EXHIBIT 99.1

Report to Shareholders for the fourth quarter ended December 31, 2020

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 the company's 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 Financial Measures Advisory section of this document. See also the Advisories section of this document. References to Oil Sands operations exclude Suncor's interests in Fort Hills and Syncrude.

"Suncor delivered strong operational results during the fourth quarter, reflecting improved performance across our assets in November and December following the completion of significant maintenance at the end of October," said Mark Little, president and chief executive officer. "We also exceeded our operating cost reduction target, met our full year capital reduction target, executed on key strategic projects, and reaffirmed our commitment to significantly reduce our debt and increase returns to shareholders through our share repurchase program in 2021."

•

Funds from operations⁽¹⁾ increased to $1.221 billion ($0.80 per common share) in the fourth quarter of 2020, from $1.166 billion ($0.76 per common share) in the third quarter of 2020, and includes a $186 million ($0.12 per common share) transportation provision related to the Keystone XL pipeline project. Funds from operations were $2.553 billion ($1.66 per common share) in the prior year quarter. Funds from operations during the fourth quarter of 2020 exceeded the company's sustaining capital and dividend payments. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $814 million ($0.53 per common share) in the fourth quarter of 2020, compared to $2.304 billion ($1.50 per common share) in the prior year quarter.

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The company recorded an operating loss⁽¹⁾ of $142 million ($0.09 per common share) in the fourth quarter of 2020, compared to an operating loss of $302 million ($0.20 per common share) in the third quarter of 2020 and operating earnings of $782 million ($0.51 per common share) in the prior year quarter. The company had a net loss of $168 million ($0.11 per common share) in the fourth quarter of 2020, which included a $539 million unrealized after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt, a non-cash impairment charge of $423 million after-tax due to the high degree of uncertainty surrounding the future of the West White Rose Project and a $142 million after-tax transportation provision related to the Keystone XL pipeline project. The net loss in the prior year quarter was $2.335 billion ($1.52 per common share), which included non-cash impairment charges of $3.352 billion after-tax related to Fort Hills and the West White Rose Project.

•

The company exceeded its previously announced operating cost reduction target, reducing annual operating costs by $1.3 billion (approximately 12%) in 2020, compared to 2019 levels, and met its capital reduction target, reducing annual capital expenditures by $1.9 billion (approximately 33%) in 2020 compared to the original 2020 capital guidance midpoint. The company delivered a number of strategic initiatives within this target that enhanced integration between Suncor and Syncrude, expanded the company's market reach, debottlenecked In Situ facilities and its Edmonton refinery, and reduced structural operating costs by leveraging technology.

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Reliable operations drove refinery utilization of 95% in the fourth quarter of 2020, compared to 87% in the third quarter of 2020 and 97% in the prior year quarter. Suncor leveraged its strong domestic sales network and export channels, including integration with the retail network, within its downstream business to achieve higher utilization rates which continued to outperform the Canadian refining average in the fourth quarter of 2020.

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During the fourth quarter of 2020, Suncor's total upstream production was 769,200 barrels of oil equivalent per day (boe/d) compared to 778,200 boe/d in the prior year quarter. The company's synthetic crude oil (SCO) production increased to 514,300 barrels per day (bbls/d) in the fourth quarter of 2020 from 456,300 bbls/d in the fourth quarter of 2019, marking the second best quarter of SCO production in the company's history. Together, the Syncrude and Oil Sands operations upgraders achieved combined upgrader utilization of 95% in the fourth quarter of 2020, compared to 83% in the prior year quarter, due to strong reliability at Syncrude and Oil Sands Base ramping up to full operating rates following the completion of maintenance early in the quarter.

•

At Firebag, work to expand the capacity of the facility by 12,000 bbls/d was completed, enabling the asset to produce near its new nameplate capacity of 215,000 bbls/d exiting the quarter. In addition, at the company's Edmonton refinery, the nameplate capacity was increased from 142,000 bbls/d to 146,000 bbls/d, subsequent to the fourth quarter of 2020, as a result of debottlenecking activities.

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The Syncrude joint venture owners reached an agreement in principle for Suncor to take over as operator of the Syncrude asset by the end of 2021. Suncor, together with the other Syncrude joint venture owners, will continue to drive operating efficiencies, improve performance and develop regional synergies through integration. By capitalizing on the collective strength of our regional operations, annual synergies of $300 million gross are expected.

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The interconnecting pipelines between Suncor's Oil Sands Base and Syncrude were brought into service in the fourth quarter of 2020. Transfers began in December 2020 reflecting the enhanced integration and operational flexibility between these assets.

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Suncor will remain disciplined in its capital allocation and, at current commodity prices, plans to pay down between $1.0 billion and $1.5 billion of debt and repurchase between $500 million and $1.0 billion of the company's shares in 2021, signifying the company's ability to generate cash flow and confidence in the underlying value of the company. Subsequent to the end of the quarter, the Toronto Stock Exchange (TSX) accepted a notice to commence a normal course issuer bid (NCIB) for up to 44,000,000 common shares.

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Subsequent to the fourth quarter of 2020, Suncor's Board of Directors approved a quarterly dividend of $0.21 per common share.

(1)

Funds from operations and operating earnings (loss) are non-GAAP financial measures. See page 6 for a reconciliation of net (loss) earnings to operating (loss) earnings. See the Non-GAAP Financial Measures Advisory section of this document.

(1)

Funds from operations, operating earnings (loss) and ROCE are non-GAAP financial measures. See page 7 for a reconciliation of net (loss) earnings to operating (loss) earnings. See the Non-GAAP Financial Measures Advisory section of this document.

