Exhibit 99.2β
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 EnergyΒ Inc.βs (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 Suncorβs Management Discussion and Analysis (MD&A) dated MayΒ 9, 2022. See also the Advisories section of the MD&A. References to Oil Sands operations exclude Suncorβs interests in Fort Hills and Syncrude.
βIn the first quarter of 2022, Suncor generated the highest quarterly adjusted funds from operations in the companyβs history of $4.1Β billion, or $2.86 per share, including record adjusted funds from operations from our Oil Sands assets, as commodity prices increased,β said Mark Little, president and chief executive officer. βOur increased cash flows enabled us to reduce net debt by $728Β million and return over $1.4Β billion of value to shareholders through $827Β million in share repurchases and payment ofβ $601Β million in dividends.β
β’
Adjusted funds from operations(1)(2) increased to $4.094Β billion ($2.86 per common share) in the first quarter of 2022, compared to $2.110Β billion ($1.39 per common share) in the prior year quarter, with adjusted funds from operations in the first quarter of 2022 more than doubling the prior year quarter on a per share basis. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $3.072Β billion ($2.14 per common share) in the first quarter of 2022, compared to $2.345Β billion ($1.54 per common share) in the prior year quarter.
β
β’
Adjusted operating earnings(1)(2) increased to $2.755Β billion ($1.92 per common share) in the first quarter of 2022, compared to $746Β million ($0.49 per common share) in the prior year quarter. The company had net earnings ofβ $2.949Β billion ($2.06 per common share) in the first quarter of 2022, compared to $821Β million ($0.54 per common share) in the prior year quarter.
β
β’
In the first quarter of 2022, Oil Sands delivered its highest quarterly adjusted funds from operations(3) on record of $3.414Β billion, compared to $1.527Β billion in the prior year quarter, supported by strong production from the companyβs In Situ assets, including Firebag, which produced its 750Β millionth barrel of oil during the quarter, and the ramp-up of production at Fort Hills, allowing the company to capture strong upstream pricing. Combined Oil Sands upgrader utilization was 96% compared to 97% in the prior year quarter.
β
β’
Refining and Marketing (R&M) generated $1.597Β billion in adjusted funds from operations(3) in the first quarter of 2022, compared to $1.172Β billion in the prior year quarter. The first quarter of 2022 included a first-in, first-out (FIFO) inventory valuation gain, including the impact of commodity risk management activities, ofβ $729Β million before-tax, compared to $432Β million before-tax in the prior year quarter. On a last-in, first-out (LIFO)(4) basis Suncorβs refining and marketing gross margin(1) improved nearly 20% compared to the prior year quarter. Refinery utilization in the first quarter of 2022 was 94%, compared to refinery utilization of 92% in the prior year quarter, as the companyβs Canadian refineries continued to outperform the national refining industry average.(5)
β
β’
In the first quarter of 2022, the company returned over $1.4Β billion of value to its shareholders through $827Β million in share repurchases and payment ofβ $601Β million of dividends. As at MayΒ 6, 2022, since the start of the year, the company has repurchased $1.3Β billion of Suncorβs common shares, representing approximately 33Β million common shares at an average share price of $39.70 per share, or the equivalent of 2.3% of its common shares as at DecemberΒ 31, 2021.
β
β’
In the first quarter of 2022, the company reduced net debt(1) by $728Β million, primarily due to an early redemption of its outstanding US$182Β million 4.50% notes and increased cash and cash equivalents, after making a significant income tax payment of approximately $1.0Β billion during the quarter related to the companyβs 2021 income tax expense.
β
β’
During the first quarter of 2022, in alignment with Suncorβs strategy to maximize value through its core business, the company announced that it is taking steps to optimize its asset portfolio through the planned divestment of its ExplorationΒ & Production (E&P) assets in Norway. Subsequent to the quarter, based on interest received in the companyβs E&P assets in the U.K., the company is exploring the sale of its entire U.K. portfolio, and has also announced plans to divest its wind and solar assets to focus on areas of energy expansion that are more complementary to its base business, with an emphasis on hydrogen and renewable fuels.
β
β’
Subsequent to the quarter, Suncorβs Board of Directors (the Board) approved a quarterly dividend ofβ $0.47Β per share, which represents an increase of 12% over the prior quarter dividend and the highest quarterly dividend per share in the companyβs history. Also, the Board and the Toronto Stock Exchange (TSX) approved an increase to the companyβs normal course issuer bid program (NCIB), to increase the maximum number of common shares the company may repurchase to up to approximately 10% of Suncorβs public float as at JanuaryΒ 31, 2022.
β
(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.
β
(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.
β
(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.
β
(4)
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.
β
(5)
Source: Canada Energy Regulatorβββhttps://www.cer-rec.gc.ca/en/data-analysis/energy-commodities/crude-oil-petroleum-products/statistics/weekly-
crude-run-summary-data/index.html.
crude-run-summary-data/index.html.
β
Β
(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.
β
(2)
Excludes capitalized interest for all periods presented and capital expenditures related to assets held for sale ofβ $19Β million in the first quarter ofΒ 2022.
β
(3)
Share repurchases per share are calculated as total share repurchases divided by the weighted average number of shares outstanding for the applicable period.
β
2Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Financial Results
Adjusted Operating Earnings
Suncorβs adjusted operating earnings increased to $2.755Β billion ($1.92 per common share) in the first quarter of 2022, compared to $746Β million ($0.49 per common share) in the prior year quarter, primarily due to significantly higher crude oil and refined product realizations reflecting the improved business environment in the current quarter. The increase in adjusted operating earnings was partially offset by an increase in royalties and income taxes associated with the improved business environment and increased operating expenses primarily related to a significant increase in commodity costs and share-based compensation expense in the current quarter compared to the prior year quarter.
Bridge Analysis of Adjusted Operating Earnings ($ 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.
β
(2)
All reconciling items are presented on a before-tax basis and adjusted for income taxes in the Income Tax bridge factor.
β
(3)
The bridge factor for Inventory Valuation is comprised of changes in the FIFO inventory valuation and the realized portion of commodity risk management activities reported in the R&M segment, and changes in the intersegment elimination of profit reported in the Corporate and Eliminations segment.
β
Net Earnings
Suncorβs net earnings were $2.949Β billion ($2.06 per common share) in the first quarter of 2022, compared to $821Β million ($0.54 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, net earnings for the first quarter of 2022 included a $146Β million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $75Β million unrealized gain on risk management activities recorded in other income (loss), and a $27Β million income tax expense related to the items noted. Net earnings in the prior year quarter included a $196Β million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $27Β million unrealized gain on risk management activities recorded in other income (loss), a restructuring charge ofβ $168Β million related to workforce reduction plans recorded in operating, selling and general expenses in the Corporate and Eliminations segment, and a $20Β million income tax recovery related to the items noted.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 3
Β
Adjusted Operating Earnings Reconciliation(1)
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Net earnings | β | β | β | β | 2β949 | β | β | β | β | β | 821 | β | β |
β | ||||||||||||||
β | Unrealized foreign exchange gain on U.S. dollar denominated debt | β | β | β | β | (146) | β | β | β | β | β | (196) | β | β |
β | ||||||||||||||
β | Unrealized gain on risk management activities | β | β | β | β | (75) | β | β | β | β | β | (27) | β | β |
β | ||||||||||||||
β | Restructuring charge | β | β | β | β | β | β | β | β | β | β | 168 | β | β |
β | ||||||||||||||
β | Income tax expense (recovery) on adjusted operating earnings adjustments | β | β | β | β | 27 | β | β | β | β | β | (20) | β | β |
β | Adjusted operating earnings(1) | β | β | β | β | 2β755 | β | β | β | β | β | 746 | β | β |
β
(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.
β
Adjusted Funds from Operations and Cash Flow Provided by Operating Activities
Adjusted funds from operations were $4.094Β billion ($2.86 per common share) in the first quarter of 2022, compared to $2.110Β billion ($1.39 per common share) in the prior year quarter. Adjusted funds from operations were influenced by the same factors impacting adjusted operating earnings noted above. Adjusted funds from operations in the prior year quarter were also impacted by the $168Β million before-tax restructuring charge related to workforce reduction plans recorded in the first quarter ofΒ 2021.
Cash flow provided by operating activities, which includes changes in non-cash working capital, was $3.072Β billion ($2.14 per common share) for the first quarter of 2022, compared to $2.345Β billion ($1.54 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 use of cash associated with the companyβs working capital balances in the first quarter of 2022, compared to a source of cash in the prior year quarter. The use of cash in the first 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 and the payment of the companyβs 2021 income tax expense, partially offset by an increase in accounts payable and accrued liabilities and an increase in taxes payable related to the companyβs 2022 income tax expense.
4Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Operating Results
Suncorβs total upstream production was 766,100Β barrels of oil equivalent per day (boe/d) in the first quarter of 2022, compared to 785,900Β boe/d in the prior year quarter.
Total Oil Sands production was 685,700Β barrels per day (bbls/d) in the first quarter of 2022, compared to 690,600Β bbls/d in the prior year quarter, with the first quarter of 2022 reflecting lower production early in the quarter due to the previously disclosed weather-related mining challenges experienced in the region. The companyβs net SCO production in the first quarter of 2022 was 515,300Β bbls/d, compared to 519,900Β bbls/d in the first quarter of 2021, reflecting a combined upgrader utilization rate of 96% compared to 97% in the prior year quarter.
The companyβs non-upgraded bitumen production was 170,400Β bbls/d in the first quarter of 2022, comparable to 170,700Β bbls/d in the prior year quarter, primarily due to increased production at Fort Hills, which was largely offset by decreased saleable bitumen production from the companyβs In Situ assets. Production from Fort Hills in the first quarter of 2022 increased to 87,500Β bbls/d, compared to 51,200Β bbls/d in the prior year quarter, as production ramped up in the quarter. Overall production from the companyβs In Situ assets was comparable to the prior year quarter, reflecting strong production in both periods, with the decrease in saleable bitumen production in the current period due to increased Firebag volumes being diverted to upgrading to maximize higher-value SCO production.
The company will commence significant planned turnaround activities at Firebag in the second quarter of 2022, the largest turnaround in Firebag history. Additionally, in the second quarter of 2022, the company will commence planned annual coker maintenance at Oil Sands Base UpgraderΒ 2 and planned maintenance at Fort Hills, and is expected to complete planned maintenance at Syncrude that commenced in the first quarter. Planned maintenance at Syncrude in the first quarter of 2022 included hydrotreating maintenance that was accelerated from later in the year to stagger coker and hydrotreating maintenance, which is expected to optimize full-year production at Syncrude.
βFollowing the weather-related impacts early in the quarter, our Oil Sands assets delivered solid production in the first quarter, and we accelerated Syncrude hydrotreating maintenance in order to optimize full-year production, positioning us well for the remainder of the year,β said Little. βIn the downstream business, refinery utilization was 94% in the first quarter as our Canadian refineries continue to outperform the national refining industry average.β
E&P produced 80,400Β boe/d during the first quarter of 2022, compared to 95,300Β boe/d in the prior year quarter. The decrease in production was primarily due to the absence of production from the Golden Eagle Area Development, as the sale of the companyβs working interest in the asset was completed in the fourth quarter of 2021, and natural declines, partially offset by liftings in Libya in the first quarter of 2022 compared to no liftings in Libya in the prior year quarter.
Refinery crude throughput increased to 436,500Β bbls/d and refinery utilization was 94% in the first quarter of 2022, compared to 428,400Β bbls/d and 92% in the prior year quarter, reflecting improved refined product demand and a strategic build in product inventory in advance of upcoming turnaround activities, partially offset by maintenance that occurred late in the current period, including maintenance that was accelerated into the first quarter from the second quarter. Refined product sales in the first quarter of 2022 increased to 551,900Β bbls/d, compared to 548,100Β bbls/d in the prior year quarter. Domestic demand for diesel has improved compared to 2019 levels, however, gasoline demand continues to lag behind the comparable 2019 levels. The company will undergo planned turnaround maintenance at its refineries in the second quarter ofΒ 2022.
The companyβs total operating, selling and general expenses were $3.088Β billion in the first quarter of 2022, compared to $2.900Β billion in the prior year quarter. The increase was primarily due to a significant increase in commodity costs, primarily driven by increased natural gas prices, and increased share-based compensation expenses in the first quarter of 2022 compared to the first quarter of 2021. The increase was also due to costs associated with increased production at Fort Hills and increased maintenance costs in the current period relative to the prior year quarter, partially offset by increased costs in the prior year quarter relating to a restructuring charge associated with the companyβs workforce reduction plans. The companyβs exposure to higher natural gas costs is partially mitigated by revenue from power sales that is recorded in operating revenues.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 5
Β
Strategy Update
Delivering competitive and sustainable returns to shareholders is a top priority of the company. Critically important to the delivery of this priority is the companyβs ability to execute on its near-term plans, including a relentless focus to operate in a safe, reliable, cost-efficient and environmentally responsible manner, while optimizing the companyβs asset portfolio to maximize value from its core integrated assets.
During the first quarter of 2022, in alignment with Suncorβs strategy to maximize value through its core business, the company announced that it is taking steps to optimize its asset portfolio through the planned divestment of its E&P assets in Norway. Suncor has initiated the disposition process of its Norway assets, with an expected close later this year. Subsequent to the quarter, based on interest received in the companyβs E&P assets in the U.K., the company is exploring the sale of its entire U.K. portfolio, and has also announced plans to divest its wind and solar assets to focus on areas of energy expansion that are more complementary to its base business, with an emphasis on hydrogen, renewable fuels and an ongoing participation in low-carbon power. The company has commenced the sale process of its wind and solar assets and expects a sale to close within the next twelve months. Proceeds from the disposition of assets will be used to support the companyβs capital allocation framework.
With the companyβs increased focus on hydrogen, renewable fuels and low-carbon power, Suncor remains committed to accelerating its progress towards its strategic objective of becoming a net-zero greenhouse gas (GHG) emissions company by 2050. The company plans to continue to pursue highly economic investments in areas that are complementary to its base business, including replacing its coke-fired boilers with a lower-emissions cogeneration facility at Oil Sands Base and accelerating commercial-scale deployment of carbon capture technology. Other targeted activities include partnering with ATCO on a project to build a world-scale hydrogen facility in Alberta and deploying next-generation renewable fuel technologies. The company expects that the disciplined decisions to adjust and streamline its portfolio will improve its competitiveness and resiliency by allowing it to capitalize on its strengths, competitive advantages and resources.
βSafety and operational excellence are foundational to our business and we are continuing to implement changes to strengthen our accountability and performance in these areas,β said Little. βWe are also sharpening our focus on our base business and areas complementary to our base business, which will drive long-term value for our shareholders.β
The company is steadfast in its commitment to capital discipline and expects to achieve its targeted annual capital expenditures ofβ $4.7Β billion in 2022, with a capital program heavily focused on the safety, long-term reliability and efficiency of the companyβs operations. Economic investment capital will continue to be focused on advancing projects and investments that are expected to enhance value within the companyβs existing integrated asset base and accelerate the companyβs progress towards its emissions reductions targets, including digital technologies, production decline mitigation and the cogeneration facility at Oil Sands Base. In E&P Canada, economic investment in the Terra Nova Floating, Production, Storage and Offloading facility related to the Asset Life Extension Project is ongoing and the asset is on track to sail back to Canada for a safe return to operations before the end of 2022.
Suncor continues to execute on its digital transformation and is implementing new digital technologies across the enterprise, such as digital mine optimization and core business systems, that are expected to reduce the companyβs cost structure while improving safety, performance and reliability. The company expects to achieve an additional $400Β million of incremental free funds flow(1) in 2022, building on the incremental $465Β million achieved in 2021, primarily driven by the implementation of digital, process and technology initiatives.
Suncor remains focused on safely increasing the reliability, utilization and integration of its assets, while continuing efforts to sustainably reduce controllable costs, including optimizing transfers on the interconnecting pipelines between Oil Sands Base and Syncrude. As operator of the Syncrude asset, the company continues to progress towards realizing $100Β million of annual gross synergies for the joint venture owners in 2022, with an additional $200Β million of annual gross synergies expected to be realized through 2023-2024.
The company 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 first quarter of 2022, the company returned over $1.4Β billion of value to its shareholders through $827Β million in share repurchases and payment ofβ $601Β million of dividends. The company also reduced net debt by $728Β million in the first quarter of 2022, reaching net debt levels ofβ $15.4Β billion, nearly achieving its 2025 targeted net debt range ofβ $12βββ$15Β billion. In the current business environment, the company expects to achieve the lower end of its 2025 targeted net debt range during the second half of 2022.
(1)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of the MD&A.
β
6Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
A combination of operational improvements and strong market conditions over the past year have driven stronger free funds flow than the scenario presented at Suncorβs 2021 Investor Day. This has enabled the company to significantly increase shareholder returns and the pace of debt repayment, and as a result, the company plans to accelerate its capital allocation plan. Looking ahead, management plans to continue to allocate excess funds equally towards debt repayment and share buybacks until net debt levels have reduced to $12 billion. Then, the company expects to allocate excess funds 75% towards share buybacks and 25% towards debt repayment. Once the companyβs net debt balance is at its $9Β billion floor, the company expects to allocate excess funds fully towards shareholder returns.
Subsequent to the quarter, consistent with Suncorβs strategy to maximize shareholder returns and accelerate its capital allocation plan, the Board approved an increase to the companyβs quarterly dividend to $0.47Β per share and to its NCIB, to repurchase up to approximately 10% of Suncorβs public float as at JanuaryΒ 31, 2022. Both the dividend per share and the NCIB program represent the highest in the companyβs history.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 7
Β
Corporate Guidance
Suncor has updated its full-year business environment outlook assumptions for Brent Sullom Voe from US$84.00/bbl to US$101.00/bbl, WTI at Cushing from US$80.00/bbl to US$97.00/bbl, WCS at Hardisty from US$68.00/bbl to US$84.00/bbl, NewΒ York HarborΒ 2-1-1 crack from US$24.00/bbl to US$38.00/bbl and AECO-C Spot from $3.75/GJ to $6.10/GJ due to improvements in key forward curve pricing for the remainder of the year. As well, Suncor has updated its Cdn$/US$ exchange rate outlook from 0.80 to 0.78.
The company has also updated its cash operating costs per barrel guidance ranges, with the increased ranges attributed primarily to increased commodity costs. As a result, Oil Sands operations cash operating costs per barrel have been updated from $25.00βββ$28.00 to $27.00βββ$30.00, Fort Hills cash operating costs per barrel have been updated from $23.00βββ$27.00 to $25.00βββ$28.00 and Syncrude cash operating costs per barrel have been updated from $31.00βββ$34.00 to $33.00βββ$36.00. In addition, Fort Hills Crown royalties have been updated from 3%βββ5% to 5%βββ7%, Syncrude Crown royalties have been updated from 16%βββ19% to 20%βββ23% and East Coast Canada Crown royalties have been updated from 12%βββ16% to 13%βββ17%, with the increase in royalty rates attributed to higher forecasted benchmark prices.
As a result of these updates, the full-year current income tax expense range has increased from $2.1Β billionβββ$2.4Β billion to $4.0Β billionβββ$4.3Β billion.
For further details and advisories regarding Suncorβs 2022 corporate guidance, see www.suncor.com/guidance.
Normal Course Issuer Bid
Subsequent to the first quarter of 2022, Suncor received approval from the TSX to amend its existing NCIB effective as of the close of markets on MayΒ 11, 2022, to increase the maximum number of common shares that may be repurchased in the period beginning FebruaryΒ 8, 2022, and ending FebruaryΒ 7, 2023, from 71,650,000 common shares, or approximately 5% of Suncorβs issued and outstanding common shares as at JanuaryΒ 31, 2022, to 143,500,000, or approximately 10% of Suncorβs public float as at JanuaryΒ 31, 2022. No other terms of the NCIB have been amended.
Between FebruaryΒ 8, 2022, and MayΒ 6, 2022, and pursuant to the NCIB, Suncor has already repurchased approximately $1.041Β billion of common shares on the open market. Pursuant to the NCIB (as amended), Suncor has agreed that it will not purchase more than 143,500,000 common shares, of which 25,432,000 common shares have already been purchased between FebruaryΒ 8, 2022, and MayΒ 6, 2022.
The actual number of common shares that may be purchased and the timing of any such purchases will be determined by Suncor. Suncor believes that, depending on the trading price of its common shares and other relevant factors, purchasing its own shares represents an attractive investment opportunity and is in the best interests of the company and its shareholders. The company does not expect the decision to allocate cash to repurchase shares will affect its long-term strategy.
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.
8Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Managementβs Discussion and Analysis
MayΒ 9, 2022
Suncor EnergyΒ Inc. (Suncor or the company) is an integrated energy company headquartered in Calgary, Alberta, Canada. Suncorβs operations include oil sands development, production and upgrading; offshore oil and gas; petroleum refining in Canada and the U.S.; and the companyβs Petro-Canada retail and wholesale distribution networks (including Canadaβs Electric Highwayβ’, 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. Suncorβs common shares (symbol: SU) are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).
For a description of Suncorβs segments, refer to Suncorβs Managementβs Discussion and Analysis (MD&A) for the year ended DecemberΒ 31, 2021, dated FebruaryΒ 23, 2022 (the 2021 annual MD&A).
This MD&A, for the threeΒ months ended MarchΒ 31, 2022, should be read in conjunction with Suncorβs unaudited interim Consolidated Financial Statements for the threeΒ months ended MarchΒ 31, 2022, Suncorβs audited Consolidated Financial Statements for the year ended DecemberΒ 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 Suncorβs Annual Information Form dated FebruaryΒ 23, 2022 (the 2021 AIF), which is also filed with the SEC under cover of FormΒ 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 EnergyΒ 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 βweβ, βourβ, βSuncorβ, or βthe companyβ are used herein for simplicity of communication and only mean there is an affiliation with Suncor EnergyΒ 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 EnergyΒ Inc. or any particular affiliate, and does not waive the corporate separateness of any affiliate. For further clarity, Suncor EnergyΒ Inc. does not directly operate or own assets in the U.S.
Table of Contents
β | β | β | β | β | 10 | β | β | |
β | β | β | β | β | 11 | β | β | |
β | β | β | β | β | 13 | β | β | |
β | β | β | β | β | 18 | β | β | |
β | β | β | β | β | 27 | β | β | |
β | β | β | β | β | 27 | β | β | |
β | β | β | β | β | 29 | β | β | |
β | β | β | β | β | 32 | β | β | |
β | β | β | β | β | 34 | β | β | |
β | β | β | β | β | 36 | β | β | |
β | β | β | β | β | 43 | β | β | |
β | β | β | β | β | 44 | β | β |
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 9
Managementβs 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 companyβs Libya operations, which is on an economic basis.
References to Oil Sands operations exclude Suncorβs 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&Aβββnamely 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 measuresβββare 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 companyβs 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 Suncorβs 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 Suncorβs other disclosure documents filed with Canadian securities regulatory authorities and the SEC, many of which are beyond the companyβs 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.
10Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
2. First Quarter Highlights
β’
First quarter financial results
β
β’
Suncorβs adjusted operating earnings(1)(2) increased to $2.755Β billion ($1.92 per common share) in the first quarter of 2022, compared to $746Β million ($0.49 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. The increase in adjusted operating earnings was partially offset by an increase in royalties and income taxes associated with the improved business environment and increased operating expenses primarily related to a significant increase in commodity costs and share-based compensation expense in the current quarter compared to the prior year quarter.
