Mr. Rich Kruger reports

SUNCOR ENERGY REPORTS SECOND QUARTER 2023 RESULTS

Suncor Energy Inc. has released its second quarter 2023 results.

Highlights:

• Delivered adjusted funds from operations of $2.7-billion, including a $275-million before-tax restructuring charge related to the company's work force reduction plans, and adjusted operating earnings of $1.3-billion;
• Returned $1.4-billion to shareholders through $684-million in share repurchases and $679-million in dividends;
• Delivered total upstream production of 741,900 barrels of oil equivalent per day (boe/d), with strong upgrader utilization outside of planned maintenance activities and continued strong performance from in situ assets;
• Completed all major annual planned maintenance across all refineries, resulting in refinery crude throughput of 394,400 barrels per day (bbl/d);
• Portfolio optimization continued with the completion of the sale of the United Kingdom exploration and production (E&P) portfolio.

"Our in situ assets and upgraders delivered strong performance once again and helped reduce the impacts of planned maintenance at our integrated operations in the Fort McMurray region," said Rich Kruger, Suncor's president and chief executive officer. "During the second quarter, we generated $2.7-billion of adjusted funds from operations and delivered $1.4-billion to shareholders, and we're making good progress on our goal of clarifying, simplifying and focusing the organization to drive improved performance and maximize value for our shareholders."

Unless otherwise noted, all financial figures are unaudited, presented in Canadian dollars and derived from the company's condensed consolidated financial statements, which are based on Canadian generally accepted accounting principles (GAAP), specifically international financial reporting standards (IFRS), as issued by the International Accounting Standards Board (IASB), and are prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting. Production volumes are presented on a working interest basis, before royalties, except for production values from the company's Libya operations, which are presented on an economic basis. Certain financial measures referred to in this news release (adjusted funds from operations, adjusted operating earnings, free funds flow and net debt) are not prescribed by Canadian GAAP. See the non-GAAP financial measures section of this news release. References to oil sands operations exclude Suncor's interest in Fort Hills and Syncrude.

Financial results

Suncor's adjusted operating earnings were $1.253-billion (96 cents per common share) in the second quarter of 2023, compared with $3.814-billion ($2.71 per common share) in the prior-year quarter, primarily due to decreased crude oil and refined product realizations, reflecting a weaker business environment in the current quarter and a first-in, first-out (FIFO) inventory valuation loss in the current quarter compared with a gain in the prior-year quarter, partially offset by lower royalties and income taxes.

Suncor's net earnings were $1.879-billion ($1.44 per common share) in the second quarter of 2023, compared with $3.996-billion ($2.84 per common share) in the prior-year quarter. In addition to the factors impacting adjusted operating earnings, net earnings for the second quarter of 2023 and the prior-year quarter were impacted by the reconciling items shown in the attached table.

Adjusted funds from operations were $2.655-billion ($2.03 per common share) in the second quarter of 2023, compared with $5.345-billion ($3.80 per common share) in the prior-year quarter, and were influenced by the same factors impacting adjusted operating earnings described above, as well as a restructuring charge related to work force reduction plans recorded in the current quarter.

Cash flow provided by operating activities, which includes changes in non-cash working capital, was $2.803-billion ($2.14 per common share) in the second quarter of 2023, compared with $4.235-billion ($3.01 per common share) in the prior-year quarter.

Suncor's total operating, selling and general (OS&G) expenses were $3.44-billion in the second quarter of 2023, compared with $3.088-billion in the prior-year quarter, with the increase primarily due to a $275-million restructuring charge related to the company's work force reduction plans, increased mining activity, the company's increased working interest in Fort Hills, increased maintenance costs and the impact of inflation. This was partially offset by a decrease in share-based compensation expense and decreased commodity input costs primarily due to lower natural gas prices.