(2)

Includes the impacts of the Government of Alberta's mandatory production curtailments for all periods presented and the impacts of the significant decline in commodity prices due to the COVID-19 pandemic in 2020.

(3)

Includes impairment charges of $3.352 billion after-tax related to the fourth quarter of 2019, $1.798 billion after-tax related to the first quarter of 2020 and $423 million after-tax related to the fourth quarter of 2020.

(4)

ROCE excluding major projects in progress and impairments would have been 8.6% and 5.4% for the fourth quarter of 2019 and first quarter of 2020, respectively, excluding the impacts of the $1.116 billion deferred tax recovery for the Alberta corporate income tax rate change in the second quarter of 2019.

Financial Results

Operating (Loss) Earnings

Suncor's fourth quarter 2020 operating loss was $142 million ($0.09 per common share), compared to operating earnings of $782 million ($0.51 per common share) in the prior year quarter. In the fourth quarter of 2020, crude oil and refined product realizations were significantly lower than the prior year quarter, with crude oil and crack spread benchmarks declining by more than 25%, primarily due to the continued impacts of the COVID-19 pandemic. Upstream production was comparable to the prior year quarter, as the company produced a higher proportion of higher value SCO barrels in the product mix, enabled by strong reliability at Syncrude and the Oil Sands Base ramp up, leading to a decline in non-upgraded bitumen. Operating losses in the fourth quarter of 2020 were minimized by the decrease in operating, selling and general expenses associated with the continued execution of the company's cost reduction initiatives.

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

(1)

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

(2)

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

Net Loss

Suncor's net loss was $168 million ($0.11 per common share) in the fourth quarter of 2020, compared to a net loss of $2.335 billion ($1.52 per common share) in the prior year quarter. In addition to the factors impacting operating (loss) earnings discussed above, the net loss for the fourth quarter of 2020 included a $539 million unrealized after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt, a $423 million non-cash after-tax asset impairment charge and a $142 million after-tax transportation provision related to the Keystone XL pipeline project. The net loss in the prior year quarter included $3.352 billion of non-cash after-tax asset impairment charges partially offset by a $235 million unrealized after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt.

Funds from Operations and Cash Flow Provided By Operating Activities

Funds from operations were $1.221 billion ($0.80 per common share) in the fourth quarter of 2020, compared to $2.553 billion ($1.66 per common share) in the fourth quarter of 2019, and includes a $186 million ($0.12 per common share) transportation provision related to the Keystone XL pipeline project. Funds from operations were influenced by the same factors impacting operating (loss) earnings noted above.

Cash flow provided by operating activities, which includes changes in non-cash working capital, was $814 million ($0.53 per common share) for the fourth quarter of 2020, compared to $2.304 billion ($1.50 per common share) in the prior year quarter. In addition to the factors noted above, cash flow provided by operating activities was further impacted by a higher use of cash associated with the company's working capital balances, as compared to the prior year quarter. The use of cash in the company's non-cash working capital balances was primarily due to an increase in production and commodity prices at the end of the quarter, resulting in an increase in accounts receivable and inventory balances.

Operating Results

During the fourth quarter of 2020, Suncor's total upstream production was 769,200 boe/d compared to 778,200 boe/d in the prior year quarter.

SCO production increased to 514,300 bbls/d in the fourth quarter of 2020 from 456,300 bbls/d in the fourth quarter of 2019, marking the second best quarter of SCO production in the company's history and resulted in a combined upgrader utilization rate of 95% in the fourth quarter of 2020 compared to 83% in the prior year quarter. Increased production in the fourth quarter of 2020 was primarily due to strong reliability at Syncrude and Oil Sands Base ramping up to full operating rates. Following the completion of maintenance activities early in the quarter, the company achieved combined upgrader utilization of 102% in November and December of 2020. Both periods were impacted by planned maintenance at Oil Sands operations while the prior year quarter was impacted by planned maintenance at Syncrude. SCO production was further supported by increased In Situ bitumen production diverted to the upgrader to maximize the production of higher value SCO barrels. Increased upgrader utilization impacted total Oil Sands production due to the yield loss associated with the bitumen upgrading process. Despite the impact on our production volumes and cost per barrel metrics, the result of this strategy had a positive impact on overall funds flow and reflects our value over volume approach.

Non-upgraded bitumen production decreased to 157,200 bbls/d in the fourth quarter of 2020 from 206,000 bbls/d in the fourth quarter of 2019, as bitumen production from Firebag was diverted to the upgrader to maximize value over volume and maintenance activities were completed at Firebag early in the quarter. Production in the fourth quarter of 2020 was also impacted by lower production at Fort Hills as the asset commenced the phased ramp up to two primary extraction trains providing additional volumes at low incremental operating costs. The maintenance activities at Firebag have expanded the capacity of the facility through the installation of new incremental emulsion handling and steam infrastructure and also addressed plant restrictions that developed during the third quarter of 2020. Building on Suncor's commitment to operational excellence, the company exited the quarter with strong In Situ bitumen production, with both Firebag and MacKay River operating at near nameplate capacity.

Throughout 2020, Suncor continued to maintain its focus on value over volume, leveraging its broad asset base and operational flexibility to maximize the value of its allotted barrels under the Province of Alberta's mandatory curtailment program. The company optimized the transfer of its allotted curtailment credits among the company's assets, which helped the company achieve the second best year of SCO production in its history. During the fourth quarter of 2020, the Alberta government made the decision to suspend monthly limits on production under the curtailment system, effective December 2020.

Exploration and Production (E&P) production during the fourth quarter of 2020 decreased to 97,700 boe/d from 115,900 boe/d in the prior year quarter, primarily due to Terra Nova quayside preservation and natural declines in the United Kingdom.