β
β’
Suncorβs net earnings were $2.949Β billion ($2.06 per common share) in the first quarter of 2022, compared to $821Β million ($0.54 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, net earnings for the first quarter of 2022 included a $146Β million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $75Β million unrealized gain on risk management activities recorded in other income (loss), and a $27Β million income tax expense related to the items noted. Net earnings in the prior year quarter included a $196Β million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $27Β million unrealized gain on risk management activities recorded in other income (loss), a restructuring charge ofβ $168Β million related to workforce reduction plans recorded in operating, selling and general expenses in the Corporate and Eliminations segment, and a $20Β million income tax recovery related to the items noted.
β
β’
Adjusted funds from operations(1)(2) were $4.094Β billion ($2.86 per common share) in the first quarter of 2022, compared to $2.110Β billion ($1.39 per common share) in the prior year quarter. Adjusted funds from operations were influenced by the same factors impacting adjusted operating earnings noted above. Adjusted funds from operations in the prior year quarter were also impacted by the $168Β million before-tax restructuring charge related to workforce reduction plans recorded in the first quarter of 2021. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $3.072Β billion ($2.14 per common share) for the first quarter of 2022, compared to $2.345Β billion ($1.54 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 use of cash associated with the companyβs working capital balances in the first quarter of 2022, compared to a source of cash in the prior year quarter. The use of cash in the first 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 and the payment of the companyβs 2021 income tax expense, partially offset by an increase in accounts payable and accrued liabilities and an increase in taxes payable related to the companyβs 2022 income tax expense.
β
β’
Record Oil Sands cash flows. In the first quarter of 2022, Oil Sands delivered its highest quarterly adjusted funds from operations(3) on record ofβ $3.414Β billion, compared to $1.527Β billion in the prior year quarter, supported by strong production from the companyβs In Situ assets, including Firebag, which produced its 750Β millionth barrel of oil during the quarter, and the ramp-up of production at Fort Hills, allowing the company to capture strong upstream pricing. Combined Oil Sands upgrader utilization was 96% compared to 97% in the prior year quarter.
β
β’
Industry-leading Refining & Marketing (R&M) utilizations. R&M generated $1.597Β billion in adjusted funds from operations(3) in the first quarter of 2022, compared to $1.172Β billion in the prior year quarter. The first quarter of 2022 included a first-in, first-out (FIFO) inventory valuation gain, including the impact of commodity risk management activities, ofβ $729Β million before-tax, compared to $432Β million before-tax in the prior year quarter. On a LIFO(4) basis Suncorβs refining and marketing gross margin(1) improved nearly 20% compared to the prior year quarter. Refinery utilization in the first quarter of 2022 was 94%, compared to refinery utilization of 92% in the prior year quarter, as the companyβs Canadian refineries continued to outperform the national refining industry average.(5)
β
(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.
β
(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.
β
(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.
β
(4)
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.
β
(5)
Source: Canada Energy Regulatorβββhttps://www.cer-rec.gc.ca/en/data-analysis/energy-commodities/crude-oil-petroleum-products/statistics/β
weekly-crude-run-summary-data/index.html.
weekly-crude-run-summary-data/index.html.
β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 11
Managementβs Discussion and Analysis
β’
Returning value to shareholders. In the first quarter of 2022, the company returned over $1.4Β billion of value to its shareholders through $827Β million in share repurchases and payment ofβ $601Β million of dividends. As at MayΒ 6, 2022, since the start of the year, the company has repurchased $1.3Β billion of Suncorβs common shares, representing approximately 33Β million common shares at an average share price of $39.70 per share, or the equivalent of 2.3% of its common shares as at DecemberΒ 31, 2021.
β
β’
Accelerating net debt reduction. In the first quarter of 2022, the company reduced net debt(1) by $728Β million, primarily due to an early redemption of its outstanding US$182Β million 4.50% notes and increased cash and cash equivalents, after making a significant income tax payment of approximately $1.0Β billion during the quarter related to the companyβs 2021Β income tax expense.
β
β’
Optimization of the companyβs asset portfolio. During the first quarter of 2022, in alignment with Suncorβs strategy to maximize value through its core business, the company announced that it is taking steps to optimize its asset portfolio through the planned divestment of its ExplorationΒ & Production (E&P) assets in Norway. Subsequent to the quarter, based on interest received in the companyβs E&P assets in the U.K., the company is exploring the sale of its entire U.K. portfolio, and has also announced plans to divest its wind and solar assets to focus on areas of energy expansion that are more complementary to its base business, with an emphasis on hydrogen and renewable fuels.
β
β’
Record dividend and share repurchase program. Subsequent to the quarter, Suncorβs Board of Directors (theΒ Board) approved a quarterly dividend ofβ $0.47 per share, which represents an increase of 12% over the prior quarter dividend and the highest quarterly dividend per share in the companyβs history. Also, the Board and the TSX approved an increase to the companyβs normal course issuer bid program (NCIB), to increase the maximum number of common shares the company may repurchase to up to approximately 10% of Suncorβs public float as at January 31, 2022.
β
(1)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
12Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
3. Consolidated Financial Information
Financial Highlights
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Earnings (loss) before income taxes(1) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Oil Sands | β | β | β | β | 2β309 | β | β | β | β | β | 445 | β | β |
β | ||||||||||||||
β | Exploration and Production | β | β | β | β | 645 | β | β | β | β | β | 258 | β | β |
β | ||||||||||||||
β | Refining and Marketing | β | β | β | β | 1β417 | β | β | β | β | β | 934 | β | β |
β | ||||||||||||||
β | Corporate and Eliminations | β | β | β | β | (523) | β | β | β | β | β | (523) | β | β |
β | ||||||||||||||
β | Income tax expense | β | β | β | β | (899) | β | β | β | β | β | (293) | β | β |
β | Net earnings | β | β | β | β | 2β949 | β | β | β | β | β | 821 | β | β |
β | Adjusted operating earnings (loss)(1)(2) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Oil Sands | β | β | β | β | 2β256 | β | β | β | β | β | 409 | β | β |
β | ||||||||||||||
β | Exploration and Production | β | β | β | β | 645 | β | β | β | β | β | 258 | β | β |
β | ||||||||||||||
β | Refining and Marketing | β | β | β | β | 1β395 | β | β | β | β | β | 943 | β | β |
β | ||||||||||||||
β | Corporate and Eliminations | β | β | β | β | (669) | β | β | β | β | β | (551) | β | β |
β | ||||||||||||||
β | Income tax expense included in adjusted operating earnings | β | β | β | β | (872) | β | β | β | β | β | (313) | β | β |
β | Total | β | β | β | β | 2β755 | β | β | β | β | β | 746 | β | β |
β | Adjusted funds from (used in) operations(1)(2) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Oil Sands | β | β | β | β | 3β414 | β | β | β | β | β | 1β527 | β | β |
β | ||||||||||||||
β | Exploration and Production | β | β | β | β | 724 | β | β | β | β | β | 365 | β | β |
β | ||||||||||||||
β | Refining and Marketing | β | β | β | β | 1β597 | β | β | β | β | β | 1β172 | β | β |
β | ||||||||||||||
β | Corporate and Eliminations | β | β | β | β | (665) | β | β | β | β | β | (670) | β | β |
β | ||||||||||||||
β | Current income tax expense | β | β | β | β | (976) | β | β | β | β | β | (284) | β | β |
β | Total | β | β | β | β | 4β094 | β | β | β | β | β | 2β110 | β | β |
β | Change in non-cash working capital | β | β | β | β | (1β022) | β | β | β | β | β | 235 | β | β |
β | ||||||||||||||
β | Cash flow provided by operating activities | β | β | β | β | 3β072 | β | β | β | β | β | 2β345 | β | β |
β | Capital and exploration expenditures(3)(4) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Asset sustainment and maintenance | β | β | β | β | 512 | β | β | β | β | β | 473 | β | β |
β | ||||||||||||||
β | Economic investment | β | β | β | β | 462 | β | β | β | β | β | 299 | β | β |
β | Total | β | β | β | β | 974 | β | β | β | β | β | 772 | β | β |
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Free funds flow(2) | β | β | β | β | 3β083 | β | β | β | β | β | 1β307 | β | β |
β
(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.
β
(2)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
(3)
Excludes capitalized interest ofβ $37Β million in the first quarter of 2022 and $31Β million in the first quarter of 2021.
β
(4)
Excludes capital expenditures related to assets held for sale ofβ $19Β million in the first quarter of 2022.
β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 13
Managementβs Discussion and Analysis
Operating Highlights
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | β | β | β | 2022 | β | β | 2021 | β | ||||||
β | Production volumes | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Oil SandsβββUpgradedβββnet SCO and diesel (mbbls/d) | β | β | β | β | 515.3 | β | β | β | β | β | 519.9 | β | β |
β | ||||||||||||||
β | Oil SandsβββNon-upgraded bitumen (mbbls/d) | β | β | β | β | 170.4 | β | β | β | β | β | 170.7 | β | β |
β | ||||||||||||||
β | Exploration and Production (mboe/d) | β | β | β | β | 80.4 | β | β | β | β | β | 95.3 | β | β |
β | Total (mboe/d) | β | β | β | β | 766.1 | β | β | β | β | β | 785.9 | β | β |
β | Refinery utilization (%) | β | β | β | β | 94 | β | β | β | β | β | 92 | β | β |
β | ||||||||||||||
β | Refinery crude oil processed (mbbls/d) | β | β | β | β | 436.5 | β | β | β | β | β | 428.4 | β | β |
Net Earnings
Suncorβs consolidated net earnings for the first quarter of 2022 were $2.949Β billion, compared to $821Β 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:
β’
An unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt ofβ $146Β million recorded in financing expenses in the Corporate and Eliminations segment in the first quarter of 2022, compared to $196Β million in the first quarter of 2021.
β
β’
An unrealized gain on risk management activities ofβ $75Β million recorded in other income (loss) in the first quarter of 2022, compared to $27Β million in the first quarter of 2021.
β
β’
A restructuring charge ofβ $168Β million related to workforce reduction plans, recorded in operating, selling and general expenses in the Corporate and Eliminations segment in the first quarter of 2021.
β
β’
An income tax expense related to the items noted above ofβ $27Β million in the first quarter of 2022, compared to an income tax recovery ofβ $20Β million in the first quarter of 2021.
β
Adjusted Operating Earnings Reconciliation(1)
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Net earnings | β | β | β | β | 2β949 | β | β | β | β | β | 821 | β | β |
β | ||||||||||||||
β | Unrealized foreign exchange gain on U.S. dollar denominated debt | β | β | β | β | (146) | β | β | β | β | β | (196) | β | β |
β | ||||||||||||||
β | Unrealized gain on risk management activities | β | β | β | β | (75) | β | β | β | β | β | (27) | β | β |
β | ||||||||||||||
β | Restructuring charge | β | β | β | β | β | β | β | β | β | β | 168 | β | β |
β | ||||||||||||||
β | Income tax expense (recovery) on adjusted operating earnings adjustments | β | β | β | β | 27 | β | β | β | β | β | (20) | β | β |
β | Adjusted operating earnings(1) | β | β | β | β | 2β755 | β | β | β | β | β | 746 | β | β |
β
(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.
β
14Β Β Β 2022 First QuarterΒ Β Β 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.
β
(2)
All reconciling items are presented on a before-tax basis and adjusted for income taxes in the Income Tax bridge factor.
β
(3)
The bridge factor for Inventory Valuation is comprised of changes in the FIFO inventory valuation and realized commodity risk management activities reported in the R&M segment, and changes in the intersegment elimination of profit reported in the Corporate and Eliminations segment.
β
Suncorβs adjusted operating earnings increased to $2.755Β billion ($1.92 per common share) in the first quarter of 2022, compared to $746Β million ($0.49 per common share) in the prior year quarter, primarily due to significantly higher crude oil and refined product realizations reflecting the improved business environment in the current quarter. The increase in adjusted operating earnings was partially offset by an increase in royalties and income taxes associated with the improved business environment and increased operating expenses primarily related to a significant increase in commodity costs and share-based compensation expense in the current quarter compared to the prior year quarter.
Operating, Selling and General Expenses
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Operations, selling and corporate costs | β | β | β | β | 2β333 | β | β | β | β | β | 2β193 | β | β |
β | ||||||||||||||
β | Commodities | β | β | β | β | 498 | β | β | β | β | β | 370 | β | β |
β | ||||||||||||||
β | Share-based compensation and other(1) | β | β | β | β | 257 | β | β | β | β | β | 337 | β | β |
β | Total operating, selling and general expenses | β | β | β | β | 3β088 | β | β | β | β | β | 2β900 | β | β |
β
(1)
In the first quarter of 2022, share-based compensation expense ofβ $206Β million includes $70Β million recorded in the Oil Sands segment, $6Β million recorded in the E&P segment, $32Β million recorded in the R&M segment and $98Β million recorded in the Corporate and Eliminations segment. The first quarter of 2021 share-based compensation expense ofβ $111Β million includes $31Β million recorded in the Oil Sands segment, $3Β million recorded in the E&P segment, $19Β million recorded in the R&M segment and $58Β million recorded in the Corporate and Eliminations segment. Other primarily includes non-recurring costs associated with investments in the companyβs digital transformation, Syncrude long-term incentive program expense in the first quarter of 2021, and a non-recurring $168Β million restructuring charge related to workforce reduction plans recorded in the first quarter of 2021.
β
The companyβs total operating, selling and general expenses were $3.088Β billion in the first quarter of 2022, compared to $2.900Β billion in the prior year quarter. The increase was primarily due to a significant increase in commodity costs, primarily driven by increased natural gas prices, and increased share-based compensation expenses in the first quarter of 2022 compared to the first quarter of 2021. The increase was also due to costs associated with increased production at Fort Hills and increased maintenance costs in the current period relative to the prior year quarter, partially offset by increased costs in the prior year quarter relating to a restructuring charge associated with the companyβs workforce reduction plans. The companyβs exposure to higher natural gas costs is partially mitigated by revenue from power sales that is recorded in operating revenues.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 15
Managementβs Discussion and Analysis
Business Environment
Commodity prices, refining crack spreads and foreign exchange rates are important factors that affect the results of Suncorβs operations.
β | β | β | β | β | β | β | Average for the threeΒ months ended MarchΒ 31 | β | |||||||||
β | β | β | β | β | β | β | 2022 | β | β | 2021 | β | ||||||
β | WTI crude oil at Cushing | β | β | US$/bbl | β | β | β | β | 94.40 | β | β | β | β | β | 57.80 | β | β |
β | |||||||||||||||||
β | Dated Brent crude | β | β | US$/bbl | β | β | β | β | 101.50 | β | β | β | β | β | 60.85 | β | β |
β | |||||||||||||||||
β | Dated Brent/Maya crude oil FOB price differential | β | β | US$/bbl | β | β | β | β | 14.30 | β | β | β | β | β | 4.70 | β | β |
β | |||||||||||||||||
β | MSW at Edmonton | β | β | Cdn$/bbl | β | β | β | β | 115.75 | β | β | β | β | β | 66.55 | β | β |
β | |||||||||||||||||
β | WCS at Hardisty | β | β | US$/bbl | β | β | β | β | 79.80 | β | β | β | β | β | 45.40 | β | β |
β | |||||||||||||||||
β | Light/heavy differential for WTI at Cushing less WCS at Hardisty | β | β | US$/bbl | β | β | β | β | (14.60) | β | β | β | β | β | (12.40) | β | β |
β | |||||||||||||||||
β | SYN-WTI differential | β | β | US$/bbl | β | β | β | β | (1.30) | β | β | β | β | β | (3.50) | β | β |
β | |||||||||||||||||
β | Condensate at Edmonton | β | β | US$/bbl | β | β | β | β | 96.15 | β | β | β | β | β | 58.00 | β | β |
β | |||||||||||||||||
β | Natural gas (Alberta spot) at AECO | β | β | Cdn$/GJ | β | β | β | β | 4.50 | β | β | β | β | β | 2.95 | β | β |
β | |||||||||||||||||
β | Alberta Power Pool Price | β | β | Cdn$/MWh | β | β | β | β | 90.00 | β | β | β | β | β | 95.45 | β | β |
β | |||||||||||||||||
β | New York Harbor 2-1-1 crack(1) | β | β | US$/bbl | β | β | β | β | 28.25 | β | β | β | β | β | 15.60 | β | β |
β | |||||||||||||||||
β | Chicago 2-1-1 crack(1) | β | β | US$/bbl | β | β | β | β | 20.20 | β | β | β | β | β | 13.40 | β | β |
β | |||||||||||||||||
β | Portland 2-1-1 crack(1) | β | β | US$/bbl | β | β | β | β | 33.80 | β | β | β | β | β | 15.80 | β | β |
β | |||||||||||||||||
β | Gulf Coast 2-1-1 crack(1) | β | β | US$/bbl | β | β | β | β | 26.80 | β | β | β | β | β | 14.45 | β | β |
β | |||||||||||||||||
β | U.S. Renewable Volume Obligation | β | β | US$/bbl | β | β | β | β | 6.45 | β | β | β | β | β | 5.50 | β | β |
β | |||||||||||||||||
β | Exchange rate | β | β | US$/Cdn$ | β | β | β | β | 0.79 | β | β | β | β | β | 0.79 | β | β |
β | |||||||||||||||||
β | Exchange rate (end of period) | β | β | US$/Cdn$ | β | β | β | β | 0.80 | β | β | β | β | β | 0.80 | β | β |
β
(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.
β
In the first 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.
Suncorβs 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 first quarter of 2022 reflected an increase in WTI at Cushing, which averaged US$94.40/bbl compared to US$57.80/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 $115.75/bbl in the first quarter of 2022 compared to $66.55/bbl in the prior year quarter, and prices for WCS at Hardisty increased to US$79.80/bbl in the first quarter of 2022, from US$45.40/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 first quarter of 2022, but were higher than the prior year quarter on an absolute basis due to the increase in WTI prices.
Suncorβs 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$101.50/bbl in the first quarter of 2022 compared to US$60.85/bbl in the prior year quarter.
Suncorβs 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
16Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
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. Suncorβs realized refining and marketing gross margins are influenced by actual crude oil feedstock costs, refinery configuration, product mix and realized market prices unique to Suncorβs 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 Suncorβs 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 Suncorβs 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 companyβs core markets during the winter and summerΒ 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 companyβs 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 first 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 decreased crude supply, increased demand for transportation fuels and to compensate for increased costs associated with renewable blending regulatory obligations. The Suncor 5-2-2-1 index was US$32.25/bbl in the first quarter of 2022 compared to US$24.50/bbl in the first quarter of 2021, primarily related to the increase in benchmark crack spreads.
The cost of natural gas used in Suncorβs Oil Sands and Refining operations is primarily referenced to Alberta spot prices at AECO. The average AECO benchmark increased to $4.50/GJ in the first quarter of 2022, from $2.95/GJ in the prior year quarter.
Excess electricity produced at Suncorβs 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 decreased to an average of $90.00/MWh in the first quarter of 2022 compared to $95.45/MWh in the prior year quarter.
The majority of Suncorβs 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 Suncorβs expenditures are realized in Canadian dollars. In the first quarter of 2022, the Canadian dollar remained unchanged in relation to the U.S. dollar as the average exchange rate for both the first quarters of 2022 and 2021 was US$0.79 per one Canadian dollar.
Suncor also has assets and liabilities, including approximately 60% of the companyβs debt, that are denominated in U.S. dollars and translated to Suncorβs reporting currency (Canadian dollars) at each balance sheet date. A decrease in the value of the Canadian dollar, relative to the U.S. dollar, from the previous balance sheet date increases the amount of Canadian dollars required to settle U.S. dollar denominated obligations, while an increase in the value of the Canadian dollar, relative to the U.S. dollar, decreases the amount of Canadian dollars required to settle U.S. dollar denominated obligations.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 17
Managementβs Discussion and Analysis
4. Segment Results and Analysis
Oil Sands
Financial Highlights
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Gross revenues | β | β | β | β | 7β470 | β | β | β | β | β | 4β351 | β | β |
β | ||||||||||||||
β | Less: Royalties | β | β | β | β | (985) | β | β | β | β | β | (158) | β | β |
β | Operating revenues, net of royalties | β | β | β | β | 6β485 | β | β | β | β | β | 4β193 | β | β |
β | Earnings before income taxes(1) | β | β | β | β | 2β309 | β | β | β | β | β | 445 | β | β |
β | Adjusted for: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Unrealized gain on risk management activities | β | β | β | β | (53) | β | β | β | β | β | (36) | β | β |
β | Adjusted operating earnings(1)(2) | β | β | β | β | 2β256 | β | β | β | β | β | 409 | β | β |
β | Adjusted funds from operations(1)(2) | β | β | β | β | 3β414 | β | β | β | β | β | 1β527 | β | β |
β
(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.
β
(2)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
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.
β
(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.
β
The Oil Sands segment had adjusted operating earnings ofβ $2.256Β billion in the first quarter of 2022, compared to $409Β million in the prior year quarter. The increase was primarily due to significantly higher realized crude prices, which was partially offset by an increase in royalties and increased operating expenses related to a significant increase in commodity costs, share-based compensation expense, costs associated with increased production at Fort Hills and increased maintenance in the current quarter compared to the prior year quarter.
18Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Production Volumes(1)
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | (mbbls/d) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Total Oil Sands bitumen production | β | β | β | β | 827.7 | β | β | β | β | β | 827.8 | β | β |
β | SCO and diesel production(2) | β | β | β | β | 531.1 | β | β | β | β | β | 536.6 | β | β |
β | ||||||||||||||
β | Internally consumed diesel and internal transfers(3)(4) | β | β | β | β | (15.8) | β | β | β | β | β | (16.7) | β | β |
β | Upgraded productionβββnet SCO and diesel | β | β | β | β | 515.3 | β | β | β | β | β | 519.9 | β | β |
β | Bitumen production | β | β | β | β | 173.6 | β | β | β | β | β | 171.9 | β | β |
β | ||||||||||||||
β | Internal bitumen transfers(4) | β | β | β | β | (3.2) | β | β | β | β | β | (1.2) | β | β |
β | Non-upgraded bitumen production | β | β | β | β | 170.4 | β | β | β | β | β | 170.7 | β | β |
β | Total Oil Sands production | β | β | β | β | 685.7 | β | β | β | β | β | 690.6 | β | β |
β
(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 Suncorβs own refineries, with SCO and diesel yields of approximately 79% of bitumen feedstock input. Fort Hills finished bitumen is sold directly to customers, including Suncorβs own refineries. Essentially all of the bitumen produced at Syncrude is upgraded to sweet SCO and a small amount of diesel, at an approximate yield of 85%.
β
(2)
Combined upgrader utilization rates are calculated using total upgraded production, inclusive of internally consumed diesel and internal transfers.
β
(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 first quarter of 2022, Oil Sands operations production volumes included 10,000 bbls/d of internallyconsumed diesel, of which 6,900 bbls/d was consumed at Oil Sands Base, 2,000 bbls/d was consumed at Fort Hills and 1,100 bbls/d was consumed at Syncrude. Syncrude production volumes included 2,000 bbls/d of internally consumed diesel.