As at June 30, 2023, Suncor's net debt was $14.394-billion, a reduction of $1.320-billion compared with March 31, 2023, with the decrease in net debt primarily due to an increase in cash and cash equivalents, which included the proceeds from the sale of the company's U.K. E&P (exploration and production) portfolio.

Operating results

Total oil sands bitumen production increased in the second quarter of 2023 compared with the prior-year quarter, due to lower maintenance activities in the current period, excluding at Syncrude, which was impacted by planned turnaround activities, and the company's increased working interest in Fort Hills.

The company's net SCO production increased to 505,000 bbl/d in the second quarter of 2023, representing combined upgrader utilizations of 94 per cent, compared with 483,000 bbl/d and 89 per cent in the prior-year quarter, reflecting lower planned maintenance activities in the current period and strong upgrader utilizations outside of planned maintenance activities.

To mitigate the impacts of planned maintenance during the quarter, the company leveraged its regional asset connectivity through increased internal transfers between assets.

The company's saleable non-upgraded bitumen production increased to 174,100 bbl/d in the second quarter of 2023, compared with 158,500 bbl/d in the prior-year quarter, reflecting increased production at the company's in situ assets, as the prior-year quarter was impacted by maintenance activities, and increased production at Fort Hills, due to the company's additional working interest.

E&P during the second quarter of 2023 decreased compared with the prior-year quarter, primarily due to natural declines and the divestment of the company's Norway assets in the third quarter of 2022.

Refinery crude throughput was 394,400 bbl/d and refinery utilization was 85 per cent in the second quarter of 2023, compared with 389,300 bbl/d and 84 per cent in the prior-year quarter, reflecting planned turnaround activities in both periods.

Refined product sales in the second quarter of 2023 were 547,000 bbl/d, compared with 536,900 bbl/d in the prior-year quarter, primarily due to the company leveraging its extensive domestic sales network and export channels.

Corporate and strategy updates:

• Portfolio optimization: completed the sale of the U.K. E&P portfolio for gross proceeds of $1.1-billion, resulting in a gain on sale of $607-million ($607-million after tax);
• Update on acquisition of TotalEnergies' Canadian operations: following ConocoPhillips Canada exercising its pre-emptive right to purchase the 50-per-cent working interest in the Surmont in situ asset, Suncor is continuing to evaluate the transaction to acquire the remainder of TotalEnergies' Canadian operations, including the remaining 31.23-per-cent working interest in Fort Hills;
• Sustainability reporting: Suncor released its 2023 report on sustainability and climate report, marking its 28th year of sustainability reporting. The reports highlight how the company is working to achieve strong environmental, social and governance performance, and its actions on sustainable energy development;
• Cybersecurity incident: The company experienced a cybersecurity incident in late June. The incident did not impact the safety or reliability of the company's field operations but did impact some business operations and services at the end of the quarter, which did not have a material impact on the company's financial results.

Corporate guidance updates

There have been no changes to the corporate guidance ranges previously issued on May 8, 2023.

For further details and advisories regarding Suncor's 2023 corporate guidance, see the company's website.

Non-GAAP financial measures

Certain financial measures in this news release, namely adjusted funds from operations, adjusted operating earnings, free funds flow and net debt, and related per-share or per-barrel amounts, are not prescribed by GAAP. These non-GAAP financial measures are included because management uses the information to analyze business performance, leverage and liquidity, as applicable, and it may be useful to investors on the same basis. These non-GAAP financial measures do not have any standardized meaning and, therefore, are unlikely to be comparable with similar measures presented by other companies. Therefore, these non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Except as otherwise indicated, these non-GAAP financial measures are calculated and disclosed on a consistent basis from period to period. Specific adjusting items may only be relevant in certain periods.

Suncor is Canada's leading integrated energy company. Suncor's operations include: oil sands development, production and upgrading; offshore oil and gas; petroleum refining in Canada and the United States; 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 and renewable fuels. 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 North American Index, FTSE4Good Index and CDP. Suncor's common shares are listed on the Toronto Stock Exchange and the New York Stock Exchange.

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