Refinery crude throughput was 438,000 bbls/d and refinery utilization was 95% in the fourth quarter of 2020, compared to refinery crude throughput of 447,500 bbls/d and refinery utilization of 97% in the prior year quarter, with the decrease due to the impacts of reduced demand for transportation fuels as a result of the COVID-19 pandemic. Suncor leveraged its strong domestic sales network and export channels, including integration with the retail network, within its downstream business to achieve higher utilization rates which continued to outperform the Canadian refining average in the fourth quarter of 2020. Refined product sales decreased in the fourth quarter of 2020 to 508,800 bbls/d, compared to 534,600 bbls/d in the prior year quarter, as a result of the COVID-19 pandemic.

"Suncor achieved 100% utilization across our Canadian refineries in the fourth quarter, once again outperforming the Canadian refining average, which was bolstered by our strong domestic sales network and export channels within our downstream business. Combined upgrader utilization was 95%, reflecting very strong reliability across our Oil Sands assets following the completion of maintenance at the end of October, with total production further supported by debottlenecking activities that were completed at Firebag," said Little. "We continue to sharpen our focus on operational excellence, cost reductions and executing on our near-term plans."

The company's total operating, selling and general expenses decreased to $2.529 billion in the fourth quarter of 2020 from $2.820 billion in the prior year quarter, primarily due to lower cash operating costs across the company's Oil Sands assets, which included lower mine maintenance at Oil Sands operations, improved reliability at Syncrude and the reduction of costs at Fort Hills as it commenced its phased ramp up of production. The company also continued to execute on its cost reduction initiatives in the fourth quarter of 2020 and exceeded its previously announced annual operating cost reduction target for the full year.

Strategy Update

2020 was a year of unprecedented challenges that significantly impacted the energy industry. In March 2020, in response to the impacts of the COVID-19 pandemic, the company took significant steps to preserve the financial health of the company by increasing its liquidity, lowering its cash break-even costs, and setting meaningful operating cost and capital reduction targets.

For the full year, operating costs were reduced by $1.3 billion, or approximately 12%, compared to 2019 levels, through base business reductions and delivering on cost reduction initiatives including enhancements to our supply chain model. At Fort Hills, the mine is being prepared to support increasing production through 2021, consistent with previously announced guidance, with improved cost-effectiveness through the optimization of the autonomous mine fleet and other cost reduction initiatives. At Syncrude, Suncor and the joint venture owners are working together to build on the significant progress made to date towards sustainably lower Syncrude cash operating costs and higher upgrader utilization. In the fourth quarter of 2020, the Syncrude joint venture owners reached an agreement in principle for Suncor to take over as operator of the Syncrude asset by the end of 2021. Suncor, together with the other Syncrude joint venture owners, will continue to drive operating efficiencies and improve performance through integration. By capitalizing on the collective strength of our regional operations, gross synergies of $300 million annually are expected, which will further support Syncrude's ability to achieve its cost and productivity targets.

Suncor also met its $1.9 billion capital reduction target by the end of 2020, reducing its capital expenditures to $3.8 billion which was a 33% decrease compared to the original 2020 capital guidance midpoint. Targeted capital reductions in 2020 included the deferral and cancellation of projects and the reduction in spending across various assets. At Terra Nova, the company continued to exercise capital discipline by safely preserving the floating production storage and offloading unit quayside and deferring the asset life extension (ALE) project until an economically viable path forward with a safe and reliable return to operations can be determined. Subsequent to the fourth quarter of 2020, Suncor and the Terra Nova joint venture partners, together with the Government of Newfoundland and Labrador, agreed to a non-binding Memorandum of Understanding, which provides for a financial commitment by the government, including a modified royalty regime, in support of continued operations. The ALE project is currently being evaluated with all stakeholders to determine the best option to integrate and optimize potential funding to recover the remaining resources from the Terra Nova project. During the fourth quarter of 2020, Suncor recorded a non-cash impairment charge on its share of White Rose assets and the West White Rose Project. While the asset is currently producing, there is considerable doubt regarding the future of the West White Rose Project. Discussions are ongoing with the operator and various levels of government to determine the future of the project. The Government of Newfoundland and Labrador has agreed to provide some support for the West White Rose Project in 2021.

Despite the challenges during the year, the company executed on its plans to optimize its existing assets through significant value-added projects. The interconnecting pipelines between Suncor's Oil Sands Base and Syncrude were brought into service in the fourth quarter of 2020. Transfers began in December 2020, reflecting the enhanced integration and operational flexibility between these assets. At Firebag, work to expand the capacity of the facility by fully integrating the new incremental emulsion handling and steam infrastructure was completed, enabling the asset to produce near its new nameplate capacity of 215,000 bbls/d exiting the quarter. Through the deployment of the Autonomous Haulage System (AHS) at Fort Hills, the company has optimized its operations and expects to further enhance safety, environmental and operational performance. The interconnecting pipelines, debottlenecking at Firebag and AHS deployment will contribute, in part, to Suncor's incremental $2 billion free funds flow⁽¹⁾ target. Looking ahead, through the acceleration of Suncor's transformation, the company continues to work to fundamentally reduce the cost structure of running the business while increasing productivity. The company anticipates that the implementation of digital technologies will facilitate the transition to the workplace of the future, bolster operational excellence and drive additional value. In addition, the company has made the decision to restart the cogeneration project at Oil Sands Base to replace the existing coke-fired boilers and the Forty Mile Wind Power Project, both of which are expected to contribute to the company's environmental goals and incremental free funds flow target.