β
(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 first quarter of 2022, Oil Sands operations included 3,700 bbls/d of SCO that were transferred to Suncorβs share of Syncrude through the interconnecting pipelines. Syncrude production included 100bbls/d of SCO and 3,200 bbls/d of bitumen that were transferred to Oil Sands Base through the interconnecting pipelines.
β
Total Oil Sands production was 685,700 bbls/d in the first quarter of 2022, compared to 690,600 bbls/d in the prior year quarter, with the first quarter of 2022 reflecting lower production early in the quarter due to the previously disclosed weather-related mining challenges experienced in the region. The companyβs net SCO production in the first quarter of 2022 was 515,300 bbls/d, compared to 519,900 bbls/d in the first quarter of 2021, reflecting a combined upgrader utilization rate of 96% compared to 97% in the prior year quarter.
The companyβs non-upgraded bitumen production was 170,400 bbls/d in the first quarter of 2022, comparable to 170,700Β bbls/d in the prior year quarter, primarily due to increased production at Fort Hills, which was largely offset by decreased saleable bitumen production from the companyβs In Situ assets. Production from Fort Hills in the first quarter of 2022 increased to 87,500Β bbls/d, compared to 51,200Β bbls/d in the prior year quarter, as production ramped up in the quarter. Overall production from the companyβs In Situ assets was comparable to the prior year quarter, reflecting strong production in both periods, with the decrease in saleable bitumen production in the current period due to increased Firebag volumes being diverted to upgrading to maximize higher-value SCO production.
Sales Volumes
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | (mbbls/d) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Upgradedβββnet SCO and diesel | β | β | β | β | 517.7 | β | β | β | β | β | 515.2 | β | β |
β | ||||||||||||||
β | Non-upgraded bitumen | β | β | β | β | 153.7 | β | β | β | β | β | 180.2 | β | β |
β | Total | β | β | β | β | 671.4 | β | β | β | β | β | 695.4 | β | β |
SCO and diesel sales volumes were 517,700 bbls/d in the first quarter of 2022, compared to 515,200 bbls/d in the prior year quarter, reflecting a draw of inventory in the first quarter of 2022 compared to a build of inventory in the prior year quarter.
Non-upgraded bitumen sales volumes decreased to 153,700 bbls/d in the first quarter of 2022, compared to 180,200 bbls/d in the prior year quarter, due to a build of inventory in the first quarter of 2022, as increased production from Fort Hills was transported to customers extending down to the U.S. Gulf Coast, compared to a draw of inventory in the prior year quarter.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 19
Managementβs Discussion and Analysis
Price Realizations(1)
β | Net of transportation costs, but before royalties | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($/bbl) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Upgradedβββnet SCO and diesel | β | β | β | β | 114.37 | β | β | β | β | β | 65.22 | β | β |
β | ||||||||||||||
β | Non-upgraded bitumen | β | β | β | β | 96.49 | β | β | β | β | β | 42.53 | β | β |
β | ||||||||||||||
β | Crude sales basket (all products) | β | β | β | β | 110.27 | β | β | β | β | β | 59.32 | β | β |
β | ||||||||||||||
β | Crude sales basket, relative to WTI | β | β | β | β | (9.24) | β | β | β | β | β | (13.87) | β | β |
β
(1)
Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
Oil Sands price realizations increased in the first quarter of 2022 from the prior year quarter, in line with the improved commodity price environment.
Royalties
Royalties for the Oil Sands segment increased in the first 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 and increased royalties for In Situ operations due to Firebag reaching the higher post-payout phase of its royalty agreement in the second quarter of 2021.
Expenses and Other Factors
Total Oil Sands operating and transportation expenses increased in the first 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 increased compared to the prior year quarter, primarily due to increased natural gas prices and increased maintenance costs.
At Fort Hills, operating costs in the first quarter of 2022 increased when compared to the prior year quarter, reflecting increased mining activity in the quarter as production ramped up, and higher natural gas and commodity prices.
Suncorβs share of Syncrude operating costs in the first quarter of 2022 increased when compared with the prior year quarter, primarily due to increased planned maintenance costs and natural gas prices.
In the first quarter of 2022, higher natural gas prices resulted in an increase of Oil Sands segment operating costs by $108Β million compared to the prior year quarter.
20Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Cash Operating Costs
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions, except as noted) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Oil Sands operating, selling and general expense (OS&G) | β | β | β | β | 2β212 | β | β | β | β | β | 1β973 | β | β |
β | Oil Sands operations cash operating costs(1) reconciliation | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Oil Sands operations OS&G | β | β | β | β | 1β283 | β | β | β | β | β | 1β153 | β | β |
β | ||||||||||||||
β | Non-production costs(2) | β | β | β | β | (45) | β | β | β | β | β | (67) | β | β |
β | ||||||||||||||
β | Excess power capacity and other(3) | β | β | β | β | (115) | β | β | β | β | β | (124) | β | β |
β | ||||||||||||||
β | Inventory changes | β | β | β | β | (12) | β | β | β | β | β | 10 | β | β |
β | Oil Sands operations cash operating costs(1) | β | β | β | β | 1β111 | β | β | β | β | β | 972 | β | β |
β | ||||||||||||||
β | Oil Sands operations production volumes (mbbls/d) | β | β | β | β | 430.4 | β | β | β | β | β | 463.8 | β | β |
β | ||||||||||||||
β | Oil Sands operations cash operating costs(1) ($/bbl) | β | β | β | β | 28.70 | β | β | β | β | β | 23.30 | β | β |
β | Fort Hills cash operating costs(1) reconciliation | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Fort Hills OS&G | β | β | β | β | 253 | β | β | β | β | β | 181 | β | β |
β | ||||||||||||||
β | Non-production costs(2) | β | β | β | β | (38) | β | β | β | β | β | (26) | β | β |
β | ||||||||||||||
β | Inventory changes | β | β | β | β | 13 | β | β | β | β | β | 15 | β | β |
β | Fort Hills cash operating costs(1) | β | β | β | β | 228 | β | β | β | β | β | 170 | β | β |
β | ||||||||||||||
β | Fort Hills production volumes (mbbls/d) | β | β | β | β | 87.5 | β | β | β | β | β | 51.2 | β | β |
β | ||||||||||||||
β | Fort Hills cash operating costs(1) ($/bbl) | β | β | β | β | 29.00 | β | β | β | β | β | 37.05 | β | β |
β | Syncrude cash operating costs(1) reconciliation | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Syncrude OS&G | β | β | β | β | 676 | β | β | β | β | β | 639 | β | β |
β | ||||||||||||||
β | Non-production costs(2) | β | β | β | β | (92) | β | β | β | β | β | (77) | β | β |
β | Syncrude cash operating costs(1) | β | β | β | β | 584 | β | β | β | β | β | 562 | β | β |
β | ||||||||||||||
β | Syncrude production volumes (mbbls/d) | β | β | β | β | 186.8 | β | β | β | β | β | 193.5 | β | β |
β | ||||||||||||||
β | Syncrude cash operating costs(1) ($/bbl) | β | β | β | β | 34.70 | β | β | β | β | β | 32.25 | β | β |
β
(1)
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.
β
(2)
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 cogenerationΒ units and an adjustment to reflect internally produced diesel from Oil Sands operations at the cost of production.
β
(3)
Oil Sands operations excess power capacity and other includes, but is not limited to, the operational revenue impacts of excess power from cogenerationΒ units and the natural gas expense recorded as part of a non-monetary arrangement involving a third-party processor.
β
Oil Sands operations cash operating costs per barrel(1) were $28.70 in the first quarter of 2022, compared to $23.30 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 lower in the current quarter compared to the prior year quarter primarily due to a decrease in research and development costs, partially offset by higher share-based compensation expense in the current quarter compared to the prior year quarter. Oil Sands operations inventory changes in the first quarter of 2022 reflected changes to inventory valuation that are excluded from cash cost per barrel, which is calculated on a production basis.
Fort Hills cash operating costs per barrel(1) decreased to $29.00 in the first quarter of 2022, compared to $37.05 in the prior year quarter, reflecting increased production, partially offset by higher operating, selling and general expenses, as detailed above. In the first quarter of 2022, non-production costs were higher compared to the prior year quarter mainly due to the increased price for internally sourced diesel, which is adjusted to reflect internally produced diesel from Oil Sands operations at the cost of production.
(1)
Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 21
Managementβs Discussion and Analysis
Syncrude cash operating costs per barrel(1) were $34.70 in the first quarter of 2022, compared to $32.25 in the prior year quarter, due to higher operating, selling and general expenses, as detailed above, and decreased production. In the first quarter of 2022, non-production costs were higher compared to the prior year quarter primarily due to the increased price for internally sourced diesel, which is adjusted to reflect internally produced diesel from Oil Sands operations at the cost of production.
Planned Maintenance Update
The company will commence significant planned turnaround activities at Firebag in the second quarter of 2022, the largest turnaround in Firebag history. Additionally, in the second quarter of 2022, the company will commence planned annual coker maintenance at Oil Sands Base Upgrader 2 and planned maintenance at Fort Hills. Planned maintenance at Syncrude, which began in the first quarter of 2022, is expected to be completed in the second quarter of 2022. The impact of these maintenance events has been reflected in the companyβs 2022 guidance.
Exploration and Production
Financial Highlights
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Gross revenues(1) | β | β | β | β | 1β015 | β | β | β | β | β | 590 | β | β |
β | ||||||||||||||
β | Less: Royalties(1) | β | β | β | β | (147) | β | β | β | β | β | (44) | β | β |
β | Operating revenues, net of royalties | β | β | β | β | 868 | β | β | β | β | β | 546 | β | β |
β | Earnings before income taxes(2) | β | β | β | β | 645 | β | β | β | β | β | 258 | β | β |
β | Adjusted operating earnings(2)(3) | β | β | β | β | 645 | β | β | β | β | β | 258 | β | β |
β | Adjusted funds from operations(2)(3) | β | β | β | β | 724 | β | β | β | β | β | 365 | β | β |
β
(1)
Production from the companyβs Libya operations has been presented in the E&P section of this MD&A on an economic basis. Revenue and royalties from the companyβs Libya operations are presented under the working-interest basis, which is required for presentation purposes in the companyβs financial statements. In the first quarter of 2022, revenue includes a gross-up amount ofβ $138Β million, with an offsetting amount ofβ $60Β million in royalties in the E&P segment and $78Β million in income tax expense reported at the consolidated level. In the first quarter of 2021, there were no Libya sales included in production, revenue or royalties.
β
(2)
Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.
β
(3)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
Bridge Analysis of Adjusted Operating Earnings ($ 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.
β
(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.
β
(1)
Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
22Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Adjusted operating earnings for the E&P segment in the first quarter of 2022 increased to $645Β million compared to $258Β million in the prior year quarter, with the increase primarily due to significantly higher realized crude prices, partially offset by higher royalties associated with higher crude price realizations.
Volumes
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | β | β | β | 2022 | β | β | 2021 | β | ||||||
β | E&P Canada (mbbls/d) | β | β | β | β | 51.2 | β | β | β | β | β | 58.0 | β | β |
β | ||||||||||||||
β | E&P International (mboe/d) | β | β | β | β | 29.2 | β | β | β | β | β | 37.3 | β | β |
β | Total production (mboe/d) | β | β | β | β | 80.4 | β | β | β | β | β | 95.3 | β | β |
β | Total sales volumes (mboe/d) | β | β | β | β | 79.5 | β | β | β | β | β | 84.2 | β | β |
Production volumes for E&P Canada were 51,200 bbls/d in the first quarter of 2022, compared to 58,000 bbls/d in the prior year quarter, primarily due to natural declines.
E&P International production was 29,200 boe/d in the first quarter of 2022, compared to 37,300 boe/d in the prior year quarter, primarily due to the absence of production from the Golden Eagle Area Development, as the sale of the companyβs working interest in the asset was completed in the fourth quarter of 2021, partially offset by liftings in Libya in the first quarter of 2022 compared to no liftings in Libya in the prior year quarter. In the first quarter of 2022, the company commenced a sale process for its assets in Norway with an expected close later this year. These assets have been reclassified as assets held for sale in the first quarter of 2022.
E&P sales volumes were 79,500 boe/d in the first quarter of 2022, compared to 84,200 boe/d in the prior year quarter, consistent with the decrease in production and impacted by a larger build of inventory in the prior year quarter compared to the current year quarter.
Price Realizations(1)
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | Net of transportation costs, but before royalties | β | β | 2022 | β | β | 2021 | β | ||||||
β | E&P CanadaβββCrude oil and natural gas liquids ($/bbl) | β | β | β | β | 122.13 | β | β | β | β | β | 73.91 | β | β |
β | ||||||||||||||
β | E&P International(2) ($/boe) | β | β | β | β | 113.60 | β | β | β | β | β | 69.51 | β | β |
β
(1)
Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
(2)
E&P International price realizations exclude Libya.
β
Price realizations at E&P Canada and E&P International increased in the first quarter of 2022 from the prior year quarter, in line with the improved commodity price environment.
Royalties
E&P royalties in the first quarter of 2022 were higher than the prior year quarter primarily due to the increase in price realizations.
Expenses and Other Factors
Operating and transportation expenses decreased in the first quarter of 2022 compared to the prior year quarter, primarily due to a one-time transportation provision recorded in the prior year quarter, and the sale of the Golden Eagle Area Development resulting in lower transportation costs in the current period.
DD&A and exploration expense increased in the first quarter of 2022 compared to the prior year quarter, primarily due to the prior year quarter including a reversal of a previous asset impairment charge relating to the sale of the companyβs working interest in the Golden Eagle Area Development, partially offset by lower production volumes in the current quarter compared to the prior year quarter.
Financing expense and other, which includes other income, decreased in the first quarter of 2022 compared to the prior year quarter, primarily due to the recognition of contingent consideration related to the companyβs sale of the Golden Eagle Area Development.
Planned Maintenance Update for Operated Assets
There are no significant maintenance events scheduled for the second quarter of 2022.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 23
Managementβs Discussion and Analysis
Refining and Marketing
Financial Highlights
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Operating revenues | β | β | β | β | 7β855 | β | β | β | β | β | 5β013 | β | β |
β | Earnings before income taxes(1) | β | β | β | β | 1β417 | β | β | β | β | β | 934 | β | β |
β | Adjusted for: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Unrealized (gain) loss on risk management activities | β | β | β | β | (22) | β | β | β | β | β | 9 | β | β |
β | Adjusted operating earnings(1)(2) | β | β | β | β | 1β395 | β | β | β | β | β | 943 | β | β |
β | Adjusted funds from operations(1)(2) | β | β | β | β | 1β597 | β | β | β | β | β | 1β172 | β | β |
β
(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.
β
(2)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
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.
β
(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.
β
R&M adjusted operating earnings in the first quarter of 2022 increased to $1.395Β billion from $943Β million in the prior year quarter. The increase was primarily due to a larger FIFO inventory valuation gain in the first quarter of 2022 compared to the prior year quarter and an increase in refining and marketing margins as a result of significantly higher crack spread benchmarks in the first quarter of 2022 compared to the prior year quarter, partially offset by an increase in operating expenses. In the first quarter of 2022, adjusted operating earnings included a before-tax FIFO inventory valuation gain, including the impact of commodity risk management activities, ofβ $729Β million on the increase in crude and refined product benchmarks, compared to a $432Β million gain in the prior year quarter.
24Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Volumes
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | β | β | β | 2022 | β | β | 2021 | β | ||||||
β | Crude oil processed (mbbls/d) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Eastern North America | β | β | β | β | 209.6 | β | β | β | β | β | 200.5 | β | β |
β | ||||||||||||||
β | Western North America | β | β | β | β | 226.9 | β | β | β | β | β | 227.9 | β | β |
β | Total | β | β | β | β | 436.5 | β | β | β | β | β | 428.4 | β | β |
β | Refinery utilization(1) (%) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Eastern North America | β | β | β | β | 94 | β | β | β | β | β | 90 | β | β |
β | ||||||||||||||
β | Western North America | β | β | β | β | 93 | β | β | β | β | β | 93 | β | β |
β | Total | β | β | β | β | 94 | β | β | β | β | β | 92 | β | β |
β | Refined product sales (mbbls/d) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Gasoline | β | β | β | β | 226.2 | β | β | β | β | β | 232.6 | β | β |
β | ||||||||||||||
β | Distillate | β | β | β | β | 254.3 | β | β | β | β | β | 245.7 | β | β |
β | ||||||||||||||
β | Other | β | β | β | β | 71.4 | β | β | β | β | β | 69.8 | β | β |
β | Total | β | β | β | β | 551.9 | β | β | β | β | β | 548.1 | β | β |
β | Refining and marketing gross marginβββFIFO(2) ($/bbl) | β | β | β | β | 53.20 | β | β | β | β | β | 40.75 | β | β |
β | ||||||||||||||
β | Refining and marketing gross marginβββLIFO(2) ($/bbl) | β | β | β | β | 35.95 | β | β | β | β | β | 30.30 | β | β |
β | ||||||||||||||
β | Refining operating expense(2) ($/bbl) | β | β | β | β | 6.25 | β | β | β | β | β | 5.75 | β | β |
β
(1)
Refinery utilization is the amount of crude oil and natural gas plant liquids run through crude distillationΒ units, expressed as aΒ percentage of the capacity of theseΒ units.
β
(2)
Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
Refinery crude throughput increased to 436,500 bbls/d and refinery utilization was 94% in the first quarter of 2022, compared to 428,400 bbls/d and 92% in the prior year quarter, reflecting improved refined product demand and a strategic build in product inventory in advance of upcoming turnaround activities, partially offset by maintenance that occurred late in the current period, including maintenance that was accelerated into the first quarter from the second quarter. Refined product sales in the first quarter of 2022 increased to 551,900 bbls/d, compared to 548,100 bbls/d in the prior year quarter. Domestic demand for diesel has improved compared to 2019 levels, however, gasoline demand continues to lag behind the comparable 2019 levels.
Refining and Marketing Gross Margins(1)β
Refining and marketing gross margins were influenced by the following:
β’
On a LIFO(2) basis, Suncorβs refining and marketing gross margin increased to $35.95/bbl in the first quarter of 2022, from $30.30/bbl in the prior year quarter, due to improved benchmark crack spreads related to decreased refined product supply in the market and increased demand, in addition to the widening of heavy crude oil differentials. Suncorβs refining and marketing gross margin also reflects Suncorβs 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.
β
β’
On a FIFO basis, Suncorβs refining and marketing gross margin increased to $53.20/bbl in the first quarter of 2022, from $40.75/bbl in the prior year quarter, due to the same factors noted above, in addition to FIFO inventory valuation impacts. In the first 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 ofβ $729Β million before-tax. In the prior year quarter, FIFO including the impact of commodity risk management activities resulted in a gain of $432Β million before-tax, for a favourable quarter-over-quarter impact ofβ $297Β million.
β
(1)
Contains non-GAAP financial measures. See the non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
(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.
β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 25
Managementβs Discussion and Analysis
Expenses and Other Factors
Operating expenses and DD&A in the first quarter of 2022 increased compared to the prior year quarter, primarily due to increased refinery maintenance expenses, an increase in share-based compensation expense and higher commodity inputΒ costs.
Refining operating expense per barrel(1) was $6.25 in the first quarter of 2022, compared to $5.75 in the prior year quarter, due to increased operating expenses partially offset by increased throughput.
Planned Maintenance
Planned turnaround maintenance is scheduled at the Edmonton, Montreal and Sarnia refineries in the second quarter of 2022. The anticipated impact of these maintenance events has been reflected in the companyβs 2022 guidance.
Corporate and Eliminations
Financial Highlights
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Loss before income taxes(1) | β | β | β | β | (523) | β | β | β | β | β | (523) | β | β |
β | Adjusted for: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Unrealized foreign exchange gain on U.S. dollar denominated debt | β | β | β | β | (146) | β | β | β | β | β | (196) | β | β |
β | ||||||||||||||
β | Restructuring charge(2) | β | β | β | β | β | β | β | β | β | β | 168 | β | β |
β | Adjusted operating loss(1)(3) | β | β | β | β | (669) | β | β | β | β | β | (551) | β | β |
β | ||||||||||||||
β | Corporate and Renewables | β | β | β | β | (388) | β | β | β | β | β | (429) | β | β |
β | ||||||||||||||
β | EliminationsβββIntersegment profit eliminated | β | β | β | β | (281) | β | β | β | β | β | (122) | β | β |
β | Adjusted funds used in operations(1)(3) | β | β | β | β | (665) | β | β | β | β | β | (670) | β | β |
β
(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.
β
(2)
During the first quarter of 2021, the company recorded a restructuring charge in operating, selling and general expenses related to workforce reduction plans.
β
(3)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
Corporate incurred an adjusted operating loss ofβ $388Β million for the first quarter of 2022, compared to an adjusted operating loss ofβ $429Β million for the prior year quarter, with the decreased loss attributable to 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 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 first quarter of 2022 compared to the prior year quarter. Suncor capitalized $37Β million of its borrowing costs in the first quarter of 2022, as part of the cost of major development assets and construction projects in progress, compared to $31Β million in the prior year quarter.
Eliminations reflect the deferral or realization of profit or loss on crude oil sales from Oil Sands to Suncorβs 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 first quarter of 2022, the company deferred $281Β million of intersegment profit, compared to $122Β 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 $665Β million for the first quarter of 2022, compared to $670Β million in the first quarter of 2021, and were influenced by the same factors impacting adjusted operating loss described above, excluding the impact of share-based compensation expense and the unrealized gain on investment recorded in the first quarter of 2022. Adjusted funds used in operations in the prior year quarter were impacted by the restructuring charge related to workforce reduction plans recorded in the first quarter of 2021, which was partially offset by a smaller share-based compensation cash payout in the prior year quarter compared to the current year quarter.
Subsequent to the first quarter of 2022, the company announced plans to divest its wind and solar assets. The company has commenced the sale process and expects a sale to close within the next twelveΒ months.
(1)
Contains non-GAAP financial measures. See the non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
26Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
5. Income Tax
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Current income tax expense | β | β | β | β | 976 | β | β | β | β | β | 284 | β | β |
β | ||||||||||||||
β | Deferred income tax (recovery) expense | β | β | β | β | (77) | β | β | β | β | β | 9 | β | β |
β | Income tax expense included in net earnings | β | β | β | β | 899 | β | β | β | β | β | 293 | β | β |
β | ||||||||||||||
β | Less: income tax expense (recovery) on adjusted operating earnings adjustments | β | β | β | β | 27 | β | β | β | β | β | (20) | β | β |
β | Income tax expense included in adjusted operating earnings | β | β | β | β | 872 | β | β | β | β | β | 313 | β | β |
β | Effective tax rate | β | β | β | β | 23.4% | β | β | β | β | β | 26.3% | β | β |
Provision for income taxes in the first quarter of 2022 increased compared to the first quarter of 2021, primarily due to increased earnings in the first quarter of 2022 compared to the prior year quarter. In the first quarter of 2022, the companyβs effective tax rate was 23.4%, compared to 26.3% in the prior year quarter. The effective tax rate decreased in the first quarter of 2022 compared to the first quarter of 2021, primarily due to the settlement of prior year appeals in the first quarter of 2022 and other permanent items impacting total tax expense.
