of refined product inventory that the company strategically built in the first quarter of 2022 in anticipation of significant planned turnaround activities in the second 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 $62.85/bbl in the second quarter of 2022, from $29.05/bbl in the prior year quarter, due to significantly higher benchmark crack spreads resulting from increased demand and declining North American refined product inventories, margin enhancement activities by the supply and marketing organization as part of the company’s incremental free funds flow target, and the widening of heavy crude oil differentials. On a LIFO basis, Suncor’s refining and marketing gross margin represents nearly 100% margin capture in the second quarter of 2022. Suncor’s refining and marketing gross margin also reflects Suncor’s feedstock advantage, which enables the company to process heavier crude oil, marketing and logistics capabilities, and strong sales channels within its integrated retail and wholesale networks. These factors were partially offset by tightened location differentials from regional benchmarks to the company’s local markets.

​

•

On a FIFO basis, Suncor’s refining and marketing gross margin increased to $76.85/bbl in the second quarter of 2022, from $38.00/bbl in the prior year quarter, due to the same factors noted above, in addition to FIFO inventory valuation impacts. In the second 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 gain of  $525 million before-tax. In the prior year quarter, FIFO, including the impact of commodity risk management activities, resulted in a gain of $288 million before-tax, for a favourable quarter-over-quarter impact of  $237 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.

​

2022 Second Quarter   Suncor Energy Inc.   27

Management’s Discussion and Analysis

Expenses and Other Factors

Operating expenses and DD&A in the second quarter of 2022 increased compared to the prior year quarter, due to higher commodity input costs and refinery maintenance expenses, primarily due to unplanned maintenance at the company’s Commerce City refinery, and increased throughput.

Refining operating expense per barrel(1) was $7.15 in the second quarter of 2022, compared to $6.65 in the prior year quarter, primarily due to increased commodity input costs partially offset by increased throughput.

Results for the First Six Months of 2022

R&M’s earnings before income taxes were $3.424 billion for the first six months of 2022, compared to $1.420 billion in the prior year period. In addition to the factors impacting operating earnings described below, earnings before income taxes for the first six months of 2022 included a $21 million unrealized gain on risk management activities, compared to a $9 million unrealized gain on risk management activities in the prior year period.

Adjusted operating earnings(1) for R&M in the first six months of 2022 increased to $3.403 billion, compared to $1.411 billion in the first six 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, a larger FIFO inventory valuation gain and higher crude throughput in the first six months of 2022 compared to the prior year period. For the first six months of 2022, the impact of the FIFO method of inventory valuation, relative to an estimated LIFO method, had a positive impact to adjusted operating earnings and adjusted funds from operations of  $1.254 billion, compared to a $720 million impact in the first six months of 2021.

R&M’s adjusted funds from operations(1) in the first six months of 2022 increased to $3.724 billion, compared to $1.849 billion in the first six months of 2021, and increased 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.

​

28   2022 Second Quarter   Suncor Energy Inc.

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 operating, selling and general expenses related to workforce reduction plans.

​

(3)

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  $358 million for the second quarter of 2022, compared to $428 million for the prior year quarter, with the decreased loss primarily attributable to an operational foreign exchange gain, as compared to an operational foreign exchange loss in the prior year quarter, and a decrease in interest expense on long-term debt in the second quarter of 2022 compared to the prior year quarter as a result of debt repayments that occurred throughout 2021. The decreased loss was partially offset by an increase in share-based compensation expense in the second quarter of 2022 compared to the prior year quarter. Suncor capitalized $44 million of its borrowing costs in the second quarter of 2022, as part of the cost of major development assets and construction projects in progress, compared to $37 million in the prior year quarter.

Eliminations reflect the deferral or realization of profit or loss on crude oil sales from Oil Sands to Suncor’s refineries. Consolidated profits and losses are only realized when the refined products produced from internal purchases of crude feedstock have been sold to third parties. During the second quarter of 2022, the company deferred $141 million of intersegment profit, compared to $66 million in the prior year quarter, which was driven by the increase in Oil Sands price realizations over the previous quarter, as lower margin crude refinery feedstock sourced internally from Oil Sands was sold and replaced by higher margin crude inventory.

Corporate and Eliminations adjusted funds used in operations were $402 million for the second quarter of 2022, compared to $431 million in the second quarter of 2021, and were influenced by the same factors impacting adjusted operating loss described above, excluding the impact of share-based compensation expense.

Results for the First Six Months of 2022

Corporate and Eliminations loss before income taxes was $1.374 billion for the first six months of 2022, compared to $843 million in the prior year period. In addition to the factors impacting operating loss described below, the loss before income taxes for the first six months of 2022 included a $206 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 a $370 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt and a restructuring charge of  $168 million related to workforce reduction plans recorded in the first quarter of 2021.

The adjusted operating loss for Corporate and Eliminations for the first six months of 2022 was $1.168 billion, compared to $1.045 billion in the first six months of 2021. The increased loss was attributed to a greater elimination of intercompany profit in the current year period compared to the prior year period and an increased share-based compensation expense in the first six months of 2022, as compared to the first six months of 2021. The increased loss was partially offset by an unrealized gain on investment recorded in the first quarter of 2022 and a decrease in interest expense on long-term debt in the first six months of 2022 compared to the prior year period as a result of debt repayments that occurred throughout 2021. The company capitalized $81 million of its borrowing costs in the first six months of 2022, compared with $68 million in the first six months of 2021.

Corporate and Eliminations adjusted funds used in operations for the first six months of 2022 were $1.067 billion, compared to $1.101 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.

The company continues to progress the sale of its wind and solar assets, with a sale expected to close in early 2023.

2022 Second Quarter   Suncor Energy Inc.   29

Management’s Discussion and Analysis

5. INCOME TAX

The provision for income taxes in the second quarter and first six months of 2022 increased compared to the prior year periods, primarily due to increased earnings in the second quarter and first six months of 2022 compared to the prior year periods. In the second quarter of 2022, the company’s effective tax rate on net earnings was 26.1%, compared to 20.2% in the prior year quarter. In the first six months of 2022, the company’s effective tax rate on net earnings was 25.0%, compared to 23.3% in the prior year period. The effective tax rate increased in the second quarter and first six months of 2022 compared to the prior year periods, 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.

30   2022 Second Quarter   Suncor Energy Inc.

6. Capital Investment Update

Capital and Exploration Expenditures by Segment