Suncor also continues to invest in midstream opportunities which expand the company's market reach and strengthen the company's sales channels, including the expansion of its Burrard product terminal, increased marine vessel activity and additional pipeline arrangements which provide feedstock optionality to our refineries. These actions have enabled the company to sustain high refinery utilization and crude production rates throughout 2020, despite demand weakness due to

(1)

Free funds flow is a non-GAAP financial measure. See the Non-GAAP Financial Measures Advisory section of this document.

the COVID-19 pandemic. Subsequent to the fourth quarter of 2020, the nameplate capacity of the company's Edmonton refinery increased from 142,000 bbls/d to 146,000 bbls/d as a result of debottlenecking activities.

"In 2020, we continued to execute on numerous strategic projects in support of structural free funds flow growth," said Little. "Our continued focus on disciplined cost management and capital allocation means that we are moving our company towards a sustainably lower cost base while continuing to maximize the value generated from our assets. These actions have strengthened the cash generation capabilities of our company, and we have already seen the initial benefits, while laying the foundation for increasing shareholder returns."

The company also continues to make investments in new technologies and renewable energy that lower its emissions and provide new sustainable energy sources. This includes equity investments in Enerkem Inc., a waste-to-biofuels and chemicals producer, and LanzaJet Inc., a company working to bring sustainable aviation fuel and renewable diesel to the commercial market. In the fourth quarter of 2020, Enerkem, Suncor and other partners announced construction plans for the Varennes Carbon Recycling facility, a biofuel plant in Varennes, Quebec, that is designed to convert commercial and industrial non-recyclable waste into biofuels and renewable chemicals. Suncor believes this investment complements Suncor's existing biofuels business and renewables portfolio and further demonstrates Suncor's active involvement in the global energy transition with low-carbon investments aligned with our current business.

Subsequent to the fourth quarter of 2020, the company reached an agreement to sell its 26.69% working interest in the Golden Eagle Area Development for US$325 million and contingent consideration up to US$50 million. The effective date of the sale is January 1, 2021 and is expected to close no later than the third quarter of 2021, subject to financing and shareholder approval of the purchaser along with other closing conditions and certain regulatory approvals.

Suncor entered the year with a strong investment grade balance sheet and a proven track record of shareholder returns and, at the onset of the COVID-19 pandemic, responded decisively to maintain its financial strength and liquidity. Suncor will remain disciplined in its capital allocation and, at current commodity prices plans, to pay down between $1.0 billion and $1.5 billion of debt and repurchase between $500 million and $1.0 billion of the company's shares in 2021, signifying the company's ability to generate cash flow and confidence in the underlying value of the company. Subsequent to the end of the quarter, the Toronto Stock Exchange (TSX) accepted a notice to commence a normal course issuer bid (NCIB) for up to 44,000,000 common shares.

In the fourth quarter of 2020, the company paid $320 million in dividends and subsequent to the end of the quarter, Suncor's Board of Directors approved a quarterly dividend of $0.21 per common share.

Operating (Loss) Earnings Reconciliation⁽¹⁾

Corporate Guidance

Suncor has updated its Corporate Guidance for the full year business environment outlook assumptions for Brent Sullom Voe from US$48.00/bbl to US$55.00/bbl, WTI at Cushing from US$45.00/bbl to US$52.00/bbl, WCS at Hardisty from US$32.00/bbl to US$39.00/bbl, New York Harbor 2-1-1 crack from US$12.50/bbl to US$15.00/bbl and the Cdn$/US$ exchange rate from 0.77 to 0.78, due to improvements in key forward curve pricing for the remainder of the year. As a result of these updates, the full year current income tax assumptions have changed from a recovery of $200 million – $500 million to an expense of $300 – $600 million.

For further details and advisories regarding Suncor's 2020 annual guidance, see www.suncor.com/guidance.

Normal Course Issuer Bid

Subsequent to the fourth quarter of 2020, the Toronto Stock Exchange (TSX) accepted a notice filed by Suncor to commence a normal course issuer bid (NCIB) to purchase shares through the facilities of the TSX, New York Stock Exchange and/or alternative trading platforms. The notice provides that, beginning February 8, 2021 and ending February 7, 2022, Suncor may purchase for cancellation up to 44,000,000 common shares, which is equal to approximately 2.9% of Suncor's issued and outstanding common shares. As at January 31, 2021, Suncor had 1,525,150,794 common shares issued and outstanding.

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

Pursuant to Suncor's previous NCIB, Suncor agreed that it would not purchase more than 78,549,178 common shares between May 6, 2019 and May 5, 2020. Suncor suspended buybacks during the first quarter of 2020. Between May 6, 2019 and March 30, 2020 and pursuant to Suncor's previous NCIB (as amended), Suncor repurchased 47,934,151 shares on the open market for approximately $1.94 billion, at a weighted average price of $40.42 per share.

Subject to the block purchase exemption that is available to Suncor for regular open market purchases under the NCIB, Suncor will limit daily purchases of Suncor common shares on the TSX in connection with the NCIB to no more than 25% (2,497,868 common shares) of the average daily trading volume of Suncor's common shares on the TSX during the previous six month period (9,991,475 common shares). Purchases under the NCIB will be made through open market purchases at market price, as well as by other means as may be permitted by the TSX and securities regulatory authorities, including by private agreements. Purchases made by private agreement under an issuer bid exemption order issued by a securities regulatory authority will be at a discount to the prevailing market price as provided in the exemption order. On February 8, 2021, Suncor expects to enter into an automatic share purchase plan in relation to purchases made in connection with the NCIB.