6. Capital Investment Update
Capital and Exploration Expenditures by Segment
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Oil Sands | β | β | β | β | 668 | β | β | β | β | β | 539 | β | β |
β | ||||||||||||||
β | Exploration and Production(1) | β | β | β | β | 83 | β | β | β | β | β | 69 | β | β |
β | ||||||||||||||
β | Refining and Marketing | β | β | β | β | 132 | β | β | β | β | β | 120 | β | β |
β | ||||||||||||||
β | Corporate and Eliminations | β | β | β | β | 128 | β | β | β | β | β | 75 | β | β |
β | Total capital and exploration expenditures | β | β | β | β | 1β011 | β | β | β | β | β | 803 | β | β |
β | ||||||||||||||
β | Less: capitalized interest on debt | β | β | β | β | (37) | β | β | β | β | β | (31) | β | β |
β | β | β | β | β | β | 974 | β | β | β | β | β | 772 | β | β |
β
(1)
Excludes capital expenditures related to assets held for sale ofβ $19Β million in the first quarter of 2022.
β
Capital and Exploration Expenditures by Type, Excluding Capitalized Interest
β | β | β | β | β | β | β | β | β | β | ThreeΒ months ended MarchΒ 31, 2022 | β | |||||||||
β | ($ millions) | β | β | Asset Sustainment and Maintenance(1) | β | β | Economic Investment(2) | β | β | Total | β | |||||||||
β | Oil Sands | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Oil Sands Base | β | β | β | β | 164 | β | β | β | β | β | 143 | β | β | β | β | β | 307 | β | β |
β | ||||||||||||||||||||
β | In Situ | β | β | β | β | 58 | β | β | β | β | β | 75 | β | β | β | β | β | 133 | β | β |
β | ||||||||||||||||||||
β | Fort Hills | β | β | β | β | 67 | β | β | β | β | β | 1 | β | β | β | β | β | 68 | β | β |
β | ||||||||||||||||||||
β | Syncrude | β | β | β | β | 95 | β | β | β | β | β | 38 | β | β | β | β | β | 133 | β | β |
β | ||||||||||||||||||||
β | Exploration and Production(3) | β | β | β | β | β | β | β | β | β | β | 77 | β | β | β | β | β | 77 | β | β |
β | ||||||||||||||||||||
β | Refining and Marketing | β | β | β | β | 124 | β | β | β | β | β | 8 | β | β | β | β | β | 132 | β | β |
β | ||||||||||||||||||||
β | Corporate and Eliminations | β | β | β | β | 4 | β | β | β | β | β | 120 | β | β | β | β | β | 124 | β | β |
β | β | β | β | β | β | 512 | β | β | β | β | β | 462 | β | β | β | β | β | 974 | β | β |
β
(1)
Asset sustainment and maintenance capital expenditures include capital investments that deliver on existing value by ensuring compliance or maintaining relations with regulators and other stakeholders, maintaining current processing capacity and delivering existing developed reserves.
β
(2)
Economic investment capital expenditures include capital investments that result in an increase in value through adding reserves or improving processing capacity, utilization, cost or margin, including associated infrastructure.
β
(3)
Excludes capital expenditures related to assets held for sale ofβ $19Β million in the first quarter of 2022.
β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 27
Managementβs Discussion and Analysis
During the first quarter of 2022, the company spent $974Β million on capital expenditures, excluding capitalized interest, compared to $772Β million in the prior year quarter. The increase in capital expenditures is primarily due to increased economic investment capital expenditures at Oil Sands Base and Corporate and Eliminations.
Activity in the first quarter of 2022 is summarized by business unit below.
Oil Sands
Oil Sands Base capital expenditures were $307Β million in the first quarter of 2022 and were primarily focused on asset sustainment and maintenance activities, as well as economic investment to progress low-carbon power cogeneration to replace the coke-fired boilers.
In Situ capital expenditures were $133Β million in the first quarter of 2022 and were directed towards economic investment activities, including the continued investment in well pad projects, and asset sustainment and maintenance activities.
Capital expenditures at Fort Hills were $68Β million in the first quarter of 2022, and were directed towards asset sustainment and maintenance activities in mine and tailings development.
Syncrude capital expenditures were $133Β million in the first quarter of 2022, the majority of which were for asset sustainment and maintenance expenditures relating to the companyοΏ½οΏ½s planned maintenance program, including planned maintenance that commenced in the first quarter and additional hydrotreating maintenance that was accelerated from later in the year to stagger coker and hydrotreating maintenance, which is expected to optimize full-year production at Syncrude. Economic investment during the quarter was directed towards progressing the Mildred Lake West Extension mining project.
Exploration and Production
Capital and exploration expenditures at E&P were $77Β million in the first quarter of 2022 and were related to economic investment projects, including the Terra Nova Asset Life Extension Project, partially offset by support from the Government of Newfoundland and Labrador, and development drilling at Hebron.
Refining and Marketing
R&M capital expenditures were $132Β million in the first quarter of 2022 and were primarily related to asset sustainment and maintenance activities relating to the companyβs planned maintenance program.
Corporate and Eliminations
Corporate and Eliminations capital expenditures were $124Β million in the first quarter of 2022 and were primarily directed towards the Forty Mile Wind Power Project and the companyβs digital transformation.
28Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
7. Financial Condition and Liquidity
Indicators
β | β | β | β | TwelveΒ months ended MarchΒ 31 | β | |||||||||
β | β | β | β | 2022 | β | β | 2021 | β | ||||||
β | Return on capital employed(1)(2) (%) | β | β | β | β | 12.7 | β | β | β | β | β | (1.4) | β | β |
β | Net debt to adjusted funds from operations(1) (times) | β | β | β | β | 1.3 | β | β | β | β | β | 3.8 | β | β |
β | Total debt to total debt plus shareholdersβ equity(1) (%) | β | β | β | β | 32.0 | β | β | β | β | β | 36.2 | β | β |
β | Net debt to net debt plus shareholdersβ equity(1) (%) | β | β | β | β | 28.7 | β | β | β | β | β | 34.1 | β | β |
β | Net debt to net debt plus shareholdersβ equityβββexcluding leases(1) (%) | β | β | β | β | 24.8 | β | β | β | β | β | 30.5 | β | β |
β
(1)
Non-GAAP financial measures or contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of thisΒ MD&A.
β
(2)
ROCE would have been 12.4% for the twelveΒ months ended MarchΒ 31, 2022, excluding the impact of the impairment reversal ofβ $221Β million ($168Β million after-tax) in the third quarter of 2021. ROCE would have been (0.6%) for the twelveΒ months ended MarchΒ 31, 2021, excluding the impact of impairments ofβ $559Β million ($423Β million after-tax) in the fourth quarter of 2020.
β
Capital Resources
Suncorβs capital resources consist primarily of cash flow provided by operating activities, cash and cash equivalents, and available lines of credit. Suncorβs management believes the company will have the capital resources to fund its planned 2022Β capital spend program ofβ $4.7Β billion and to meet current and future working capital requirements, through cash and cash equivalents balances, cash flow provided by operating activities, available committed credit facilities, issuing commercial paper and, if needed, accessing capital markets. The companyβs cash flow provided by operating activities depends on a number of factors, including commodity prices, production and sales volumes, refining and marketing gross margins, operating expenses, taxes, royalties and foreign exchange rates.
The company has invested cash in short-term financial instruments that are presented as cash and cash equivalents. The objectives of the companyβs short-term investment portfolio are to ensure the preservation of capital, maintain adequate liquidity to meet Suncorβs cash flow requirements and deliver competitive returns derived from the quality and diversification of investments within acceptable risk parameters. The maximum weighted average term to maturity of the short-term investment portfolio is not expected to exceed sixΒ months, and all investments will be with counterparties with investment grade debt ratings.
Available Sources of Liquidity
For the threeΒ months ended MarchΒ 31, 2022, cash and cash equivalents increased to $2.599Β billion from $2.205Β billion at DecemberΒ 31, 2021, due to cash flow provided by operating activities exceeding the companyβs capital and exploration expenditures, debt reduction, the payment ofβ $601Β million in dividends, the repurchase ofβ $827Β million of Suncorβs common shares under its NCIB, and the completion of a significant income tax payment related to the companyβs 2021 income tax expense in the first quarter of 2022.
As at MarchΒ 31, 2022, the weighted average days to maturity of the companyβs short-term investment portfolio was approximately 18Β days.
Available credit facilities for liquidity purposes at MarchΒ 31, 2022 were $4.153Β billion, comparable to $4.247Β billion at DecemberΒ 31,Β 2021.
Financing Activities
Management of debt levels and liquidity continues to be a priority for Suncor given the companyβs long-term plans and future expected volatility in the current business environment. Suncor believes a phased and flexible approach to existing and future projects should assist the company in maintaining its ability to manage project costs and debt levels.
Total Debt to Total Debt Plus Shareholdersβ Equity
Suncor is subject to financial and operating covenants related to its bank debt and public market debt. Failure to meet the terms of one or more of these covenants may constitute an βevent of defaultβ as defined in the respective debt agreements, potentially resulting in accelerated repayment of one or more of the debt obligations. The company is in compliance with its financial covenant that requires total debt to not exceed 65% of its total debt plus shareholdersβ equity. At MarchΒ 31, 2022, total debt to total debt plus shareholdersβ equity was 32.0% (DecemberΒ 31, 2021βββ33.4%). The company continues to be in compliance with all operating covenants under its debt agreements.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 29
Managementβs Discussion and Analysis
Change in Debt
β | β | β | β | ThreeΒ months ended | β | |||
β | ($ millions) | β | β | MarchΒ 31, 2022 | β | |||
β | Total debt(1)βββbeginning of period | β | β | β | β | 18β354 | β | β |
β | ||||||||
β | Decrease in long-term debt | β | β | β | β | (233) | β | β |
β | ||||||||
β | Increase in short-term debt | β | β | β | β | 71 | β | β |
β | ||||||||
β | Increase in lease liability | β | β | β | β | 66 | β | β |
β | ||||||||
β | Lease payments | β | β | β | β | (84) | β | β |
β | ||||||||
β | Foreign exchange on debt, and other | β | β | β | β | (154) | β | β |
β | Total debt(1)βββMarchΒ 31, 2022 | β | β | β | β | 18β020 | β | β |
β | ||||||||
β | Less: Cash and cash equivalentsβββMarchΒ 31, 2022 | β | β | β | β | 2β599 | β | β |
β | Net debt(1)βββMarchΒ 31, 2022 | β | β | β | β | 15β421 | β | β |
β
(1)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.
β
The companyβs total debt decreased in the first quarter of 2022 due primarily to the repayment of long-term debt and favourable foreign exchange rates on U.S. dollar denominated debt compared to DecemberΒ 31, 2021.
At MarchΒ 31, 2022, Suncorβs net debt was $15.421Β billion, compared to $16.149Β billion at DecemberΒ 31, 2021, with the decrease primarily due to the factors listed above and an increase in cash and cash equivalents.
In the first quarter of 2022, the company completed an early redemption of its outstanding US$182Β million 4.50% notes, originally scheduled to mature in the second quarter of 2022.
Common Shares
β | β | β | β | MarchΒ 31, | β | |||
β | (thousands) | β | β | 2022 | β | |||
β | Common shares | β | β | β | β | 1β422β165 | β | β |
β | ||||||||
β | Common share optionsβββexercisable | β | β | β | β | 26β499 | β | β |
β | ||||||||
β | Common share optionsβββnon-exercisable | β | β | β | β | 5β990 | β | β |
As at MayΒ 6, 2022, the total number of common shares outstanding was 1,413,400,265 and the total number of exercisable and non-exercisable common share options outstanding was 30,109,538. Once exercisable, each outstanding common share option is convertible into one common share.
Share Repurchases
During the first quarter of 2022, the TSX accepted a notice filed by Suncor to renew its NCIB to purchase up to 5% of the companyβs common shares through the facilities of the TSX, NYSE and/or alternative trading systems. The notice provided that, beginning FebruaryΒ 8, 2022, and ending FebruaryΒ 7, 2023, Suncor may purchase for cancellation up to 71,650,000 common shares, which is equal to approximately 5% of Suncorβs issued and outstanding common shares as at the date hereof. As at JanuaryΒ 31, 2022, Suncor had 1,435,748,494 common shares issued and outstanding.
Subsequent to the first quarter of 2022, and following the Boardβs approval to increase the companyβs share repurchase program to up to 10% of the companyβs public float, Suncor received approval from the TSX to amend its existing NCIB effective as of the close of markets on MayΒ 11, 2022, to increase the maximum number of common shares that may be repurchased in the period beginning FebruaryΒ 8, 2022, and ending FebruaryΒ 7, 2023, from 71,650,000 common shares, or approximately 5% of Suncorβs issued and outstanding common shares as at JanuaryΒ 31, 2022, to 143,500,000, or approximately 10% of Suncorβs public float as at JanuaryΒ 31, 2022. No other terms of the NCIB have been amended. Suncor security holders may obtain a copy of the amended notice, without charge, by contacting the company.
Between FebruaryΒ 8, 2022, and MayΒ 6, 2022, and pursuant to Suncorβs NCIB, Suncor repurchased 25,432,000 common shares on the open market, representing the equivalent of 1.8% of its common shares as at JanuaryΒ 31, 2022, for approximately $1.041Β billion, at a weighted average price of $40.93 per common share.
30Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
The actual number of common shares that may be purchased and the timing of any such purchases will be determined by Suncor. Suncor believes that, depending on the trading price of its common shares and other relevant factors, purchasing its own shares represents an attractive investment opportunity and is in the best interests of the company and its shareholders. The company does not expect the decision to allocate cash to repurchase shares will affect its long-term strategy.
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions, except as noted) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Share repurchase activities (thousands of common shares) | β | β | β | β | 21β698 | β | β | β | β | β | 12β055 | β | β |
β | ||||||||||||||
β | Weighted average repurchase price per share (dollars per share) | β | β | β | β | 38.12 | β | β | β | β | β | 26.36 | β | β |
β | ||||||||||||||
β | Share repurchase cost | β | β | β | β | 827 | β | β | β | β | β | 318 | β | β |
Contractual Obligations, Commitments, Guarantees and Off-Balance Sheet Arrangements
In the normal course of business, the company is obligated to make future payments, including contractual obligations and non-cancellable commitments. Suncor has included these items in the Financial Condition and Liquidity section of the 2021 annual MD&A with no material updates to note during the first threeΒ months of 2022. Suncor does not believe it has any guarantees or off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the companyβs financial performance or financial condition, results of operations, liquidity or capital expenditures.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 31
Managementβs Discussion and Analysis
8. Quarterly Financial Data
Trends in Suncorβs quarterly revenue, earnings and adjusted funds from operations are driven primarily by production volumes, which can be significantly impacted by major maintenance events, changes in commodity prices and crude differentials, refining crack spreads, foreign exchange rates and other significant events impacting operations, such as operational incidents and the impacts of the COVID-19 pandemic.
Financial Summary
β | ThreeΒ months ended ($ millions, unless otherwise noted) | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2020 | β | β | SepΒ 30 2020 | β | β | JunΒ 30 2020 | β | ||||||||||||||||||||||||
β | Total production (mboe/d) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Oil Sands | β | β | β | β | 685.7 | β | β | β | β | β | 665.9 | β | β | β | β | β | 605.1 | β | β | β | β | β | 615.7 | β | β | β | β | β | 690.6 | β | β | β | β | β | 671.5 | β | β | β | β | β | 519.0 | β | β | β | β | β | 553.7 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Exploration and Production | β | β | β | β | 80.4 | β | β | β | β | β | 77.4 | β | β | β | β | β | 93.5 | β | β | β | β | β | 84.0 | β | β | β | β | β | 95.3 | β | β | β | β | β | 97.7 | β | β | β | β | β | 97.2 | β | β | β | β | β | 101.8 | β | β |
β | β | β | β | β | β | 766.1 | β | β | β | β | β | 743.3 | β | β | β | β | β | 698.6 | β | β | β | β | β | 699.7 | β | β | β | β | β | 785.9 | β | β | β | β | β | 769.2 | β | β | β | β | β | 616.2 | β | β | β | β | β | 655.5 | β | β |
β | Revenues and other income | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 13β487 | β | β | β | β | β | 11β149 | β | β | β | β | β | 10β145 | β | β | β | β | β | 9β159 | β | β | β | β | β | 8β679 | β | β | β | β | β | 6β615 | β | β | β | β | β | 6β427 | β | β | β | β | β | 4β229 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Other income (loss) | β | β | β | β | 14 | β | β | β | β | β | 10 | β | β | β | β | β | 68 | β | β | β | β | β | (66) | β | β | β | β | β | (43) | β | β | β | β | β | (21) | β | β | β | β | β | 30 | β | β | β | β | β | 16 | β | β |
β | β | β | β | β | β | 13β501 | β | β | β | β | β | 11β159 | β | β | β | β | β | 10β213 | β | β | β | β | β | 9β093 | β | β | β | β | β | 8β636 | β | β | β | β | β | 6β594 | β | β | β | β | β | 6β457 | β | β | β | β | β | 4β245 | β | β |
β | Net earnings (loss) | β | β | β | β | 2β949 | β | β | β | β | β | 1β553 | β | β | β | β | β | 877 | β | β | β | β | β | 868 | β | β | β | β | β | 821 | β | β | β | β | β | (168) | β | β | β | β | β | (12) | β | β | β | β | β | (614) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | per common share(1) (dollars) | β | β | β | β | 2.06 | β | β | β | β | β | 1.07 | β | β | β | β | β | 0.59 | β | β | β | β | β | 0.58 | β | β | β | β | β | 0.54 | β | β | β | β | β | (0.11) | β | β | β | β | β | (0.01) | β | β | β | β | β | (0.40) | β | β |
β | Adjusted operating earnings (loss)(2)(3) | β | β | β | β | 2β755 | β | β | β | β | β | 1β294 | β | β | β | β | β | 1β043 | β | β | β | β | β | 722 | β | β | β | β | β | 746 | β | β | β | β | β | (109) | β | β | β | β | β | (338) | β | β | β | β | β | (1β345) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | per common share(4)(5) (dollars) | β | β | β | β | 1.92 | β | β | β | β | β | 0.89 | β | β | β | β | β | 0.71 | β | β | β | β | β | 0.48 | β | β | β | β | β | 0.49 | β | β | β | β | β | (0.07) | β | β | β | β | β | (0.22) | β | β | β | β | β | (0.88) | β | β |
β | Adjusted funds from operations(2) | β | β | β | β | 4β094 | β | β | β | β | β | 3β144 | β | β | β | β | β | 2β641 | β | β | β | β | β | 2β362 | β | β | β | β | β | 2β110 | β | β | β | β | β | 1β221 | β | β | β | β | β | 1β166 | β | β | β | β | β | 488 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | per common share(4)(5) (dollars) | β | β | β | β | 2.86 | β | β | β | β | β | 2.17 | β | β | β | β | β | 1.79 | β | β | β | β | β | 1.57 | β | β | β | β | β | 1.39 | β | β | β | β | β | 0.80 | β | β | β | β | β | 0.76 | β | β | β | β | β | 0.32 | β | β |
β | Cash flow provided by (used in) operating activities | β | β | β | β | 3β072 | β | β | β | β | β | 2β615 | β | β | β | β | β | 4β718 | β | β | β | β | β | 2β086 | β | β | β | β | β | 2β345 | β | β | β | β | β | 814 | β | β | β | β | β | 1β245 | β | β | β | β | β | (768) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | per common shareβββbasic (dollars) | β | β | β | β | 2.14 | β | β | β | β | β | 1.80 | β | β | β | β | β | 3.19 | β | β | β | β | β | 1.39 | β | β | β | β | β | 1.54 | β | β | β | β | β | 0.53 | β | β | β | β | β | 0.82 | β | β | β | β | β | (0.50) | β | β |
β | ROCE(4) (%) for the twelveΒ months ended | β | β | β | β | 12.7 | β | β | β | β | β | 8.6 | β | β | β | β | β | 4.5 | β | β | β | β | β | 1.9 | β | β | β | β | β | (1.4) | β | β | β | β | β | (6.9) | β | β | β | β | β | (10.2) | β | β | β | β | β | (7.5) | β | β |
β | ROCE excluding impairments(4) (%) for the twelveΒ months ended | β | β | β | β | 12.4 | β | β | β | β | β | 8.2 | β | β | β | β | β | 4.9 | β | β | β | β | β | 2.6 | β | β | β | β | β | (0.6) | β | β | β | β | β | (2.9) | β | β | β | β | β | (1.3) | β | β | β | β | β | 1.0 | β | β |
β | Common share information (dollars) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Dividend per common share | β | β | β | β | 0.42 | β | β | β | β | β | 0.42 | β | β | β | β | β | 0.21 | β | β | β | β | β | 0.21 | β | β | β | β | β | 0.21 | β | β | β | β | β | 0.21 | β | β | β | β | β | 0.21 | β | β | β | β | β | 0.21 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Share price at the end of trading | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Toronto Stock Exchange (Cdn$) | β | β | β | β | 40.70 | β | β | β | β | β | 31.65 | β | β | β | β | β | 26.26 | β | β | β | β | β | 29.69 | β | β | β | β | β | 26.27 | β | β | β | β | β | 21.35 | β | β | β | β | β | 16.26 | β | β | β | β | β | 22.89 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | New York Stock Exchange (US$) | β | β | β | β | 32.59 | β | β | β | β | β | 25.03 | β | β | β | β | β | 20.74 | β | β | β | β | β | 23.97 | β | β | β | β | β | 20.90 | β | β | β | β | β | 16.78 | β | β | β | β | β | 12.23 | β | β | β | β | β | 16.86 | β | β |
β
(1)
Represented on a basic and diluted per share basis.
β
(2)
Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A. Adjusted operating earnings (loss) for each quarter are defined in the Non-GAAP and Other Financial Measures Advisory section and reconciled to GAAP measures in the Consolidated Financial Information and Segment Results and Analysis sections of each Quarterly Report to Shareholders issued by Suncor (Quarterly Reports) in respect of the relevant quarter. Adjusted funds from operations for each quarter are defined and reconciled to GAAP measures in the Non-GAAP and Other Financial Measures Advisory section of each Quarterly Report in respect of the relevant quarter, with such information being incorporated by reference herein and available on SEDAR at www.sedar.com.
β
(3)
Beginning in the first quarter of 2021, the company revised its calculation of adjusted operating earnings (loss), a non-GAAP financial measure, to exclude unrealized (gains) losses on derivative financial instruments that are recorded at fair value in other income (loss) to better align the earnings impact of the activity with the underlying items being risk-managed. Prior period comparatives have been restated to reflect this change.
β
(4)
Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A. Non-GAAP measures included in ROCE and ROCE excluding impairments are defined and reconciled to GAAP measures in the Non-GAAP and Other Financial Measures Advisory section of each Quarterly Report in respect of the relevant quarter, with such information being incorporated by reference herein and available on SEDAR at www.sedar.com.
β
(5)
Represented on a basic per share basis.
β
32Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Business Environment
β | (average for the threeΒ months ended) | β | β | β | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2020 | β | β | SepΒ 30 2020 | β | β | JunΒ 30 2020 | β | ||||||||||||||||||||||||
β | WTI crude oil at Cushing | β | β | US$/bbl | β | β | β | β | 94.40 | β | β | β | β | β | 77.15 | β | β | β | β | β | 70.55 | β | β | β | β | β | 66.05 | β | β | β | β | β | 57.80 | β | β | β | β | β | 42.65 | β | β | β | β | β | 40.95 | β | β | β | β | β | 27.85 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Dated Brent crude | β | β | US$/bbl | β | β | β | β | 101.50 | β | β | β | β | β | 79.70 | β | β | β | β | β | 73.45 | β | β | β | β | β | 68.85 | β | β | β | β | β | 60.85 | β | β | β | β | β | 44.20 | β | β | β | β | β | 43.00 | β | β | β | β | β | 29.20 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Dated Brent/Maya FOB price differential | β | β | US$/bbl | β | β | β | β | 14.30 | β | β | β | β | β | 8.60 | β | β | β | β | β | 7.80 | β | β | β | β | β | 6.20 | β | β | β | β | β | 4.70 | β | β | β | β | β | 3.30 | β | β | β | β | β | 3.50 | β | β | β | β | β | 2.70 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | MSW at Edmonton | β | β | Cdn$/bbl | β | β | β | β | 115.75 | β | β | β | β | β | 93.25 | β | β | β | β | β | 83.75 | β | β | β | β | β | 77.25 | β | β | β | β | β | 66.55 | β | β | β | β | β | 50.25 | β | β | β | β | β | 51.30 | β | β | β | β | β | 30.20 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | WCS at Hardisty | β | β | US$/bbl | β | β | β | β | 79.80 | β | β | β | β | β | 62.50 | β | β | β | β | β | 56.95 | β | β | β | β | β | 54.60 | β | β | β | β | β | 45.40 | β | β | β | β | β | 33.35 | β | β | β | β | β | 31.90 | β | β | β | β | β | 16.35 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Light/heavy crude oil differential for WTI at Cushing less WCS at Hardisty | β | β | US$/bbl | β | β | β | β | (14.60) | β | β | β | β | β | (14.65) | β | β | β | β | β | (13.60) | β | β | β | β | β | (11.45) | β | β | β | β | β | (12.40) | β | β | β | β | β | (9.30) | β | β | β | β | β | (9.05) | β | β | β | β | β | (11.50) | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | SYN-WTI (differential) premium | β | β | US$/bbl | β | β | β | β | (1.30) | β | β | β | β | β | (1.80) | β | β | β | β | β | (1.60) | β | β | β | β | β | 0.35 | β | β | β | β | β | (3.50) | β | β | β | β | β | (3.05) | β | β | β | β | β | (2.45) | β | β | β | β | β | (4.55) | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Condensate at Edmonton | β | β | US$/bbl | β | β | β | β | 96.15 | β | β | β | β | β | 79.10 | β | β | β | β | β | 69.20 | β | β | β | β | β | 66.40 | β | β | β | β | β | 58.00 | β | β | β | β | β | 42.55 | β | β | β | β | β | 37.55 | β | β | β | β | β | 22.20 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Natural gas (Alberta spot) at AECO | β | β | Cdn$/GJ | β | β | β | β | 4.50 | β | β | β | β | β | 4.45 | β | β | β | β | β | 3.40 | β | β | β | β | β | 2.95 | β | β | β | β | β | 2.95 | β | β | β | β | β | 2.50 | β | β | β | β | β | 2.10 | β | β | β | β | β | 1.90 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Alberta Power Pool Price | β | β | Cdn$/MWh | β | β | β | β | 90.00 | β | β | β | β | β | 107.30 | β | β | β | β | β | 100.35 | β | β | β | β | β | 104.50 | β | β | β | β | β | 95.45 | β | β | β | β | β | 46.15 | β | β | β | β | β | 43.85 | β | β | β | β | β | 29.90 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | New York Harbor 2-1-1 crack(1) | β | β | US$/bbl | β | β | β | β | 28.25 | β | β | β | β | β | 20.65 | β | β | β | β | β | 20.90 | β | β | β | β | β | 20.35 | β | β | β | β | β | 15.60 | β | β | β | β | β | 9.85 | β | β | β | β | β | 10.20 | β | β | β | β | β | 12.20 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Chicago 2-1-1 crack(1) | β | β | US$/bbl | β | β | β | β | 20.20 | β | β | β | β | β | 16.90 | β | β | β | β | β | 20.45 | β | β | β | β | β | 20.25 | β | β | β | β | β | 13.40 | β | β | β | β | β | 7.95 | β | β | β | β | β | 7.75 | β | β | β | β | β | 6.75 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Portland 2-1-1 crack(1) | β | β | US$/bbl | β | β | β | β | 33.80 | β | β | β | β | β | 25.35 | β | β | β | β | β | 26.70 | β | β | β | β | β | 24.55 | β | β | β | β | β | 15.80 | β | β | β | β | β | 13.15 | β | β | β | β | β | 12.55 | β | β | β | β | β | 12.20 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Gulf Coast 2-1-1 crack(1) | β | β | US$/bbl | β | β | β | β | 26.80 | β | β | β | β | β | 19.65 | β | β | β | β | β | 19.55 | β | β | β | β | β | 18.25 | β | β | β | β | β | 14.45 | β | β | β | β | β | 9.00 | β | β | β | β | β | 8.55 | β | β | β | β | β | 9.00 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | U.S. Renewable Volume Obligation | β | β | US$/bbl | β | β | β | β | 6.45 | β | β | β | β | β | 6.10 | β | β | β | β | β | 7.33 | β | β | β | β | β | 8.13 | β | β | β | β | β | 5.50 | β | β | β | β | β | 3.48 | β | β | β | β | β | 2.64 | β | β | β | β | β | 2.21 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Exchange rate | β | β | US$/Cdn$ | β | β | β | β | 0.79 | β | β | β | β | β | 0.79 | β | β | β | β | β | 0.79 | β | β | β | β | β | 0.81 | β | β | β | β | β | 0.79 | β | β | β | β | β | 0.77 | β | β | β | β | β | 0.75 | β | β | β | β | β | 0.72 | β | β |
β | |||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Exchange rate (end of period) | β | β | US$/Cdn$ | β | β | β | β | 0.80 | β | β | β | β | β | 0.79 | β | β | β | β | β | 0.78 | β | β | β | β | β | 0.81 | β | β | β | β | β | 0.80 | β | β | β | β | β | 0.78 | β | β | β | β | β | 0.75 | β | β | β | β | β | 0.73 | β | β |
β
(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.
β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 33
Managementβs Discussion and Analysis
9. Other Items
Accounting Policies and New IFRS Standards
Suncorβs significant accounting policies and a summary of recently announced accounting standards are described in the Accounting Policies and Critical Accounting Estimates section of Suncorβs 2021 annual MD&A and in notesΒ 3 and 5 of Suncorβs audited Consolidated Financial Statements for the year ended DecemberΒ 31, 2021.
Critical Accounting Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates, judgments and assumptions that affect reported assets, liabilities, revenues and expenses, gains and losses, and disclosures of contingencies. These estimates and assumptions are subject to change based on experience and new information. Critical accounting estimates are those that require management to make assumptions about matters that are highly uncertain at the time the estimate is made. Critical accounting estimates are also those estimates which, where a different estimate could have been used or where changes in the estimate that are reasonably likely to occur, would have a material impact on the companyβs financial condition, changes in financial condition or financial performance. Critical accounting estimates and judgments are reviewed annually by the Audit Committee of the Board of Directors. A detailed description of Suncorβs critical accounting estimates is provided in noteΒ 4 to the audited Consolidated Financial Statements for the year ended DecemberΒ 31, 2021, and in the Accounting Policies and Critical Accounting Estimates section of Suncorβs 2021 annual MD&A.
On JanuaryΒ 30, 2020, the World Health Organization declared the COVID-19 outbreak a Public Health Emergency of International Concern and, on MarchΒ 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas, and forced closures for certain types of public places and businesses. These measures have and will continue to have significant disruption to business operations and a significant increase in economic uncertainty, with reduced demand for commodities leading to volatile prices and currency exchange rates, and a decline in long-term interest rates. Our operations and business are particularly sensitive to a reduction in the demand for, and prices of, commodities that are closely linked to Suncorβs financial performance, including crude oil, refined petroleum products (such as jet fuel and gasoline), natural gas and electricity. The potential direct and indirect impacts of the economic volatility have been considered in managementβs estimates, and assumptions at period-end have been reflected in our results with any significant changes described in the relevant notes to the companyβs unaudited interim Consolidated Financial Statements for the threeΒ months ended MarchΒ 31, 2022.
The COVID-19 pandemic is an evolving situation that is expected to continue to have widespread implications for our business environment, operations and financial condition. Management cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact our consolidated statements of comprehensive income (loss), consolidated balance sheets and consolidated statements of cash flows.
Financial Instruments
Suncor periodically enters into derivative contracts such as forwards, futures, swaps, options and costless collars to manage exposure to fluctuations in commodity prices and foreign exchange rates, and to optimize the companyβs position with respect to interest payments. The company also uses physical and financial energy derivatives to earn trading profits. For more information on Suncorβs financial instruments and the related financial risk factors, see noteΒ 27 of the audited Consolidated Financial Statements for the year ended DecemberΒ 31, 2021, noteΒ 9 to the unaudited interim Consolidated Financial Statements for the threeΒ months ended MarchΒ 31, 2022, and the Financial Condition and Liquidity section of the 2021 annual MD&A.
Control Environment
Based on their evaluation as at MarchΒ 31, 2022, Suncorβs Chief Executive Officer and Chief Financial Officer concluded that the companyβs disclosure controls and procedures (as defined in RulesΒ 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to ensure that information required to be disclosed by the company in reports that are filed or submitted to Canadian and U.S. securities authorities is recorded, processed, summarized and reported within the time periods specified in Canadian and U.S. securities laws. In addition, as at MarchΒ 31, 2022, there were no changes in the internal control over financial reporting (as defined in Exchange Act RulesΒ 13a-15(f) and 15d-15(f)) that occurred during the three-month period ended MarchΒ 31, 2022, that have materially affected, or are reasonably likely to materially affect, the companyβs internal control over financial reporting. Management will continue to periodically evaluate the companyβs disclosure controls and procedures and internal control over financial reporting and will make any modifications from time to time as deemed necessary.
34Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Based on their inherent limitations, disclosure controls and procedures and internal control over financial reporting may not prevent or detect misstatements, and even those controls determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Corporate Guidance
Suncor has further updated its previously announced 2022 guidance (which was originally disclosed via press release on DecemberΒ 13, 2021), as set forth in Suncorβs press releases dated FebruaryΒ 2, 2022, and MayΒ 9, 2022, a copy of which is available on www.sedar.com.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 35
Managementβs Discussion and Analysis
10. Non-GAAP and Other Financial Measures Advisory
Certain financial measures in this MD&Aβββnamely adjusted operating earnings (loss), adjusted funds from (used in) operations, measures contained in ROCE and ROCE excluding impairments, price realizations, free funds flow, Oil Sands operations cash operating costs, Fort Hills cash operating costs, Syncrude cash operating costs, refining and marketing gross margin, refining operating expense, net debt, total debt, LIFO inventory valuation methodology and related per share or per barrel amounts or metrics that contain such measuresβββare 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 to 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.
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.
Adjusted Operating Earnings (Loss)
Adjusted operating earnings (loss) is a non-GAAP financial measure that adjusts net earnings (loss) for significant items that are not indicative of operating performance. Management uses adjusted operating earnings (loss) to evaluate operating performance because management believes it provides better comparability between periods. Adjusted operating earnings (loss) is reconciled to net earnings (loss) in the Consolidated Financial Information and Segment Results and Analysis sections of this MD&A.
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.
Bridge Analyses of Adjusted Operating Earnings (Loss)
Throughout this MD&A, the company presents charts that illustrate the change in adjusted operating earnings (loss) from the comparative period through key variance factors. These factors are analyzed in the Adjusted Operating Earnings (Loss) narratives following the bridge analyses in particular sections of this MD&A. These bridge analyses are presented because management uses this presentation to evaluate performance.
β’
The factor for Sales Volumes and Mix is calculated based on sales volumes and mix for the Oil Sands and E&P segments and throughput volumes for the R&M segment.
β
β’
The factor for Price, Margin and Other Revenue includes upstream price realizations before royalties, with the exception of Libya, which is net of royalties, and realized commodity risk management activities. Also included are refining and marketing gross margins, other operating revenue, and the net impacts of sales and purchases of third-party crude, including product purchased for use as diluent in the companyβs Oil Sands operations and subsequently sold as part of diluted bitumen.
β
β’
The factor for Royalties excludes the impact of Libya, as royalties in Libya are taken into account in Price, Margin and Other Revenue as described above.
β
β’
The factor for Inventory Valuation includes the before-tax impact of the FIFO method of inventory valuation in the companyβs R&M segment, as well as the impact of the deferral or realization of profit or loss on crude oil sales from the Oil Sands segment to Suncorβs refineries, as both represent inventory valuation adjustments, and downstream realized commodity risk management activities.
β
β’
The factor for Operating and Transportation Expense includes project startup costs, operating, selling and general expense, and transportation expense.
β
β’
The factor for Financing Expense and Other includes financing expenses, other income, operational foreign exchange gains and losses and changes in gains and losses on disposal of assets that are not adjusted operating earnings (loss) adjustments.
β
β’
The factor for DD&A and Exploration Expense includes depreciation, depletion and amortization expense, and exploration expense.
β
β’
The factor for Income Tax includes the companyβs current and deferred income tax expense on adjusted operating earnings, changes in statutory income tax rates and other income tax adjustments.
β
36Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Return on Capital Employed (ROCE) and ROCE Excluding Impairments
ROCE is a measure that management uses to analyze operating performance and the efficiency of Suncorβs capital allocation process. ROCE is calculated using the non-GAAP financial measures adjusted net earnings and average capital employed. Adjusted net earnings are calculated by taking net earnings (loss) and adjusting after-tax amounts for unrealized foreign exchange on U.S. dollar denominated debt and net interest expense. Average capital employed is calculated as a twelve-month average of the capital employed balance at the beginning of the twelve-month period and the month-end capital employed balances throughout the remainder of the twelve-month period. Figures for capital employed at the beginning and end of the twelve-month period are presented to show the changes in the components of the calculation over the twelve-month period.
β | For the twelveΒ months ended MarchΒ 31 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ($ millions, except as noted) | β | β | β | β | β | β | β | β | 2022 | β | β | 2021 | β | ||||||
β | Adjustments to net earnings | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Net earnings | β | β | β | β | β | β | β | β | β | β | 6β247 | β | β | β | β | β | 27 | β | β |
β | ||||||||||||||||||||
β | (Deduct) add after-tax amounts for: | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Unrealized foreign exchange gain on U.S. dollar denominated debt | β | β | β | β | β | β | β | β | β | β | (57) | β | β | β | β | β | (1β488) | β | β |
β | ||||||||||||||||||||
β | Net interest expense | β | β | β | β | β | β | β | β | β | β | 628 | β | β | β | β | β | 704 | β | β |
β | Adjusted net earnings (loss)(1) | β | β | β | β | A | β | β | β | β | β | 6β818 | β | β | β | β | β | (757) | β | β |
β | Capital employedβββbeginning of twelve-month period | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Net debt(2) | β | β | β | β | β | β | β | β | β | β | 18β829 | β | β | β | β | β | 18β212 | β | β |
β | ||||||||||||||||||||
β | Shareholdersβ equity | β | β | β | β | β | β | β | β | β | β | 36β325 | β | β | β | β | β | 37β965 | β | β |
β | β | β | β | β | β | β | β | β | β | β | β | 55β154 | β | β | β | β | β | 56β177 | β | β |
β | Capital employedβββend of twelve-month period | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Net debt(2) | β | β | β | β | β | β | β | β | β | β | 15β421 | β | β | β | β | β | 18β829 | β | β |
β | ||||||||||||||||||||
β | Shareholdersβ equity | β | β | β | β | β | β | β | β | β | β | 38β274 | β | β | β | β | β | 36β325 | β | β |
β | β | β | β | β | β | β | β | β | β | β | β | 53β695 | β | β | β | β | β | 55β154 | β | β |
β | Average capital employed | β | β | β | β | B | β | β | β | β | β | 53β700 | β | β | β | β | β | 55β854 | β | β |
β | ROCE (%)(3) | β | β | β | β | A/B | β | β | β | β | β | 12.7 | β | β | β | β | β | (1.4) | β | β |
β
(1)
Total before-tax impact of adjustments is $765Β million for the twelveΒ months ended MarchΒ 31, 2022, and ($674) million for the twelveΒ months ended MarchΒ 31, 2021.
β
(2)
Net debt is a non-GAAP financial measure.
β
(3)
ROCE would have been 12.4% for the twelveΒ months ended MarchΒ 31, 2022, excluding the impact of the impairment reversal ofβ $221Β million ($168Β million after-tax) in the third quarter of 2021. ROCE would have been (0.6%) for the twelveΒ months ended MarchΒ 31, 2021, excluding the impact of impairments ofβ $559Β million ($423Β million after-tax) in the fourth quarter of 2020.
β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 37
Managementβs Discussion and Analysis
Adjusted Funds From (Used In) Operations(1)
Adjusted funds from (used in) operations is a non-GAAP financial measure that adjusts a GAAP measureβββcash flow provided by operating activitiesβββfor changes in non-cash working capital, which management uses to analyze operating performance and liquidity. Changes to non-cash working capital can be impacted by, among other factors, commodity price volatility, the timing of offshore feedstock purchases and payments for commodity and income taxes, the timing of cash flows related to accounts receivable and accounts payable, and changes in inventory, which management believes reduces comparability between periods.
Adjusted funds from (used in) operations for each quarter are separately defined and reconciled to the cash flow provided by the operating activities measure in the Non-GAAP and Other Financial Measures Advisory section of each respective managementβs discussion and analysis or quarterly report to shareholders, as applicable, for the related quarter, with such information being incorporated by reference herein and available on SEDAR at www.sedar.com.
β | ThreeΒ months ended MarchΒ 31 | β | β | Oil Sands | β | β | Exploration and Production | β | β | Refining and Marketing | β | β | Corporate and Eliminations | β | β | Income Taxes(1) | β | β | Total | β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | ||||||||||||||||||||||||||||||||||||
β | Earnings (loss) before income taxes(1) | β | β | β | β | 2β309 | β | β | β | β | β | 445 | β | β | β | β | β | 645 | β | β | β | β | β | 258 | β | β | β | β | β | 1β417 | β | β | β | β | β | 934 | β | β | β | β | β | (523) | β | β | β | β | β | (523) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 3β848 | β | β | β | β | β | 1β114 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Adjustments for: | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Depreciation, depletion, amortization and impairment | β | β | β | β | 1β105 | β | β | β | β | β | 1β158 | β | β | β | β | β | 129 | β | β | β | β | β | 102 | β | β | β | β | β | 212 | β | β | β | β | β | 209 | β | β | β | β | β | 25 | β | β | β | β | β | 21 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 1β471 | β | β | β | β | β | 1β490 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Accretion | β | β | β | β | 63 | β | β | β | β | β | 59 | β | β | β | β | β | 14 | β | β | β | β | β | 14 | β | β | β | β | β | 1 | β | β | β | β | β | 2 | β | β | β | β | β | β | β | β | β | β | β | (1) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 78 | β | β | β | β | β | 74 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Unrealized foreign exchange gain on U.S.Β dollar denominated debt | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (146) | β | β | β | β | β | (196) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (146) | β | β | β | β | β | (196) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Change in fair value of financial instruments and trading inventory | β | β | β | β | (21) | β | β | β | β | β | (115) | β | β | β | β | β | (17) | β | β | β | β | β | (7) | β | β | β | β | β | (36) | β | β | β | β | β | 18 | β | β | β | β | β | β | β | β | β | β | β | 1 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (74) | β | β | β | β | β | (103) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Gain on disposal of assets | β | β | β | β | (2) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (8) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (2) | β | β | β | β | β | (8) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Share-based compensation | β | β | β | β | 28 | β | β | β | β | β | (1) | β | β | β | β | β | (1) | β | β | β | β | β | (1) | β | β | β | β | β | 5 | β | β | β | β | β | (2) | β | β | β | β | β | 24 | β | β | β | β | β | 2 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 56 | β | β | β | β | β | (2) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Settlement of decommissioning and restoration liabilities | β | β | β | β | (88) | β | β | β | β | β | (68) | β | β | β | β | β | β | β | β | β | β | β | (1) | β | β | β | β | β | (2) | β | β | β | β | β | (1) | β | β | β | β | β | (1) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (91) | β | β | β | β | β | (70) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Other | β | β | β | β | 20 | β | β | β | β | β | 49 | β | β | β | β | β | (46) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 20 | β | β | β | β | β | (44) | β | β | β | β | β | 26 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (70) | β | β | β | β | β | 95 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Current income tax expense | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (976) | β | β | β | β | β | (284) | β | β | β | β | β | (976) | β | β | β | β | β | (284) | β | β |
β | Adjusted funds from (used in) operations(1) | β | β | β | β | 3β414 | β | β | β | β | β | 1β527 | β | β | β | β | β | 724 | β | β | β | β | β | 365 | β | β | β | β | β | 1β597 | β | β | β | β | β | 1β172 | β | β | β | β | β | (665) | β | β | β | β | β | (670) | β | β | β | β | β | (976) | β | β | β | β | β | (284) | β | β | β | β | β | 4β094 | β | β | β | β | β | 2β110 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Change in non-cash working capital | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (1β022) | β | β | β | β | β | 235 | β | β |
β | Cash flow provided by operating activities | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 3β072 | β | β | β | β | β | 2β345 | β | β |
β
(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 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.
β
38Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Free Funds Flow
Free funds flow is a non-GAAP financial measure that is calculated by taking adjusted funds from operations and subtracting capital expenditures, including capitalized interest. Free funds flow reflects cash available for increasing distributions to shareholders and reducing debt. Management uses free funds flow to measure the capacity of the company to increase returns to shareholders and to grow Suncorβs business.
β | β | β | β | ThreeΒ months ended MarΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Cash flow provided by operating activities | β | β | β | β | 3β072 | β | β | β | β | β | 2β345 | β | β |
β | ||||||||||||||
β | (Add) deduct change in non-cash working capital | β | β | β | β | (1β022) | β | β | β | β | β | 235 | β | β |
β | Adjusted funds from operations | β | β | β | β | 4β094 | β | β | β | β | β | 2β110 | β | β |
β | ||||||||||||||
β | Less capital expenditures including capitalized interest(1) | β | β | β | β | (1β011) | β | β | β | β | β | (803) | β | β |
β | Free funds flow | β | β | β | β | 3β083 | β | β | β | β | β | 1β307 | β | β |
β
(1)
Excludes capital expenditures related to assets held for sale ofβ $19Β million in the first quarter of 2022.