Measurement Conversions

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

FOURTH QUARTER DISCUSSION
February 3, 2021

Suncor is an integrated energy company headquartered in Calgary, Alberta, Canada. We are strategically focused on developing one of the world's largest petroleum resource basins – Canada's Athabasca oil sands. In addition, we explore for, acquire, develop, produce and market crude oil in Canada and internationally; we transport and refine crude oil, and we market petroleum and petrochemical products primarily in Canada. We also operate a renewable energy business and conduct energy trading activities focused principally on the marketing and trading of crude oil, natural gas, byproducts, refined products, and power.

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 26, 2020 (the 2019 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 document, and is not incorporated into this document by reference.

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

Table of Contents

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 is on an economic basis.

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

Non-GAAP Financial Measures

Certain financial measures in this document – namely operating (loss) earnings, funds from (used in) operations, return on capital employed (ROCE), Oil Sands operations cash operating costs, Fort Hills cash operating costs, Syncrude cash operating costs, refining and marketing margin, refining operating expense, free funds flow, discretionary free funds flow (deficit), and last-in, first-out (LIFO) inventory valuation methodology and related per share or per barrel amounts - are not prescribed by GAAP. Operating (loss) earnings is defined in the Non-GAAP Financial Measures Advisory section of this document and reconciled to the most directly comparable GAAP measures in the Consolidated Financial Information and Segment Results and Analysis sections of this document. Oil Sands operations cash operating costs, Fort Hills cash operating costs, Syncrude cash operating costs and LIFO inventory valuation methodology are defined in the Non-GAAP Financial Measures Advisory section of this document and reconciled to the most directly comparable GAAP measures in the Segment Results and Analysis section of this document. Funds from (used in) operations, ROCE, free funds flow, discretionary free funds flow (deficit), refining and marketing margin, and refining operating expense are defined and reconciled, where applicable, to the most directly comparable GAAP measures in the Non-GAAP Financial Measures Advisory section of this document.

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 below and within the Forward-Looking Information section of this document. This document contains forward-looking information based on Suncor's current expectations, estimates, projections and assumptions. This information is subject to a number of risks and uncertainties, including those discussed in this document, Management's Discussion and Analysis for the year ended December 31, 2019 dated February 26, 2020 (the 2019 annual MD&A) and Suncor's other disclosure documents filed with Canadian securities regulatory authorities and the SEC, many of which are beyond the company's control. Users of this information are cautioned that actual results may differ materially. Refer to the Forward-Looking Information section of this document for information on the material risk factors and assumptions underlying our forward-looking information contained in this document.

Continued Impact of the COVID-19 Pandemic

Suncor's business, financial condition and results of operations could be materially and adversely affected by the outbreak of epidemics, pandemics and other public health crises in geographic areas in which Suncor has operations, suppliers, customers or employees, including the COVID-19 pandemic and the ongoing uncertainty as to the extent and duration of the pandemic, as well as uncertainty surrounding new variations or mutations of the COVID-19 virus. The ongoing COVID-19 pandemic, and actions that have and may be taken by governmental authorities in response thereto, has resulted, and may continue to result in, among other things: increased volatility in financial markets, commodity prices and foreign currency exchange rates; disruptions to global supply chains; labour shortages; reductions in trade volumes; temporary operational restrictions and restrictions on gatherings greater than a certain number of individuals, shelter-in-place declarations and quarantine orders, business closures and travel bans; an overall slowdown in the global economy; political and economic instability; and civil unrest. In particular, the COVID-19 pandemic has resulted in, and may continue to result in, a reduction in the demand for, and prices of, commodities that are closely linked to Suncor's financial performance, including crude oil, refined petroleum products (such as jet fuel and gasoline), natural gas and electricity, and also increases the risk that storage for crude oil and refined petroleum products could reach capacity in certain geographic locations in which we operate. The recent resurgence of COVID-19 cases (including cases related to variants or mutations of the COVID-19 virus) in certain geographic areas, and the possibility that a resurgence may occur in other areas, has resulted in the re-imposition of certain restrictions noted above by local authorities. In addition, while vaccines are beginning to be distributed, there is uncertainty as to the timing, level of

adoption, duration of efficacy and effectiveness of the vaccine against variants or mutations. This continues the risk and uncertainty as to the extent and duration of the COVID-19 pandemic and the resultant impact on commodity demand and prices. A prolonged period of decreased demand for, and prices of, these commodities, and any applicable storage constraints, could also result in us voluntarily curtailing or shutting in production and a decrease in our refined product volumes and refinery utilization rates, which could adversely impact our business, financial condition and results of operations. Suncor is also subject to risks relating to the health and safety of our people, as well as the potential for a slowdown or temporary suspension of our operations in locations impacted by an outbreak. Such a suspension in operations could also be mandated by governmental authorities in response to the COVID-19 pandemic. This could negatively impact Suncor's production or refined product volumes and refinery utilization rates for a sustained period of time, which would adversely impact our business, financial condition and results of operations.

Continued Weakness and Volatility in Commodity and Petroleum Products Prices

Recent market events and conditions, including excess global crude oil and petroleum products supply as a result of decreased global demand due to the COVID-19 pandemic, have caused significant weakness and volatility in commodity and petroleum products prices. Commodity prices could remain under pressure for a prolonged period and which could cause continued weakness and volatility. This could result in reduced utilization and/or the suspension of operations at certain of our facilities, buyers of our products declaring force majeure or bankruptcy, the unavailability of storage, and disruptions of pipeline and other transportation systems for our products, which would further negatively impact Suncor's production or refined product volumes, and could adversely impact our business, financial condition and results of operations.