β
Oil Sands Operations, Fort Hills and Syncrude Cash Operating Costs
Cash operating costs are calculated by adjusting Oil Sands segment OS&G expense for i)Β non-production costs that management believes do not relate to production performance, including, but not limited to, share-based compensation adjustments, research costs, safe-mode costs associated with the deferral of capital projects, additional costs incurred in response to the COVID-19 pandemic, adjustments to reflect the cost of internal transfers in the receiving asset at the cost of production and the expense recorded as part of a non-monetary arrangement involving a third-party processor; ii)Β revenues associated with excess capacity, including excess power generated and sold that is recorded in operating revenue; iii)Β project startup costs; and iv)Β the impacts of changes in inventory levels and valuation, such that the company is able to present cost information based on production volumes. Oil Sands operations and Syncrude production volumes are gross of internally consumed diesel and feedstock transfers between assets through the interconnecting pipelines. Oil Sands operations, Fort Hills and Syncrude cash operating costs are reconciled in the Segment Results and AnalysisβββOil Sands section of this MD&A. Management uses cash operating costs to measure operating performance.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 39
Managementβs Discussion and Analysis
Refining and Marketing Gross Margin and Refining Operating Expense
Refining and marketing gross margins and refining operating expense are non-GAAP financial measures. Refining and marketing gross margin, on a FIFO basis, is calculated by adjusting R&M segment operating revenue, other income and purchases of crude oil and products (all of which are GAAP measures) for intersegment marketing fees recorded in intersegment revenues. Refining and marketing gross margin, on a LIFO basis, is further adjusted for the impacts of FIFO inventory valuation recorded in purchases of crude oil and products and risk management activities recorded in other income (loss). Refinery operating expense is calculated by adjusting R&M segment OS&G for i)Β non-refining costs pertaining to the companyβs supply, marketing and ethanol businesses; and ii)Β non-refining costs that management believes do not relate to the production of refined products, including, but not limited to, share-based compensation and enterprise shared service allocations. Management uses refining and marketing gross margin and refining operating expense to measure operating performance on a production barrel basis.
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions, except as noted) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Refining and marketing gross margin reconciliation | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Operating revenues | β | β | β | β | 7β855 | β | β | β | β | β | 5β013 | β | β |
β | ||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | (5β482) | β | β | β | β | β | (3β275) | β | β |
β | β | β | β | β | β | 2β373 | β | β | β | β | β | 1β738 | β | β |
β | ||||||||||||||
β | Other (loss) income | β | β | β | β | (110) | β | β | β | β | β | (45) | β | β |
β | ||||||||||||||
β | Non-refining and marketing margin | β | β | β | β | (13) | β | β | β | β | β | (13) | β | β |
β | Refining and marketing gross marginβββFIFO | β | β | β | β | 2β250 | β | β | β | β | β | 1β680 | β | β |
β | ||||||||||||||
β | Refinery production(1) (mbbls) | β | β | β | β | 42β311 | β | β | β | β | β | 41β211 | β | β |
β | Refining and marketing gross marginβββFIFO ($/bbl) | β | β | β | β | 53.20 | β | β | β | β | β | 40.75 | β | β |
β | FIFO and risk management activities adjustment | β | β | β | β | (729) | β | β | β | β | β | (432) | β | β |
β | Refining and marketing gross marginβββLIFO | β | β | β | β | 1β521 | β | β | β | β | β | 1β248 | β | β |
β | Refining and marketing gross marginβββLIFO ($/bbl) | β | β | β | β | 35.95 | β | β | β | β | β | 30.30 | β | β |
β | Refining operating expense reconciliation | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Operating, selling and general expense | β | β | β | β | 559 | β | β | β | β | β | 479 | β | β |
β | ||||||||||||||
β | Non-refining costs | β | β | β | β | (294) | β | β | β | β | β | (242) | β | β |
β | Refining operating expense | β | β | β | β | 265 | β | β | β | β | β | 237 | β | β |
β | ||||||||||||||
β | Refinery production(1) (mbbls) | β | β | β | β | 42β311 | β | β | β | β | β | 41β211 | β | β |
β | Refining operating expense ($/bbl) | β | β | β | β | 6.25 | β | β | β | β | β | 5.75 | β | β |
β
(1)
Refinery production is the output of the refining process, and differs from crude oil processed as a result of volumetric adjustments for non-crude feedstock, volumetric gain associated with the refining process and changes in unfinished product inventories.
β
40Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Impact of First-in, First-out (FIFO) Inventory Valuation on Refining and Marketing Net Earnings (Loss)
GAAP requires the use of a FIFO inventory valuation methodology. For Suncor, this results in a disconnect between the sales prices for refined products, which reflect current market conditions, and the amount recorded as the cost of sale for the related refinery feedstock, which reflects market conditions at the time the feedstock was purchased. This lag between purchase and sale can be anywhere from several weeks to severalΒ months, and is influenced by the time to receive crude after purchase (which can be several weeks for foreign offshore crude purchases), regional crude inventory levels, the completion of refining processes, transportation time to distribution channels and regional refined product inventory levels.
Suncor prepares and presents an estimate of the impact of using a FIFO inventory valuation methodology compared to a LIFO methodology, because management uses the information to analyze operating performance and compare itself against refining peers that are permitted to use LIFO inventory valuation under United States GAAP (U.S. GAAP).
The companyβs estimate is not derived from a standardized calculation and, therefore, may not be directly comparable to similar measures presented by other companies, and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP or U.S. GAAP.
Net Debt and Total Debt
Net debt and total debt are non-GAAP financial measures that management uses to analyze the financial condition of the company. Total debt includes short-term debt, current portion of long-term debt, current portion of long-term lease liabilities, long-term debt and long-term lease liabilities (all of which are GAAP measures). Net debt is equal to total debt less cash and cash equivalents (a GAAP measure).
β | β | β | β | MarchΒ 31 | β | β | DecemberΒ 31 | β | ||||||
β | ($ millions, except as noted) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Short-term debt | β | β | β | β | 1β344 | β | β | β | β | β | 1β284 | β | β |
β | ||||||||||||||
β | Current portion of long-term debt | β | β | β | β | β | β | β | β | β | β | 231 | β | β |
β | ||||||||||||||
β | Current portion of long-term lease liabilities | β | β | β | β | 309 | β | β | β | β | β | 310 | β | β |
β | ||||||||||||||
β | Long-term debt | β | β | β | β | 13β861 | β | β | β | β | β | 13β989 | β | β |
β | ||||||||||||||
β | Long-term lease liabilities | β | β | β | β | 2β506 | β | β | β | β | β | 2β540 | β | β |
β | Total debt | β | β | β | β | 18β020 | β | β | β | β | β | 18β354 | β | β |
β | ||||||||||||||
β | Less: Cash and cash equivalents | β | β | β | β | 2β599 | β | β | β | β | β | 2β205 | β | β |
β | Net debt | β | β | β | β | 15β421 | β | β | β | β | β | 16β149 | β | β |
β | ||||||||||||||
β | Shareholdersβ equity | β | β | β | β | 38β274 | β | β | β | β | β | 36β614 | β | β |
β | Total debt plus shareholdersβ equity | β | β | β | β | 56β294 | β | β | β | β | β | 54β968 | β | β |
β | Total debt to total debt plus shareholdersβ equity (%) | β | β | β | β | 32.0 | β | β | β | β | β | 33.4 | β | β |
β | Net debt to net debt plus shareholdersβ equity (%) | β | β | β | β | 28.7 | β | β | β | β | β | 30.6 | β | β |
β | Net debt to net debt plus shareholdersβ equityβββexcluding leases (%) | β | β | β | β | 24.8 | β | β | β | β | β | 26.6 | β | β |
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 41
Managementβs Discussion and Analysis
Price Realizations
Price realizations are a non-GAAP measure used by management to measure profitability. Oil Sands price realizations are presented on a crude product basis and are derived from the Oil Sands segmented statement of net earnings (loss), after adjusting for items not directly attributable to the revenues associated with production. E&P price realizations are presented on an asset location basis and are derived from the E&P segmented statement of net earnings (loss), after adjusting for other E&P assets, such as Libya, for which price realizations are not provided.
Oil Sands Price Realizations
β | For the threeΒ months ended | β | β | MarchΒ 31, 2022 | β | β | MarchΒ 31, 2021 | β | ||||||||||||||||||||||||||||||||||||||||||
β | ($ millions, except as noted) | β | β | Non- Upgraded Bitumen | β | β | Upgradedββ Net SCO and Diesel | β | β | Crude Sales Basket | β | β | Oil Sands Segment | β | β | Non- Upgraded Bitumen | β | β | Upgradedββ Net SCO and Diesel | β | β | Crude Sales Basket | β | β | Oil Sands Segment | β | ||||||||||||||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 1β571 | β | β | β | β | β | 4β914 | β | β | β | β | β | 6β485 | β | β | β | β | β | 6β485 | β | β | β | β | β | 990 | β | β | β | β | β | 3β203 | β | β | β | β | β | 4β193 | β | β | β | β | β | 4β193 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Add: Royalties | β | β | β | β | 211 | β | β | β | β | β | 774 | β | β | β | β | β | 985 | β | β | β | β | β | 985 | β | β | β | β | β | 14 | β | β | β | β | β | 144 | β | β | β | β | β | 158 | β | β | β | β | β | 158 | β | β |
β | Operating revenues | β | β | β | β | 1β782 | β | β | β | β | β | 5β688 | β | β | β | β | β | 7β470 | β | β | β | β | β | 7β470 | β | β | β | β | β | 1β004 | β | β | β | β | β | 3β347 | β | β | β | β | β | 4β351 | β | β | β | β | β | 4β351 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Other (loss) income | β | β | β | β | (37) | β | β | β | β | β | 44 | β | β | β | β | β | 7 | β | β | β | β | β | 7 | β | β | β | β | β | 7 | β | β | β | β | β | (9) | β | β | β | β | β | (2) | β | β | β | β | β | (2) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | (390) | β | β | β | β | β | (63) | β | β | β | β | β | (453) | β | β | β | β | β | (453) | β | β | β | β | β | (203) | β | β | β | β | β | (47) | β | β | β | β | β | (250) | β | β | β | β | β | (250) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Gross realization adjustment(1) | β | β | β | β | 67 | β | β | β | β | β | (136) | β | β | β | β | β | (69) | β | β | β | β | β | β | β | β | β | β | β | (35) | β | β | β | β | β | (74) | β | β | β | β | β | (109) | β | β | β | β | β | β | β | β |
β | Gross realization | β | β | β | β | 1β422 | β | β | β | β | β | 5β533 | β | β | β | β | β | 6β955 | β | β | β | β | β | β | β | β | β | β | β | 773 | β | β | β | β | β | 3β217 | β | β | β | β | β | 3β990 | β | β | β | β | β | β | β | β |
β | Transportation and distribution | β | β | β | β | (87) | β | β | β | β | β | (206) | β | β | β | β | β | (293) | β | β | β | β | β | (293) | β | β | β | β | β | (82) | β | β | β | β | β | (194) | β | β | β | β | β | (276) | β | β | β | β | β | (276) | β | β |
β | Price realization | β | β | β | β | 1β335 | β | β | β | β | β | 5β327 | β | β | β | β | β | 6β662 | β | β | β | β | β | β | β | β | β | β | β | 691 | β | β | β | β | β | 3β023 | β | β | β | β | β | 3β714 | β | β | β | β | β | β | β | β |
β | Sales volumes (mbbls) | β | β | β | β | 13β830 | β | β | β | β | β | 46β592 | β | β | β | β | β | 60β422 | β | β | β | β | β | β | β | β | β | β | β | 16β246 | β | β | β | β | β | 46β343 | β | β | β | β | β | 62β589 | β | β | β | β | β | β | β | β |
β | Price realization per barrel | β | β | β | β | 96.49 | β | β | β | β | β | 114.37 | β | β | β | β | β | 110.27 | β | β | β | β | β | β | β | β | β | β | β | 42.53 | β | β | β | β | β | 65.22 | β | β | β | β | β | 59.32 | β | β | β | β | β | β | β | β |
β
(1)
Reflects the items not directly attributed to revenues received from the sale of proprietary crude and net non-proprietary activity at its deemed point of sale.
β
E&P Price Realizations
β | For the threeΒ months ended | β | β | MarchΒ 31, 2022 | β | β | MarchΒ 31, 2021 | β | ||||||||||||||||||||||||||||||||||||||||||
β | ($ millions, except as noted) | β | β | E&P International | β | β | E&P Canada | β | β | Other(1)(2) | β | β | E&P Segment | β | β | E&P International | β | β | E&P Canada | β | β | Other(1)(2) | β | β | E&P Segment | β | ||||||||||||||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 272 | β | β | β | β | β | 476 | β | β | β | β | β | 120 | β | β | β | β | β | 868 | β | β | β | β | β | 204 | β | β | β | β | β | 317 | β | β | β | β | β | 25 | β | β | β | β | β | 546 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Add: Royalties | β | β | β | β | β | β | β | β | β | β | 87 | β | β | β | β | β | 60 | β | β | β | β | β | 147 | β | β | β | β | β | β | β | β | β | β | β | 44 | β | β | β | β | β | β | β | β | β | β | β | 44 | β | β |
β | Operating revenues | β | β | β | β | 272 | β | β | β | β | β | 563 | β | β | β | β | β | 180 | β | β | β | β | β | 1β015 | β | β | β | β | β | 204 | β | β | β | β | β | 361 | β | β | β | β | β | 25 | β | β | β | β | β | 590 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (6) | β | β | β | β | β | (17) | β | β | β | β | β | β | β | β | β | β | β | (23) | β | β | β | β | β | (7) | β | β | β | β | β | (10) | β | β | β | β | β | (35) | β | β | β | β | β | (52) | β | β |
β | Price realization | β | β | β | β | 266 | β | β | β | β | β | 546 | β | β | β | β | β | 180 | β | β | β | β | β | β | β | β | β | β | β | 197 | β | β | β | β | β | 351 | β | β | β | β | β | (10) | β | β | β | β | β | β | β | β |
β | Sales volumes (mbbls) | β | β | β | β | 2β336 | β | β | β | β | β | 4β460 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 2β828 | β | β | β | β | β | 4β748 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Price realization per barrel | β | β | β | β | 113.60 | β | β | β | β | β | 122.13 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 69.51 | β | β | β | β | β | 73.91 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β
(1)
Reflects other E&P assets, such as Libya, for which price realizations are not provided.
β
(2)
Production from the companyβs Libya operations has been presented in the E&P section of this MD&A on an economic basis. Revenue and royalties from the companyβs Libya operations are presented under the working-interest basis, which is required for presentation purposes in the companyβs financial statements. In the first quarter of 2022, revenue includes a gross-up amount ofβ $138Β million, with an offsetting amount ofβ $60Β million in royalties in the E&P segment and $78Β million in income tax expense reported at the consolidated level. In the first quarter of 2021, there were no Libya sales included in production, revenue or royalties.
β
42Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
11. Common Abbreviations
The following is a list of abbreviations that may be used in this MD&A:
Measurement | β | β | Places and Currencies | β | ||||||
bbl | β | β | barrel | β | β | U.S. | β | β | United States | β |
bbls/d | β | β | barrels per day | β | β | U.K. | β | β | United Kingdom | β |
mbbls/d | β | β | thousands of barrels per day | β | β | β | β | β | β | β |
β | β | β | β | β | β | $ or Cdn$ | β | β | Canadian dollars | β |
boe | β | β | barrels of oil equivalent | β | β | US$ | β | β | United States dollars | β |
boe/d | β | β | barrels of oil equivalent per day | β | β | β | β | β | β | β |
mboe | β | β | thousands of barrels of oil equivalent | β | β | β | β | β | β | β |
mboe/d | β | β | thousands of barrels of oil equivalent per day | β | β | Financial and Business Environmentβ | β | |||
β | β | β | β | β | β | Q1 | β | β | ThreeΒ months ended MarchΒ 31 | β |
GJ | β | β | Gigajoule | β | β | DD&A | β | β | Depreciation, depletion and amortization | β |
β | β | β | β | β | β | WTI | β | β | West Texas Intermediate | β |
mcf | β | β | thousands of cubic feet of natural gas | β | β | WCS | β | β | Western Canadian Select | β |
mcfe | β | β | thousands of cubic feet of natural gas equivalent | β | β | SCO | β | β | Synthetic crude oil | β |
β | β | β | β | β | β | SYN | β | β | Synthetic crude oil benchmark | β |
MW | β | β | megawatts | β | β | MSW | β | β | Mixed Sweet Blend | β |
MWh | β | β | megawatts per hour | β | β | NYMEX | β | β | New York Mercantile Exchange | β |
β | β | β | β | β | β | YTD | β | β | Year to date | β |
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 43
Managementβs Discussion and Analysis
12. Forward-Looking Information
This MD&A contains certain forward-looking information and forward-looking statements (collectively referred to herein as βforward-looking statementsβ) within the meaning of applicable Canadian and U.S. securities laws. Forward-looking statements and other information are based on Suncorβs current expectations, estimates, projections and assumptions that were made by the company in light of information available at the time the statement was made and consider Suncorβs experience and its perception of historical trends, including expectations and assumptions concerning: the accuracy of reserves estimates; the current and potential adverse impacts of the COVID-19 pandemic, including the status of the pandemic and future waves and any associated policies around current business restrictions, shelter-in-place orders or gatherings of individuals; commodity prices and interest and foreign exchange rates; the performance of assets and equipment; uncertainty related to geopolitical conflict; capital efficiencies and cost savings; applicable laws and government policies; future production rates; the sufficiency of budgeted capital expenditures in carrying out planned activities; the availability and cost of labour, services and infrastructure; the satisfaction by third parties of their obligations to Suncor; the development and execution of projects; and the receipt, in a timely manner, of regulatory and third-party approvals. All statements and information that address expectations or projections about the future, and other statements and information about Suncorβs strategy for growth, expected and future expenditures or investment decisions, commodity prices, costs, schedules, production volumes, operating and financial results, future financing and capital activities, and the expected impact of future commitments are forward-looking statements. Some of the forward-looking statements may be identified by words like βexpectsβ, βanticipatesβ, βwillβ, βestimatesβ, βplansβ, βscheduledβ, βintendsβ, βbelievesβ, βprojectsβ, βindicatesβ, βcouldβ, βfocusβ, βvisionβ, βgoalβ, βoutlookβ, βproposedβ, βtargetβ, βobjectiveβ, βcontinueβ, βshouldβ, βmayβ, βfutureβ, βpotentialβ, βopportunityβ, βwouldβ, βpriorityβ, βstrategyβ and similar expressions. Forward-looking statements in this MD&A include references to:
β’
Suncorβs expectation that its disposition process of its E&P assets in Norway will close later this year, that a sale of its wind and solar assets will close within the next twelveΒ months, statements regarding the potential sale of Suncorβs entire U.K. portfolio and the expectation that proceeds from the disposition of assets will be used to support the companyβs capital allocation framework;
β
β’
Suncorβs strategic objective of becoming a net-zero GHG emissions company by 2050, including its expectations on how it will achieve this objective and the targeted activities that are expected to contribute to it, including its focus on hydrogen and renewable fuels and an ongoing strategic participation in low-carbon power;
β
β’
statements and expectations regarding the proposed project with ATCO to build a world-scale hydrogen facility in Alberta and deploying next generation renewable fuel technology;
β
β’
Suncorβs expectation that its economic investment capital will continue to be focused on advancing projects and investments that are expected to enhance value within the companyβs existing integrated asset base and accelerate the companyβs progress towards its emissions reductions targets, including digital technologies, production decline mitigation and the cogeneration facility at Oil Sands Base;
β
β’
Suncorβs expectation that the disciplined decisions to adjust and streamline its portfolio will improve the companyβs competitiveness and resiliency by allowing it to capitalize on its strengths, competitive advantages and resources;
β
β’
the companyβs expectation that it will achieve an additional $400Β million of incremental free funds flow in 2022, primarily driven by the implementation of digital, process and technology initiatives;
β
β’
Suncorβs goals of safety and operational excellence and its expectation that sharpening its focus on its base business and areas complementary to its base business will drive long-term value for its shareholders;
β
β’
statements about the Terra Nova Floating, Production, Storage and Offloading facility and the Asset Life Extension Project, including that the asset is on track to sail back to Canada for a safe return to operations before the end of 2022;
β
β’
the belief that Suncor will continue to focus on safely increasing the reliability, utilization and integration of its assets while continuing efforts to sustainably reduce controllable costs;
β
β’
expectations regarding Suncorβs operatorship of the Syncrude asset, including that the Suncor is continuing to press towards realizing $100Β million of annual gross synergies for the joint venture owners in 2022, with an additional $200Β million of annual gross synergies expected to be realized through 2023-2024;
β
β’
Suncorβs expectation that it will remain committed to its capital allocation framework, its plan to accelerate its capital allocation plan and allocate incremental free funds flow in accordance therewith, with excess funds being allocated towards debt repayment and share buybacks based on net debt levels;
β
β’
statements about Suncorβs 2025 targeted net debt range ofβ $12-$15Β billion and the companyβs expectation that, in the current business environment, it will achieve the lower end of its 2025 targeted net debt range during the second half ofΒ 2022;
β
44Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
β’
statements with respect to planned maintenance events, the timing thereof and the expected benefits therefrom, including a turnaround at Firebag, annual coker maintenance at Oil Sands Base Upgrader 2, planned maintenance at Fort Hills and Syncrude and planned maintenance at the Edmonton, Montreal and Sarnia refineries;
β
β’
Suncorβs belief that its indicative 5-2-2-1 index will continue to be an appropriate measure against Suncorβs actual results;
β
β’
statements regarding Suncorβs planned 2022 capital spending program ofβ $4.7Β billion, including Suncorβs expectation that its capital program will be heavily focused on the safety, long-term reliability and efficiency of the companyβs operations and its belief that it will have the capital resources to fund the capital spending program and to meet current and future working capital requirements through cash and cash equivalents balances, cash flow provided by operating activities, available committed credit facilities, issuing commercial paper and, if needed, accessing capital markets and Suncorβs expectations regarding the allocation of its capital spending program and its expected benefits therefrom;
β
β’
the objectives of Suncorβs short-term investment portfolio and Suncorβs expectation that the maximum weighted average term to maturity of the short-term investment portfolio will not exceed sixΒ months, and that all investments will be with counterparties with investment grade debt ratings;
β
β’
the companyβs priority regarding the management of debt levels and liquidity given the companyβs long-term plans and future expected volatility in the pricing environment and Suncorβs belief that a phased and flexible approach to existing and future projects should assist Suncor in its ability to manage project costs and debt levels;
β
β’
the companyβs belief that it does not have any guarantees or off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the companyβs financial performance or financial condition, results of operations, liquidity or capital expenditures;
β
β’
statements about the NCIB, including the amount, timing and manner of purchases under the NCIB, that depending on the trading price of its common shares and other relevant factors, repurchasing its common shares represents an attractive investment opportunity and is in the best interest of the company and its shareholders, and the expectation that the decision to allocate cash to repurchase shares will not affect its long-term strategy; and
β
β’
Suncorβs full-year outlook range on Oil Sands operations cash operating costs per barrel, Fort Hills cash operating costs per barrel, Syncrude cash operating costs per barrel, Fort Hills Crown royalties, Syncrude Crown royalties, East Coast Canada Crown royalties and full-year current income tax expenses as well as business environment outlook assumptions for Brent Sullom Voe, WTI at Cushing, WCS at Hardisty, New York Harbor 2-1-1 crack, AECO-C Spot and the CAD/USD exchange rate.