Measurement Conversions

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

Common Abbreviations

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

2. FOURTH QUARTER HIGHLIGHTS

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Fourth quarter financial results  

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Suncor's fourth quarter 2020 operating loss⁽¹⁾ was $142 million ($0.09 per common share), compared to operating earnings of $782 million ($0.51 per common share) in the prior year quarter. In the fourth quarter of 2020, crude oil and refined product realizations were significantly lower than the prior year quarter, with crude oil and crack spread benchmarks declining by more than 25%, primarily due to the continued impacts of the COVID-19 pandemic. Upstream production was comparable to the prior year quarter, as the company produced a higher proportion of higher value SCO barrels in the product mix, enabled by strong reliability at Syncrude and the Oil Sands Base ramp up, leading to a decline in non-upgraded bitumen. Operating losses in the fourth quarter of 2020 were minimized by the decrease in operating, selling and general expenses associated with the continued execution of the company's cost reduction initiatives.

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Suncor's net loss was $168 million ($0.11 per common share) in the fourth quarter of 2020, compared to a net loss of $2.335 billion ($1.52 per common share) in the prior year quarter. In addition to the factors impacting operating (loss) earnings discussed above, the net loss for the fourth quarter of 2020 included a $539 million unrealized after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt, a $423 million non-cash after-tax asset impairment charge and a $142 million after-tax transportation provision related to the Keystone XL pipeline project. The net loss in the prior year quarter included $3.352 billion of non-cash after-tax asset impairment charges partially offset by a $235 million unrealized after-tax foreign exchange gain on the revaluation of U.S. dollar denominated debt.

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Funds from operations⁽¹⁾ were $1.221 billion ($0.80 per common share) in the fourth quarter of 2020, compared to $2.553 billion ($1.66 per common share) in the fourth quarter of 2019, and includes a $186 million ($0.12 per common share) transportation provision related to the Keystone XL pipeline project. Funds from operations were influenced by the same factors impacting operating (loss) earnings noted above. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $814 million ($0.53 per common share) for the fourth quarter of 2020, compared to $2.304 billion ($1.50 per common share) in the prior year quarter. In addition to the factors noted above, cash flow provided by operating activities was further impacted by a higher use of cash associated with the company's working capital balances, as compared to the prior year quarter. The use of cash in the company's non-cash working capital balances was primarily due to an increase in production and commodity prices at the end of the quarter, resulting in an increase in accounts receivable and inventory balances.

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Delivered on annual cost reduction targets. The company exceeded its previously announced operating cost reduction target, reducing annual operating costs by $1.3 billion (approximately 12%) in 2020, compared to 2019 levels, and met its capital reduction target, reducing annual capital expenditures by $1.9 billion (approximately 33%) in 2020 compared to the original 2020 capital guidance midpoint. The company delivered a number of strategic initiatives within this target that enhanced integration between Suncor and Syncrude, expanded the company's market reach, debottlenecked In Situ facilities and its Edmonton refinery, and reduced structural operating costs by leveraging technology.

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Sustained downstream outperformance. Reliable operations drove refinery utilization of 95% in the fourth quarter of 2020, compared to 87% in the third quarter of 2020 and 97% in the prior year quarter. Suncor leveraged its strong domestic sales network and export channels, including integration with the retail network, within its downstream business to achieve higher utilization rates which continued to outperform the Canadian refining average in the fourth quarter of 2020.

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Solid upstream results and continued focus on value over volume. During the fourth quarter of 2020, Suncor's total upstream production was 769,200 boe/d compared to 778,200 boe/d in the prior year quarter. The company's SCO production increased to 514,300 bbls/d in the fourth quarter of 2020 from 456,300 bbls/d in the fourth quarter of 2019, marking the second best quarter of SCO production in the company's history. Together, the Syncrude and Oil Sands operations upgraders achieved combined upgrader utilization of 95% in the fourth quarter of 2020, compared to 83% in the prior year quarter, due to strong reliability at Syncrude and Oil Sands Base ramping up to full operating rates following the completion of maintenance early in the quarter.

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Execution of debottlenecking activities. At Firebag, work to expand the capacity of the facility by 12,000 bbls/d was completed, enabling the asset to produce near its new nameplate capacity of 215,000 bbls/d exiting the quarter. In addition, at the company's Edmonton refinery, the nameplate capacity was increased from 142,000 bbls/d to 146,000 bbls/d, subsequent to the fourth quarter of 2020, as a result of debottlenecking activities.

(1)

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

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Syncrude operatorship agreement expected to unlock further value. The Syncrude joint venture owners reached an agreement in principle for Suncor to take over as operator of the Syncrude asset by the end of 2021. Suncor, together with the other Syncrude joint venture owners, will continue to drive operating efficiencies, improve performance and develop regional synergies through integration. By capitalizing on the collective strength of our regional operations, annual synergies of $300 million gross are expected.

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Enhancing integration between Suncor and Syncrude. The interconnecting pipelines between Suncor's Oil Sands Base and Syncrude were brought into service in the fourth quarter of 2020. Transfers began in December 2020, reflecting the enhanced integration and operational flexibility between these assets.

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Disciplined capital allocation framework. Suncor will remain disciplined in its capital allocation and, at current commodity prices, plans to pay down between $1.0 billion and $1.5 billion of debt and repurchase between $500 million and $1.0 billion of the company's shares in 2021, signifying the company's ability to generate cash flow and confidence in the underlying value of the company. Subsequent to the end of the quarter, the Toronto Stock Exchange (TSX) accepted a notice to commence a normal course issuer bid (NCIB) for up to 44,000,000 common shares.

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Dividend approved. Subsequent to the fourth quarter of 2020, Suncor's Board of Directors approved a quarterly dividend of $0.21 per common share.