β
Forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties, some that are similar to other oil and gas companies and some that are unique to Suncor. Suncorβs actual results may differ materially from those expressed or implied by its forward-looking statements, so readers are cautioned not to place undue reliance on them. The financial and operating performance of the companyβs reportable operating segments, specifically Oil Sands, E&P and R&M, may be affected by a number of factors.
Factors that affect Suncorβs Oil Sands segment include, but are not limited to, volatility in the prices for crude oil and other production, and the related impacts of fluctuating light/heavy and sweet/sour crude oil differentials; changes in the demand for refinery feedstock and diesel fuel, including the possibility that refiners that process the companyβs proprietary production will be closed, experience equipment failure or other accidents; Suncorβs ability to operate its Oil Sands facilities reliably in order to meet production targets; the output of newly commissioned facilities, the performance of which may be difficult to predict during initial operations; Suncorβs dependence on pipeline capacity and other logistical constraints, which may affect the companyβs ability to distribute products to market and which may cause the company to delay or cancel planned growth projects in the event of insufficient takeaway capacity; Suncorβs ability to finance Oil Sands economic investment and asset sustainment and maintenance capital expenditures; the availability of bitumen feedstock for upgrading operations, which can be negatively affected by poor ore grade quality, unplanned mine equipment and extraction plant maintenance, tailings storage, and in situ reservoir and equipment performance, or the unavailability of third-party bitumen; changes in operating costs, including the cost of labour, natural gas and other energy sources used in oil sands processes; and the companyβs ability to complete projects, including planned maintenance events, both on time and on budget, which could be impacted by competition from other projects (including other oil sands projects) for goods and services and demands on infrastructure in Albertaβs Wood Buffalo region and the surrounding area (including housing, roads and schools).
Factors that affect Suncorβs E&P segment include, but are not limited to, volatility in crude oil and natural gas prices; operational risks and uncertainties associated with oil and gas activities, including unexpected formations or pressures, premature declines of reservoirs, fires, blow-outs, equipment failures and other accidents, uncontrollable flows of crude oil, natural gas or well fluids, and pollution and other environmental risks; adverse weather conditions, which could disrupt output from producing assets or impact drilling programs, resulting in increased costs and/or delays in bringing on new production; political, economic and socioeconomic risks associated with Suncorβs foreign operations, including the unpredictability of operating in Libya due to ongoing political unrest; and market demand for mineral rights and producing properties, potentially leading to losses on disposition or increased property acquisition costs.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 45
Managementβs Discussion and Analysis
Factors that affect our R&M segment include, but are not limited to, fluctuations in demand and supply for refined products that impact the companyβs margins; market competition, including potential new market entrants; the companyβs ability to reliably operate refining and marketing facilities in order to meet production or sales targets; and risks and uncertainties affecting construction or planned maintenance schedules, including the availability of labour and other impacts of competing projects drawing on the same resources during the same time period.
Additional risks, uncertainties and other factors that could influence the financial and operating performance of all of Suncorβs operating segments and activities include, but are not limited to, changes in general economic, market and business conditions, such as commodity prices, interest rates and currency exchange rates (including as a result of demand and supply effects resulting from the COVID-19 pandemic and the actions of OPEC+); fluctuations in supply and demand for Suncorβs products; the successful and timely implementation of capital projects, including growth projects and regulatory projects; risks associated with the development and execution of Suncorβs major projects and the commissioning and integration of new facilities; the possibility that completed maintenance activities may not improve operational performance or the output of related facilities; the risk that projects and initiatives intended to achieve cash flow growth and/or reductions in operating costs may not achieve the expected results in the time anticipated or at all; competitive actions of other companies, including increased competition from other oil and gas companies or from companies that provide alternative sources of energy; labour and material shortages; actions by government authorities, including the imposition or reassessment of, or changes to, taxes, fees, royalties, duties and other government-imposed compliance costs; changes to laws and government policies that could impact the companyβs business, including environmental (including climate change), royalty and tax laws and policies; the ability and willingness of parties with whom Suncor has material relationships to perform their obligations to the company; the unavailability of, or outages to, third-party infrastructure that could cause disruptions to production or prevent the company from being able to transport its products; the occurrence of a protracted operational outage, a major safety or environmental incident, or unexpected events such as fires (including forest fires), equipment failures and other similar events affecting Suncor or other parties whose operations or assets directly or indirectly affect Suncor; the potential for security breaches of Suncorβs information technology and infrastructure by malicious persons or entities, and the unavailability or failure of such systems to perform as anticipated as a result of such breaches; security threats and terrorist or activist activities; the risk that competing business objectives may exceed Suncorβs capacity to adopt and implement change; risks and uncertainties associated with obtaining regulatory, third-party and stakeholder approvals outside of Suncorβs control for the companyβs operations, projects, initiatives and exploration and development activities and the satisfaction of any conditions to approvals; the potential for disruptions to operations and construction projects as a result of Suncorβs relationships with labour unions that represent employees at the companyβs facilities; the companyβs ability to find new oil and gas reserves that can be developed economically; the accuracy of Suncorβs reserves, resources and future production estimates; market instability affecting Suncorβs ability to borrow in the capital debt markets at acceptable rates or to issue other securities at acceptable prices; maintaining an optimal debt to cash flow ratio; the success of the companyβs marketing and logistics activities using derivatives and other financial instruments; the cost of compliance with current and future environmental laws, including climate change laws; risks relating to increased activism and public opposition to fossil fuels and oil sands; risks and uncertainties associated with closing a transaction for the purchase or sale of a business, asset or oil and gas property, including estimates of the final consideration to be paid or received; the ability of counterparties to comply with their obligations in a timely manner; risks associated with joint arrangements in which the company has an interest; risks associated with land claims and Aboriginal consultation requirements; the risk that the company may be subject to litigation; the impact of technology and risks associated with developing and implementing new technologies; and the accuracy of cost estimates, some of which are provided at the conceptual or other preliminary stage of projects and prior to commencement or conception of the detailed engineering that is needed to reduce the margin of error and increase the level of accuracy. The foregoing important factors are not exhaustive.
Many of these risk factors and other assumptions related to Suncorβs forward-looking statements are discussed in further detail throughout this MD&A, and in the companyβs 2021 annual MD&A, the 2021 AIF and FormΒ 40-F on file with Canadian securities commissions at www.sedar.com and the United States Securities and Exchange Commission at www.sec.gov. Readers are also referred to the risk factors and assumptions described in other MD&As that Suncor files from time to time with securities regulatory authorities. Copies of these MD&As are available without charge from the company.
The forward-looking statements contained in this MD&A are made as of the date of this MD&A. Except as required by applicable securities laws, we assume no obligation to update publicly or otherwise revise any forward-looking statements or the foregoing risks and assumptions affecting such forward-looking statements, whether as a result of new information, future events or otherwise.
46Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Consolidated Statements of Comprehensive Income
(unaudited)β
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Revenues and Other Income | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Operating revenues, net of royalties (noteΒ 3) | β | β | β | β | 13β487 | β | β | β | β | β | 8β679 | β | β |
β | ||||||||||||||
β | Other income (loss) (noteΒ 4) | β | β | β | β | 14 | β | β | β | β | β | (43) | β | β |
β | β | β | β | β | β | 13β501 | β | β | β | β | β | 8β636 | β | β |
β | Expenses | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | 4β502 | β | β | β | β | β | 2β583 | β | β |
β | ||||||||||||||
β | Operating, selling and general | β | β | β | β | 3β088 | β | β | β | β | β | 2β900 | β | β |
β | ||||||||||||||
β | Transportation and distribution | β | β | β | β | 370 | β | β | β | β | β | 381 | β | β |
β | ||||||||||||||
β | Depreciation, depletion, amortization and impairment | β | β | β | β | 1β471 | β | β | β | β | β | 1β490 | β | β |
β | ||||||||||||||
β | Exploration | β | β | β | β | 39 | β | β | β | β | β | 8 | β | β |
β | ||||||||||||||
β | Gain on disposal of assets | β | β | β | β | (2) | β | β | β | β | β | (8) | β | β |
β | ||||||||||||||
β | Financing expenses (noteΒ 6) | β | β | β | β | 185 | β | β | β | β | β | 168 | β | β |
β | β | β | β | β | β | 9β653 | β | β | β | β | β | 7β522 | β | β |
β | Earnings before Income Taxes | β | β | β | β | 3β848 | β | β | β | β | β | 1β114 | β | β |
β | Income Tax Expense (Recovery) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Current | β | β | β | β | 976 | β | β | β | β | β | 284 | β | β |
β | ||||||||||||||
β | Deferred | β | β | β | β | (77) | β | β | β | β | β | 9 | β | β |
β | β | β | β | β | β | 899 | β | β | β | β | β | 293 | β | β |
β | Net Earnings | β | β | β | β | 2β949 | β | β | β | β | β | 821 | β | β |
β | Other Comprehensive Income | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | ItemsΒ That May be Subsequently Reclassified to Earnings: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Foreign currency translation adjustment | β | β | β | β | (56) | β | β | β | β | β | (41) | β | β |
β | ||||||||||||||
β | ItemsΒ That Will Not be Reclassified to Earnings: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Actuarial gain on employee retirement benefit plans, net of income taxes (noteΒ 11) | β | β | β | β | 392 | β | β | β | β | β | 656 | β | β |
β | Other Comprehensive Income | β | β | β | β | 336 | β | β | β | β | β | 615 | β | β |
β | Total Comprehensive Income | β | β | β | β | 3β285 | β | β | β | β | β | 1β436 | β | β |
β | Per Common Share (dollars) (noteΒ 7) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Net earningsβββbasic and diluted | β | β | β | β | 2.06 | β | β | β | β | β | 0.54 | β | β |
β | ||||||||||||||
β | Cash dividends | β | β | β | β | 0.42 | β | β | β | β | β | 0.21 | β | β |
See accompanying notes to the condensed interim consolidated financial statements.β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 47
Β
Consolidated Balance Sheets
(unaudited)β
β | ($ millions) | β | β | MarchΒ 31 2022 | β | β | DecemberΒ 31 2021 | β | ||||||
β | Assets | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Current assets | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Cash and cash equivalents | β | β | β | β | 2β599 | β | β | β | β | β | 2β205 | β | β |
β | ||||||||||||||
β | Accounts receivable | β | β | β | β | 5β986 | β | β | β | β | β | 4β534 | β | β |
β | ||||||||||||||
β | Inventories | β | β | β | β | 5β323 | β | β | β | β | β | 4β110 | β | β |
β | ||||||||||||||
β | Income taxes receivable | β | β | β | β | 181 | β | β | β | β | β | 128 | β | β |
β | ||||||||||||||
β | Assets held for sale (noteΒ 12) | β | β | β | β | 448 | β | β | β | β | β | β | β | β |
β | Total current assets | β | β | β | β | 14β537 | β | β | β | β | β | 10β977 | β | β |
β | ||||||||||||||
β | Property, plant and equipment, net | β | β | β | β | 63β195 | β | β | β | β | β | 65β546 | β | β |
β | ||||||||||||||
β | Exploration and evaluation | β | β | β | β | 2β225 | β | β | β | β | β | 2β226 | β | β |
β | ||||||||||||||
β | Other assets | β | β | β | β | 1β486 | β | β | β | β | β | 1β307 | β | β |
β | ||||||||||||||
β | Goodwill and other intangible assets | β | β | β | β | 3β563 | β | β | β | β | β | 3β523 | β | β |
β | ||||||||||||||
β | Deferred income taxes | β | β | β | β | 61 | β | β | β | β | β | 160 | β | β |
β | Total assets | β | β | β | β | 85β067 | β | β | β | β | β | 83β739 | β | β |
β | Liabilities and Shareholdersβ Equity | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Current liabilities | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Short-term debt | β | β | β | β | 1β344 | β | β | β | β | β | 1β284 | β | β |
β | ||||||||||||||
β | Current portion of long-term debt (noteΒ 6) | β | β | β | β | β | β | β | β | β | β | 231 | β | β |
β | ||||||||||||||
β | Current portion of long-term lease liabilities | β | β | β | β | 309 | β | β | β | β | β | 310 | β | β |
β | ||||||||||||||
β | Accounts payable and accrued liabilities | β | β | β | β | 8β576 | β | β | β | β | β | 6β503 | οΏ½οΏ½οΏ½ | β |
β | ||||||||||||||
β | Current portion of provisions | β | β | β | β | 871 | β | β | β | β | β | 779 | β | β |
β | ||||||||||||||
β | Income taxes payable | β | β | β | β | 1β183 | β | β | β | β | β | 1β292 | β | β |
β | ||||||||||||||
β | Liabilities associated with assets held for sale (noteΒ 12) | β | β | β | β | 65 | β | β | β | β | β | β | β | β |
β | Total current liabilities | β | β | β | β | 12β348 | β | β | β | β | β | 10β399 | β | β |
β | ||||||||||||||
β | Long-term debt (noteΒ 6) | β | β | β | β | 13β861 | β | β | β | β | β | 13β989 | β | β |
β | ||||||||||||||
β | Long-term lease liabilities | β | β | β | β | 2β506 | β | β | β | β | β | 2β540 | β | β |
β | ||||||||||||||
β | Other long-term liabilities (noteΒ 11) | β | β | β | β | 1β663 | β | β | β | β | β | 2β180 | β | β |
β | ||||||||||||||
β | Provisions (noteΒ 10) | β | β | β | β | 7β210 | β | β | β | β | β | 8β776 | β | β |
β | ||||||||||||||
β | Deferred income taxes | β | β | β | β | 9β205 | β | β | β | β | β | 9β241 | β | β |
β | ||||||||||||||
β | Equity | β | β | β | β | 38β274 | β | β | β | β | β | 36β614 | β | β |
β | Total liabilities and shareholdersβ equity | β | β | β | β | 85β067 | β | β | β | β | β | 83β739 | β | β |
See accompanying notes to the condensed interim consolidated financial statements.β
48Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Consolidated Statements of Cash Flows
(unaudited)β
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Operating Activities | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Net Earnings | β | β | β | β | 2β949 | β | β | β | β | β | 821 | β | β |
β | ||||||||||||||
β | Adjustments for: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Depreciation, depletion, amortization and impairment | β | β | β | β | 1β471 | β | β | β | β | β | 1β490 | β | β |
β | ||||||||||||||
β | Deferred income tax (recovery) expense | β | β | β | β | (77) | β | β | β | β | β | 9 | β | β |
β | ||||||||||||||
β | Accretion (noteΒ 6) | β | β | β | β | 78 | β | β | β | β | β | 74 | β | β |
β | ||||||||||||||
β | Unrealized foreign exchange gain on U.S. dollar denominated debt (noteΒ 6) | β | β | β | β | (146) | β | β | β | β | β | (196) | β | β |
β | ||||||||||||||
β | Change in fair value of financial instruments and trading inventory | β | β | β | β | (74) | β | β | β | β | β | (103) | β | β |
β | ||||||||||||||
β | Gain on disposal of assets | β | β | β | β | (2) | β | β | β | β | β | (8) | β | β |
β | ||||||||||||||
β | Share-based compensation | β | β | β | β | 56 | β | β | β | β | β | (2) | β | β |
β | ||||||||||||||
β | Settlement of decommissioning and restoration liabilities | β | β | β | β | (91) | β | β | β | β | β | (70) | β | β |
β | ||||||||||||||
β | Other | β | β | β | β | (70) | β | β | β | β | β | 95 | β | β |
β | ||||||||||||||
β | (Increase) decrease in non-cash working capital | β | β | β | β | (1β022) | β | β | β | β | β | 235 | β | β |
β | Cash flow provided by operating activities | β | β | β | β | 3β072 | β | β | β | β | β | 2β345 | β | β |
β | Investing Activities | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Capital and exploration expenditures | β | β | β | β | (1β011) | β | β | β | β | β | (803) | β | β |
β | ||||||||||||||
β | Capital expenditures on assets held for sale | β | β | β | β | (19) | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Proceeds from disposal of assets | β | β | β | β | 2 | β | β | β | β | β | 8 | β | β |
β | ||||||||||||||
β | Other investments and acquisitions | β | β | β | οΏ½οΏ½ | (14) | β | β | β | β | β | (7) | β | β |
β | ||||||||||||||
β | Increase in non-cash working capital | β | β | β | β | (31) | β | β | β | β | β | (34) | β | β |
β | Cash flow used in investing activities | β | β | β | β | (1β073) | β | β | β | β | β | (836) | β | β |
β | Financing Activities | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Net increase (decrease) in short-term debt | β | β | β | β | 71 | β | β | β | β | β | (1β271) | β | β |
β | ||||||||||||||
β | Repayment of long-term debt (noteΒ 6) | β | β | β | β | (233) | β | β | β | β | β | (1β050) | β | β |
β | ||||||||||||||
β | Issuance of long-term debt (noteΒ 6) | β | β | β | β | β | β | β | β | β | β | 1β423 | β | β |
β | ||||||||||||||
β | Lease liability payments | β | β | β | β | (84) | β | β | β | β | β | (88) | β | β |
β | ||||||||||||||
β | Issuance of common shares under share option plans | β | β | β | β | 79 | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Repurchase of common shares (noteΒ 8) | β | β | β | β | (827) | β | β | β | β | β | (318) | β | β |
β | ||||||||||||||
β | Distributions relating to non-controlling interest | β | β | β | β | (2) | β | β | β | β | β | (2) | β | β |
β | ||||||||||||||
β | Dividends paid on common shares | β | β | β | β | (601) | β | β | β | β | β | (319) | β | β |
β | Cash flow used in financing activities | β | β | β | β | (1β597) | β | β | β | β | β | (1β625) | β | β |
β | Increase (Decrease) in Cash and Cash Equivalents | β | β | β | β | 402 | β | β | β | β | β | (116) | β | β |
β | ||||||||||||||
β | Effect of foreign exchange on cash and cash equivalents | β | β | β | β | (8) | β | β | β | β | β | (7) | β | β |
β | ||||||||||||||
β | Cash and cash equivalents at beginning of period | β | β | β | β | 2β205 | β | β | β | β | β | 1β885 | β | β |
β | Cash and Cash Equivalents at End of Period | β | β | β | β | 2β599 | β | β | β | β | β | 1β762 | β | β |
β | Supplementary Cash Flow Information | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Interest paid | β | β | β | β | 141 | β | β | β | β | β | 139 | β | β |
β | ||||||||||||||
β | Income taxes paid | β | β | β | β | 1β092 | β | β | β | β | β | 148 | β | β |
See accompanying notes to the condensed interim consolidated financial statements.β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 49
Β
Consolidated Statements of Changes in Equity
(unaudited)β
β | ($ millions) | β | β | Share Capital | β | β | Contributed Surplus | β | β | Accumulated Other Comprehensive Income | β | β | Retained Earnings | β | β | Total | β | β | β | Number of Common Shares (thousands) | β | ||||||||||||||||||
β | At DecemberΒ 31, 2020 | β | β | β | β | 25β144 | β | β | β | β | β | 591 | β | β | β | β | β | 877 | β | β | β | β | β | 9β145 | β | β | β | β | β | 35β757 | β | β | β | β | β | β | 1β525β151 | β | β |
β | Net earnings | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 821 | β | β | β | β | β | 821 | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Foreign currency translation adjustment | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (41) | β | β | β | β | β | β | β | β | β | β | β | (41) | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Actuarial gain on employee retirement benefit plans, net of income taxes ofβ $207 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 656 | β | β | β | β | β | 656 | β | β | β | β | β | β | β | β | β |
β | Total comprehensive (loss) income | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (41) | β | β | β | β | β | 1β477 | β | β | β | β | β | 1β436 | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Repurchase of common shares for cancellation (noteΒ 8) | β | β | β | β | (199) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (119) | β | β | β | β | β | (318) | β | β | β | β | β | β | (12β055) | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Change in liability for share repurchase commitment | β | β | β | β | (151) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (89) | β | β | β | β | β | (240) | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Share-based compensation | β | β | β | β | β | β | β | β | β | β | 9 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 9 | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Dividends paid on common shares | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (319) | β | β | β | β | β | (319) | β | β | β | β | β | β | β | β | β |
β | At MarchΒ 31, 2021 | β | β | β | β | 24β794 | β | β | β | β | β | 600 | β | β | β | β | β | 836 | β | β | β | β | β | 10β095 | β | β | β | β | β | 36β325 | β | β | β | β | β | β | 1β513β096 | β | β |
β | At DecemberΒ 31, 2021 | β | β | β | β | 23β650 | β | β | β | β | β | 612 | β | β | β | β | β | 814 | β | β | β | β | β | 11β538 | β | β | β | β | β | 36β614 | β | β | β | β | β | β | 1β441β251 | β | β |
β | Net earnings | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 2β949 | β | β | β | β | β | 2β949 | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Foreign currency translation adjustment | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (56) | β | β | β | β | β | β | β | β | β | β | β | (56) | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Actuarial gain on employee retirement benefit plans, net of income taxes ofβ $123 (noteΒ 11) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 392 | β | β | β | β | β | 392 | β | β | β | β | β | β | β | β | β |
β | Total comprehensive (loss) income | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (56) | β | β | β | β | β | 3β341 | β | β | β | β | β | 3β285 | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Issued under share option plans | β | β | β | β | 91 | β | β | β | β | β | (11) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 80 | β | β | β | β | β | β | 2β612 | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Repurchase of common shares for cancellation (noteΒ 8) | β | β | β | β | (358) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (469) | β | β | β | β | β | (827) | β | β | β | β | β | β | (21β698) | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Change in liability for share repurchase commitment | β | β | β | β | (89) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (196) | β | β | β | β | β | (285) | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Share-based compensation | β | β | β | β | β | β | β | β | β | β | 8 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 8 | β | β | β | β | β | β | β | β | β |
β | |||||||||||||||||||||||||||||||||||||||
β | Dividends paid on common shares | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (601) | β | β | β | β | β | (601) | β | β | β | β | β | β | β | β | β |
β | At MarchΒ 31, 2022 | β | β | β | β | 23β294 | β | β | β | β | β | 609 | β | β | β | β | β | 758 | β | β | β | β | β | 13β613 | β | β | β | β | β | 38β274 | β | β | β | β | β | β | 1β422β165 | β | β |
See accompanying notes to the condensed interim consolidated financial statements.
50Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Notes to the Consolidated Financial Statements
(unaudited)
1. Reporting Entity and Description of the Business
Suncor EnergyΒ Inc. (Suncor or the company) is an integrated energy company headquartered in Calgary, Alberta. Suncorβs operations include oil sands development, production and upgrading; offshore oil and gas; petroleum refining in Canada and the U.S.; and the companyβs Petro-Canada retail and wholesale distribution networks (including Canadaβs Electric HighwayTM, aΒ 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 CompactΒ 100 stock index. Suncorβs common shares (symbol: SU) are listed on the Toronto Stock Exchange (TSX) and New York Stock Exchange (NYSE).
The address of the companyβs registered office is 150βββ6th AvenueΒ S.W., Calgary, Alberta, Canada, T2PΒ 3E3.
2. Basis of Preparation
(a) Statement of Compliance
These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, specifically International Accounting StandardΒ 34 Interim Financial Reporting as issued by the International Accounting Standards Board. They are condensed as they do not include all of the information required for full annual financial statements, and they should be read in conjunction with the audited consolidated financial statements of the company for the year ended DecemberΒ 31, 2021.