3. CONSOLIDATED FINANCIAL INFORMATION

Financial Highlights

Operating Highlights

Net Loss

Suncor's consolidated net loss for the fourth quarter of 2020 was $168 million, compared to a net loss of $2.335 billion for the prior year quarter. The net loss was primarily caused by the same factors that resulted in the operating loss described subsequently in this section of this document.

Other items affecting net loss over these periods included:

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The after-tax unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt was $539 million for the fourth quarter of 2020, compared to a gain of $235 million for the fourth quarter of 2019.

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During the fourth quarter of 2020, the company recorded non-cash after-tax impairment charges of $423 million against its share of the White Rose assets, in the Exploration and Production (E&P) segment, as a result of the high degree of uncertainty surrounding the future of the West White Rose Project.

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In the fourth quarter of 2020, the company recorded a provision to transportation expense for $186 million ($142 million after-tax) related to the Keystone XL pipeline project.

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During the fourth quarter of 2019, the company recorded after-tax impairment charges of $2.803 billion on its share of the Fort Hills assets, in the Oil Sands segment, due to a decline in forecasted long-term heavy crude oil prices, and $393 million against White Rose, in the E&P segment, due to increased capital cost estimates at the West White Rose Project.

Operating (Loss) Earnings Reconciliation⁽¹⁾

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

(1)

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

(2)

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

Suncor's fourth quarter 2020 operating loss was $142 million ($0.09 per common share), compared to operating earnings of $782 million ($0.51 per common share) in the prior year quarter. In the fourth quarter of 2020, crude oil and refined product realizations were significantly lower than the prior year quarter, with crude oil and crack spread benchmarks declining by more than 25%, primarily due to the continued impacts of the COVID-19 pandemic. Upstream production was comparable to the prior year quarter, as the company produced a higher proportion of higher value SCO barrels in the product mix, enabled by strong reliability at Syncrude and the Oil Sands Base ramp up, leading to a decline in non-upgraded bitumen. Operating losses in the fourth quarter of 2020 were minimized by the decrease in operating, selling and general expenses associated with the continued execution of the company's cost reduction initiatives.

After-Tax Share-Based Compensation Expense by Segment

The after-tax share-based compensation expense increased to $74 million during the fourth quarter of 2020, compared to an expense of $55 million during the prior year quarter, as a result of a greater increase in the company's share price through the fourth quarter of 2020.

Business Environment

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

The COVID-19 pandemic has significantly lowered demand for crude oil and refined products, resulting in a decrease in crude oil and crack spread benchmarks of more than 25% compared to the prior year quarter.

Suncor's sweet SCO price realizations are influenced primarily by the price of WTI at Cushing and by the supply and demand for sweet SCO from Western Canada. Sweet SCO price realizations in the fourth quarter of 2020 reflected a significant decrease in WTI at Cushing, which averaged US$42.65/bbl compared to US$56.95/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 decreased to $50.25/bbl in the fourth quarter of 2020 compared to $68.10/bbl in the prior year quarter, and prices for WCS at Hardisty decreased to an average of US$33.35/bbl in the fourth quarter of 2020, from US$41.10/bbl in the prior year quarter.

Bitumen production that Suncor does not upgrade is blended with diluent or SCO to facilitate delivery on pipeline systems. Net bitumen price realizations are, therefore, influenced by both prices for Canadian heavy crude oil (WCS at Hardisty is a common reference), prices for diluent (Condensate at Edmonton) and SCO. Bitumen price realizations can also be affected by bitumen quality and spot sales, and the price variance between Hardisty, Alberta and U.S. Gulf Coast heavy pricing. 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 price realizations. Bitumen prices benefited from the narrowing of heavy crude oil differentials in the fourth quarter of 2020.

Suncor's price realizations for production from E&P Canada and E&P International assets are influenced primarily by the price for Brent crude, which decreased to US$44.20/bbl in the fourth quarter of 2020, compared to US$63.30/bbl in the prior year quarter.

Suncor's refining and marketing 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 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.

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 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 margins are also presented on a LIFO basis, which is consistent with how industry benchmarks and the Suncor 5-2-2-1 index are calculated and with how management evaluates performance.

In the fourth quarter of 2020, the 2-1-1 benchmark crack spreads declined significantly compared to the prior year quarter due to decreased demand for transportation fuels. The Suncor 5-2-2-1 index was US$18.55/bbl in the fourth quarter of 2020, compared to US$26.20/bbl in the fourth quarter of 2019, impacted by lower benchmark cracking margins and narrowing crude differentials.

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 $2.65/mcf in the fourth quarter of 2020, from $2.50/mcf in the prior year quarter.

Excess electricity produced in Suncor's Oil Sands operations and at Fort Hills is sold to the Alberta Electric System Operator, with the proceeds netted against the cash operating cost per barrel metric. The Alberta power pool price decreased to an average of $46.15/MWh in the fourth quarter of 2020, compared to $46.95/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. The Canadian dollar strengthened in relation to the U.S. dollar in the fourth quarter of 2020, as the average exchange rate increased to US$0.77 per one Canadian dollar from US$0.76 per one Canadian dollar in the prior year quarter. This rate increase had a negative impact on price realizations for the company during the fourth quarter of 2020 when compared to the prior year quarter.

Suncor also has assets and liabilities, including approximately 65% of the company's debt, that are denominated in U.S. dollars and translated to Suncor's reporting currency (Canadian dollars) at each balance sheet date. A decrease in the value of the Canadian dollar, relative to the U.S. dollar, from the previous balance sheet date increases the amount of Canadian dollars required to settle U.S. dollar denominated obligations, while an increase in the value of the Canadian dollar, relative to the U.S. dollar, decreases the amount of Canadian dollars required to settle U.S. dollar denominated obligations.

4. SEGMENT RESULTS AND ANALYSIS

OIL SANDS

Financial Highlights

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

(1)

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

The Oil Sands segment had an operating loss of $151 million in the fourth quarter of 2020, compared to operating earnings of $277 million in the prior year quarter. The decrease was primarily due to lower realized crude prices, as crude benchmarks decreased by approximately 25% compared to the prior year quarter as a result of the COVID-19 pandemic, partially offset by lower operating expenses, a higher proportion of higher value SCO barrels in the product mix, enabled by strong reliability and lower royalties, and DD&A and exploration expenses.

Production Volumes⁽¹⁾⁽²⁾

SCO production increased to 514,300 bbls/d in the fourth quarter of 2020 from 456,300 bbls/d in the fourth quarter of 2019, marking the second best quarter of SCO production in the company's history and resulted in a combined upgrader utilization rate of 95% in the fourth quarter of 2020 compared to 83% in the prior year quarter. Increased production in the fourth quarter of 2020 was primarily due to strong reliability at Syncrude and Oil Sands Base ramping up to full operating rates. Following the completion of maintenance activities early in the quarter, the company achieved combined upgrader utilization of 102% in November and December of 2020. Both periods were impacted by planned maintenance at Oil Sands operations while the prior year quarter was impacted by planned maintenance at Syncrude. SCO production was further supported by increased In Situ bitumen production diverted to the upgrader to maximize the production of higher value SCO barrels. Increased upgrader utilization impacted total Oil Sands production due to the yield loss associated with the bitumen upgrading process. Despite the impact on our production volumes and cost per barrel metrics, the result of this strategy had a positive impact on overall funds flow and reflects our value over volume approach.

Non-upgraded bitumen production decreased to 157,200 bbls/d in the fourth quarter of 2020 from 206,000 bbls/d in the fourth quarter of 2019, as bitumen production from Firebag was diverted to the upgrader to maximize value over volume and maintenance activities were completed at Firebag early in the quarter. Production in the fourth quarter of 2020 was also impacted by lower production at Fort Hills as the asset commenced the phased ramp up to two primary extraction trains providing additional volumes at low incremental operating costs. The maintenance activities at Firebag have expanded the capacity of the facility through the installation of new incremental emulsion handling and steam infrastructure and also addressed plant restrictions that developed during the third quarter of 2020. Building on Suncor's commitment to operational excellence, the company exited the quarter with strong In Situ bitumen production, with both Firebag and MacKay River operating at near nameplate capacity.

Sales Volumes⁽¹⁾

SCO and diesel sales volumes increased to 495,600 bbls/d in the fourth quarter of 2020, from 447,600 bbls/d in the prior year quarter, consistent with the increase in production, partially offset by a build of inventory as a result of strong production and timing of sales.

Non-upgraded bitumen sales volumes were 139,600 bbls/d in the fourth quarter of 2020, compared to 218,100 bbls/d in the prior year quarter, and were influenced by the same factors that impacted production volumes, discussed above, in addition to a build of inventory as increased sales were transported to customers extending down to the U.S. Gulf Coast.

Price Realizations⁽¹⁾

In the fourth quarter of 2020, Oil Sands price realizations continued to be impacted by the decline in demand due to the impacts of the COVID-19 pandemic.

Royalties

Royalties for the Oil Sands segment were lower in the fourth quarter of 2020 compared to the prior year quarter, primarily due to lower crude price realizations.

Expenses and Other Factors

Total Oil Sands operating and transportation expenses decreased significantly in the fourth quarter of 2020 compared to the prior year quarter, as described in detail below. 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 decreased compared to the prior year quarter, primarily due to lower mine maintenance, tailings and upgrading costs as well as cost reduction initiatives, partially offset by an increase in natural gas prices.

At Fort Hills, operating costs in the fourth quarter of 2020 decreased when compared to the prior year quarter, primarily due to lower costs associated with operating at reduced capacity and improved cost-effectiveness through the optimization of the autonomous mine fleet and other cost reduction initiatives.

Suncor's share of Syncrude operating costs in the fourth quarter of 2020 decreased compared to the prior year quarter, primarily due to lower maintenance costs on improved reliability and cost reduction initiatives.

DD&A expense for the fourth quarter of 2020 was lower compared to the prior year quarter, as the prior year included additional depreciation related to the company's asset retirement obligation asset.

Cash Operating Costs

Oil Sands operations cash operating costs⁽¹⁾ per barrel decreased to $26.50 in the fourth quarter of 2020, compared to $28.55 in the prior year quarter, primarily due to lower maintenance costs and cost reduction initiatives, partially offset by higher natural gas costs, as well as the impact of a product mix more weighted towards higher value but higher cost SCO sales. Inventory changes reflected a build of inventory.

Fort Hills cash operating costs⁽¹⁾ per barrel were $31.55 in the fourth quarter of 2020, compared to $28.65 in the prior year quarter, primarily due to lower production associated with operating at reduced capacity, partially offset by a significant reduction in costs.

Syncrude cash operating costs⁽¹⁾ per barrel were $28.45 in the fourth quarter of 2020, compared to $38.85 in the prior year quarter, with the decrease primarily due to increased production volumes, lower maintenance costs on improved reliability and cost reduction initiatives.

Planned Maintenance Update

The company completed maintenance at Oil Sands Base and Firebag early in the fourth quarter of 2020. The company plans to commence maintenance at Upgrader 1 in the first quarter of 2021. The anticipated impact of this maintenance event has been reflected in the company's 2021 guidance.

(1)

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

EXPLORATION AND PRODUCTION

Financial Highlights