(b) Basis of Measurement
The consolidated financial statements are prepared on a historical cost basis except as detailed in the accounting policies disclosed in the companyβs audited consolidated financial statements for the year ended DecemberΒ 31, 2021.
(c) Functional Currency and Presentation Currency
These consolidated financial statements are presented in Canadian dollars, which is the companyβs functional currency.
(d) Use of Estimates, Assumptions and Judgments
The timely preparation of financial statements requires that management make estimates and assumptions and use judgment. Accordingly, actual results may differ from estimated amounts as future confirming events occur. Significant estimates and judgment used in the preparation of the financial statements are described in the companyβs audited consolidated financial statements for the year ended DecemberΒ 31, 2021.
On JanuaryΒ 30, 2020, the World Health Organization declared the COVID-19 outbreak a Public Health Emergency of International Concern and, on MarchΒ 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas, and forced closures for certain types of public places and businesses. These measures have and may continue to have significant disruption to business operations and a significant increase in economic uncertainty, with fluctuating demand for commodities leading to volatile prices and currency exchange rates, and a decline in long-term interest rates. Our operations and business are particularly sensitive to a reduction in the demand for, and prices of, commodities that are closely linked to Suncorβs financial performance, including crude oil, refined petroleum products (such as jet fuel and gasoline), natural gas and electricity. The potential direct and indirect impacts of the economic volatility have been considered in managementβs estimates, and assumptions at period-end have been reflected in our results with any significant changes described in the relevant notes to the companyβs unaudited interim Consolidated Financial Statements for the threeΒ months ended MarchΒ 31, 2022.
The COVID-19 pandemic is an evolving situation that is expected to continue to have widespread implications for our business environment, operations and financial condition. Management cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact our consolidated statements of comprehensive income, consolidated balance sheets and consolidated statements of cash flows in fiscal 2022.
(e) Income Taxes
The company recognizes the impacts of income tax rate changes in earnings in the period that the applicable rate change is enacted or substantively enacted.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 51
Notes to the Consolidated Financial Statements
3. Segmented Information
The companyβs operating segments are reported based on the nature of their products and services and management responsibility.
Intersegment sales of crude oil and natural gas are accounted for at market values and are included, for segmented reporting, in revenues of the segment making the transfer and expenses of the segment receiving the transfer. Intersegment amounts are eliminated on consolidation. 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 and comparative periods have been restated to reflect this change.
β | ThreeΒ months ended MarchΒ 31 | β | β | Oil Sands | β | β | Exploration and Production | β | β | Refining and Marketing | β | β | Corporate and Eliminations | β | β | Total | β | |||||||||||||||||||||||||||||||||||||||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | β | 2022 | β | β | 2021 | β | ||||||||||||||||||||||||||||||
β | Revenues and Other Income | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Gross revenues | β | β | β | β | 5β772 | β | β | β | β | β | 3β295 | β | β | β | β | β | 1β015 | β | β | β | β | β | 590 | β | β | β | β | β | 7β823 | β | β | β | β | β | 4β990 | β | β | β | β | β | 9 | β | β | β | β | β | 6 | β | β | β | β | β | 14β619 | β | β | β | β | β | 8β881 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Intersegment revenues | β | β | β | β | 1β698 | β | β | β | β | β | 1β056 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 32 | β | β | β | β | β | 23 | β | β | β | β | β | (1β730) | β | β | β | β | β | (1β079) | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Less: Royalties | β | β | β | β | (985) | β | β | β | β | β | (158) | β | β | β | β | β | (147) | β | β | β | β | β | (44) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (1β132) | β | β | β | β | β | (202) | β | β |
β | Operating revenues, net of royalties | β | β | β | β | 6β485 | β | β | β | β | β | 4β193 | β | β | β | β | β | 868 | β | β | β | β | β | 546 | β | β | β | β | β | 7β855 | β | β | β | β | β | 5β013 | β | β | β | β | β | (1β721) | β | β | β | β | β | (1β073) | β | β | β | β | β | 13β487 | β | β | β | β | β | 8β679 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Other income (loss) | β | β | β | β | 7 | β | β | β | β | β | (2) | β | β | β | β | β | 68 | β | β | β | β | β | (1) | β | β | β | β | β | (110) | β | β | β | β | β | (45) | β | β | β | β | β | 49 | β | β | β | β | β | 5 | β | β | β | β | β | 14 | β | β | β | β | β | (43) | β | β |
β | β | β | β | β | β | 6β492 | β | β | β | β | β | 4β191 | β | β | β | β | β | 936 | β | β | β | β | β | 545 | β | β | β | β | β | 7β745 | β | β | β | β | β | 4β968 | β | β | β | β | β | (1β672) | β | β | β | β | β | (1β068) | β | β | β | β | β | 13β501 | β | β | β | β | β | 8β636 | β | β |
β | Expenses | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | 453 | β | β | β | β | β | 250 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 5β482 | β | β | β | β | β | 3β275 | β | β | β | β | β | (1β433) | β | β | β | β | β | (942) | β | β | β | β | β | 4β502 | β | β | β | β | β | 2β583 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Operating, selling and general | β | β | β | β | 2β212 | β | β | β | β | β | 1β973 | β | β | β | β | β | 108 | β | β | β | β | β | 110 | β | β | β | β | β | 559 | β | β | β | β | β | 479 | β | β | β | β | β | 209 | β | β | β | β | β | 338 | β | β | β | β | β | 3β088 | β | β | β | β | β | 2β900 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | 293 | β | β | β | β | β | 276 | β | β | β | β | β | 23 | β | β | β | β | β | 52 | β | β | β | β | β | 63 | β | β | β | β | β | 63 | β | β | β | β | β | (9) | β | β | β | β | β | (10) | β | β | β | β | β | 370 | β | β | β | β | β | 381 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Depreciation, depletion, amortization and impairment | β | β | β | β | 1β105 | β | β | β | β | β | 1β158 | β | β | β | β | β | 129 | β | β | β | β | β | 102 | β | β | β | β | β | 212 | β | β | β | β | β | 209 | β | β | β | β | β | 25 | β | β | β | β | β | 21 | β | β | β | β | β | 1β471 | β | β | β | β | β | 1β490 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Exploration | β | β | β | β | 31 | β | β | β | β | β | 2 | β | β | β | β | β | 8 | β | β | β | β | β | 6 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 39 | β | β | β | β | β | 8 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Gain on disposal of assets | β | β | β | β | (2) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (8) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (2) | β | β | β | β | β | (8) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Financing expenses | β | β | β | β | 91 | β | β | β | β | β | 87 | β | β | β | β | β | 23 | β | β | β | β | β | 17 | β | β | β | β | β | 12 | β | β | β | β | β | 16 | β | β | β | β | β | 59 | β | β | β | β | β | 48 | β | β | β | β | β | 185 | β | β | β | β | β | 168 | β | β |
β | β | β | β | β | β | 4β183 | β | β | β | β | β | 3β746 | β | β | β | β | β | 291 | β | β | β | β | β | 287 | β | β | β | β | β | 6β328 | β | β | β | β | β | 4β034 | β | β | β | β | β | (1β149) | β | β | β | β | β | (545) | β | β | β | β | β | 9β653 | β | β | β | β | β | 7β522 | β | β |
β | Earnings (Loss) before Income Taxes | β | β | β | β | 2β309 | β | β | β | β | β | 445 | β | β | β | β | β | 645 | β | β | β | β | β | 258 | β | β | β | β | β | 1β417 | β | β | β | β | β | 934 | β | β | β | β | β | (523) | β | β | β | β | β | (523) | β | β | β | β | β | 3β848 | β | β | β | β | β | 1β114 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Income Tax Expense (Recovery) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Current | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 976 | β | β | β | β | β | 284 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
β | Deferred | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | (77) | β | β | β | β | β | 9 | β | β |
β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 899 | β | β | β | β | β | 293 | β | β |
β | Net Earnings | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 2β949 | β | β | β | β | β | 821 | β | β |
β | Capital and Exploration Expenditures(1) | β | β | β | β | 668 | β | β | β | β | β | 539 | β | β | β | β | β | 83 | β | β | β | β | β | 69 | β | β | β | β | β | 132 | β | β | β | β | β | 120 | β | β | β | β | β | 128 | β | β | β | β | β | 75 | β | β | β | β | β | 1β011 | β | β | β | β | β | 803 | β | β |
β
(1)
Excludes capital expenditures related to assets held for sale ofβ $19Β million in the first quarter of 2022.
β
β
52Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Disaggregation of Revenue from Contracts with Customers and Intersegment Revenue
The company derives revenue from the transfer of goods mainly at a point in time in the following major commodities, revenue streams and geographical regions:
β | ThreeΒ months ended MarchΒ 31 | β | β | 2022 | β | β | 2021 | β | ||||||||||||||||||||||||||||||
β | ($ millions) | β | β | North America | β | β | International | β | β | Total | β | β | North America | β | β | International | β | β | Total | β | ||||||||||||||||||
β | Oil Sands | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Synthetic crude oil and diesel | β | β | β | β | 5β688 | β | β | β | β | β | β | β | β | β | β | β | 5β688 | β | β | β | β | β | 3β347 | β | β | β | β | β | β | β | β | β | β | β | 3β347 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Bitumen | β | β | β | β | 1β782 | β | β | β | β | β | β | β | β | β | β | β | 1β782 | β | β | β | β | β | 1β004 | β | β | β | β | β | β | β | β | β | β | β | 1β004 | β | β |
β | β | β | β | β | β | 7β470 | β | β | β | β | β | β | β | β | β | β | β | 7β470 | β | β | β | β | β | 4β351 | β | β | β | β | β | β | β | β | β | β | β | 4β351 | β | β |
β | Exploration and Production | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Crude oil and natural gas liquids | β | β | β | β | 563 | β | β | β | β | β | 443 | β | β | β | β | β | 1β006 | β | β | β | β | β | 386 | β | β | β | β | β | 202 | β | β | β | β | β | 588 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Natural gas | β | β | β | β | β | β | β | β | β | β | 9 | β | β | β | β | β | 9 | β | β | β | β | β | β | β | β | β | β | β | 2 | β | β | β | β | β | 2 | β | β |
β | β | β | β | β | β | 563 | β | β | β | β | β | 452 | β | β | β | β | β | 1β015 | β | β | β | β | β | 386 | β | β | β | β | β | 204 | β | β | β | β | β | 590 | β | β |
β | Refining and Marketing | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Gasoline | β | β | β | β | 3β033 | β | β | β | β | β | β | β | β | β | β | β | 3β033 | β | β | β | β | β | 2β051 | β | β | β | β | β | β | β | β | β | β | β | 2β051 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Distillate | β | β | β | β | 3β845 | β | β | β | β | β | β | β | β | β | β | β | 3β845 | β | β | β | β | β | 2β287 | β | β | β | β | β | β | β | β | β | β | β | 2β287 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Other | β | β | β | β | 977 | β | β | β | β | β | β | β | β | β | β | β | 977 | β | β | β | β | β | 675 | β | β | β | β | β | β | β | β | β | β | β | 675 | β | β |
β | β | β | β | β | β | 7β855 | β | β | β | β | β | β | β | β | β | β | β | 7β855 | β | β | β | β | β | 5β013 | β | β | β | β | β | β | β | β | β | β | β | 5β013 | β | β |
β | Corporate and Eliminations | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | β | β | β | β | β | (1β721) | β | β | β | β | β | β | β | β | β | β | β | (1β721) | β | β | β | β | β | (1β073) | β | β | β | β | β | β | β | β | β | β | β | (1β073) | β | β |
β | Total Revenue from Contracts with Customers | β | β | β | β | 14β167 | β | β | β | β | β | 452 | β | β | β | β | β | 14β619 | β | β | β | β | β | 8β677 | β | β | β | β | β | 204 | β | β | β | β | β | 8β881 | β | β |
4. Other Income (Loss)
Other income (loss) consists of the following:
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Energy trading activities | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Gains recognized in earnings | β | β | β | β | 4 | β | β | β | β | β | 11 | β | β |
β | ||||||||||||||
β | Gains (losses) on inventory valuation | β | β | β | β | 21 | β | β | β | β | β | (21) | β | β |
β | ||||||||||||||
β | Commodity risk management | β | β | β | β | (118) | β | β | β | β | β | (66) | β | β |
β | ||||||||||||||
β | Investment and interest income | β | β | β | β | 32 | β | β | β | β | β | 23 | β | β |
β | ||||||||||||||
β | Other(1) | β | β | β | β | 75 | β | β | β | β | β | 10 | β | β |
β | β | β | β | β | β | 14 | β | β | β | β | β | (43) | β | β |
β
(1)
ThreeΒ months ended MarchΒ 31, 2022, includes a US$50Β million contingent consideration gain related to the sale of the companyβs 26.69% working interest in the Golden Eagle Area Development in the fourth quarter of 2021, within the Exploration & Production segment, and an unrealized gain on an equity investment, within the Corporate segment.
β
β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 53
Notes to the Consolidated Financial Statements
5. Share-Based Compensation
The following table summarizes the share-based compensation expense for all plans recorded within operating, selling and general expense:
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Equity-settled plans | β | β | β | β | 8 | β | β | β | β | β | 9 | β | β |
β | ||||||||||||||
β | Cash-settled plans | β | β | β | β | 198 | β | β | β | β | β | 102 | β | β |
β | β | β | β | β | β | 206 | β | β | β | β | β | 111 | β | β |
6. Financing Expenses
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Interest on debt | β | β | β | β | 195 | β | β | β | β | β | 210 | β | β |
β | ||||||||||||||
β | Interest on lease liabilities | β | β | β | β | 39 | β | β | β | οΏ½οΏ½ | β | 41 | β | β |
β | ||||||||||||||
β | Capitalized interest | β | β | β | β | (37) | β | β | β | β | β | (31) | β | β |
β | Interest expense | β | β | β | β | 197 | β | β | β | β | β | 220 | β | β |
β | ||||||||||||||
β | Interest on partnership liability | β | β | β | β | 13 | β | β | β | β | β | 13 | β | β |
β | ||||||||||||||
β | Interest on pension and other post-retirement benefits | β | β | β | β | 10 | β | β | β | β | β | 15 | β | β |
β | ||||||||||||||
β | Accretion | β | β | β | β | 78 | β | β | β | β | β | 74 | β | β |
β | ||||||||||||||
β | Foreign exchange gain on U.S. dollar denominated debt | β | β | β | β | (146) | β | β | β | β | β | (196) | β | β |
β | ||||||||||||||
β | Operational foreign exchange and other | β | β | β | β | 33 | β | β | β | β | β | 42 | β | β |
β | β | β | β | β | β | 185 | β | β | β | β | β | 168 | β | β |
During the first quarter of 2022, the company completed an early redemption of its outstanding US$182Β million 4.50% notes, originally scheduled to mature in the second quarter of 2022.
7. Earnings per Common Share
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Net earnings | β | β | β | β | 2β949 | β | β | β | β | β | 821 | β | β |
β | (millions of common shares)β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Weighted average number of common shares | β | β | β | β | 1β433 | β | β | β | β | β | 1β522 | β | β |
β | ||||||||||||||
β | Dilutive securities: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Effect of share options | β | β | β | β | 2 | β | β | β | β | β | β | β | β |
β | Weighted average number of diluted common shares | β | β | β | β | 1β435 | β | β | β | β | β | 1β522 | β | β |
β | (dollars per common share) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Basic and diluted earnings per share | β | β | β | β | 2.06 | β | β | β | β | β | 0.54 | β | β |
54Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
8. Normal Course Issuer Bid
During the first quarter of 2022, the Toronto Stock Exchange (TSX) accepted a notice filed by Suncor to renew its normal course issuer bid (NCIB) to purchase the companyβs common shares through the facilities of the TSX, New York Stock Exchange and/or alternative trading systems. The notice provided that, beginning FebruaryΒ 8, 2022, and ending FebruaryΒ 7, 2023, Suncor may purchase for cancellation up to 71,650,000 common shares, which is equal to approximately 5% of Suncorβs issued and outstanding common shares as at the date hereof.
During the first quarter of 2022, the company repurchased 7.1Β million common shares under the previous 2021 NCIB and 14.6Β million under the 2022 renewed NCIB at an average price ofβ $38.12 per share, for a total repurchase cost ofβ $827Β million.
Subsequent to the first quarter of 2022, Suncor received approval from the TSX to amend its existing NCIB effective as of the close of markets on MayΒ 11, 2022, to increase the maximum number of common shares that may be repurchased in the period beginning FebruaryΒ 8, 2022, and ending FebruaryΒ 7, 2023, from 71,650,000 common shares, or approximately 5% of Suncorβs issued and outstanding common shares as at JanuaryΒ 31, 2022, to 143,500,000, or approximately 10% of Suncorβs public float as at JanuaryΒ 31, 2022. No other terms of the NCIB have been amended.
The following table summarizes the share repurchase activities during the period:
β | β | β | β | ThreeΒ months ended MarchΒ 31 | β | |||||||||
β | ($ millions, except as noted) | β | β | 2022 | β | β | 2021 | β | ||||||
β | Share repurchase activities (thousands of common shares) | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Shares repurchased | β | β | β | β | 21β698 | β | β | β | β | β | 12β055 | β | β |
β | Amounts charged to: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Share capital | β | β | β | β | 358 | β | β | β | β | β | 199 | β | β |
β | ||||||||||||||
β | Retained earnings | β | β | β | β | 469 | β | β | β | β | β | 119 | β | β |
β | Share repurchase cost | β | β | β | β | 827 | β | β | β | β | β | 318 | β | β |
Under an automatic repurchase plan agreement with an independent broker, the company has recorded the following liability for share repurchases that may take place during its internal blackout period:
β | ($ millions) | β | β | MarchΒ 31 2022 | β | β | DecemberΒ 31 2021 | β | ||||||
β | Amounts charged to: | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||
β | Share capital | β | β | β | β | 209 | β | β | β | β | β | 120 | β | β |
β | ||||||||||||||
β | Retained earnings | β | β | β | β | 306 | β | β | β | β | β | 110 | β | β |
β | Liability for share purchase commitment | β | β | β | β | 515 | β | β | β | β | β | 230 | β | β |
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 55
Notes to the Consolidated Financial Statements
9. Financial Instruments
Derivative Financial Instruments
(a) Non-Designated Derivative Financial Instruments
The company uses derivative financial instruments, such as physical and financial contracts, to manage certain exposures to fluctuations in interest rates, commodity prices and foreign currency exchange rates, as part of its overall risk management program, as well as for trading purposes.
The changes in the fair value of non-designated derivatives are as follows:
β | ($ millions) | β | β | Total | β | |||
β | Fair value outstanding at DecemberΒ 31, 2021 | β | β | β | β | (98) | β | β |
β | ||||||||
β | Cash settlementsβββpaid during the year | β | β | β | β | 166 | β | β |
β | ||||||||
β | Changes in fair value recognized in earnings during the year | β | β | β | β | (114) | β | β |
β | Fair value outstanding at MarchΒ 31, 2022 | β | β | β | β | (46) | β | β |
(b) Fair Value Hierarchy
To estimate the fair value of derivatives, the company uses quoted market prices when available, or third-party models and valuation methodologies that utilize observable market data. In addition to market information, the company incorporates transaction-specific details that market participants would utilize in a fair value measurement, including the impact of non-performance risk. However, these fair value estimates may not necessarily be indicative of the amounts that could be realized or settled in a current market transaction. The company characterizes inputs used in determining fair value using a hierarchy that prioritizes inputs depending on the degree to which they are observable. The three levels of the fair value hierarchy are as follows:
β’
LevelΒ 1 consists of instruments with a fair value determined by an unadjusted quoted price in an active market for identical assets or liabilities. An active market is characterized by readily and regularly available quoted prices where the prices are representative of actual and regularly occurring market transactions to assure liquidity.
β
β’
LevelΒ 2 consists of instruments with a fair value that is determined by quoted prices in an inactive market, prices with observable inputs or prices with insignificant non-observable inputs. The fair value of these positions is determined using observable inputs from exchanges, pricing services, third-party independent broker quotes and published transportation tolls. The observable inputs may be adjusted using certain methods, which include extrapolation over the quoted price term and quotes for comparable assets and liabilities.
β
β’
LevelΒ 3 consists of instruments with a fair value that is determined by prices with significant unobservable inputs. As at MarchΒ 31, 2022, the company does not have any derivative instruments measured at fair value LevelΒ 3.
β
In forming estimates, the company utilizes the most observable inputs available for valuation purposes. If a fair value measurement reflects inputs of different levels within the hierarchy, the measurement is categorized based upon the lowest level of input that is significant to the fair value measurement.
The following table presents the companyβs derivative financial instruments measured at fair value for each hierarchy level as at MarchΒ 31, 2022:
β | ($ millions) | β | β | LevelΒ 1 | β | β | LevelΒ 2 | β | β | LevelΒ 3 | β | β | Total Fair Value | β | ||||||||||||
β | Accounts receivable | β | β | β | β | 101 | β | β | β | β | β | 81 | β | β | β | β | β | β | β | β | β | β | β | 182 | β | β |
β | ||||||||||||||||||||||||||
β | Accounts payable | β | β | β | β | (160) | β | β | β | β | β | (68) | β | β | β | β | β | β | β | β | β | β | β | (228) | β | β |
β | β | β | β | β | β | (59) | β | β | β | β | β | 13 | β | β | β | β | β | β | β | β | β | β | β | (46) | β | β |
During the first quarter of 2022, there were no transfers between LevelΒ 1 and LevelΒ 2 fair value measurements.
A substantial portion of the companyβs accounts receivable are with customers in the oil and gas industry and are subject to normal industry credit risk. While the industry has experienced credit downgrades due to the COVID-19 pandemic, Suncor has not been significantly affected as the majority of Suncorβs customers are large and established downstream companies with investment grade credit ratings.
Non-Derivative Financial Instruments
At MarchΒ 31, 2022, the carrying value of fixed-term debt accounted for under amortized cost was $13.9Β billion (DecemberΒ 31, 2021βββ$14.2Β billion) and the fair value was $15.5Β billion (DecemberΒ 31, 2021βββ$17.4Β billion). The estimated fair value of long-term debt is based on pricing sourced from market data.
56Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
10. Provisions
Suncorβs decommissioning and restoration provision decreased by $1.5Β billion for the threeΒ months ended MarchΒ 31, 2022. The decrease was primarily due to an increase in the credit-adjusted risk-free interest rate to 4.70% (DecemberΒ 31, 2021βββ3.70%).
11. Pensions and Other Post-Retirement Benefits
For the threeΒ months ended MarchΒ 31, 2022, the actuarial gain on employee retirement benefit plans was $392Β million (net of taxes ofβ $123Β million), mainly due to an increase in the discount rate to 3.80% (DecemberΒ 31, 2021βββ2.90%).
12. Assets Held For Sale
During the first quarter of 2022, the company reclassified the assets and liabilities related to its Norway operations as assets held for sale, including its 30% working interest in Oda and its 17.5% working interest in the Fenja Development Joint Venture. Suncor commenced a sale process for the Norway operations with an expected close later this year. The Norway assets are reported within the Exploration and Production segment.
The table below details the assets and liabilities held for sale as at MarchΒ 31, 2022:
β | β | β | β | MarchΒ 31 | β | |||
β | ($ millions) | β | β | 2022 | β | |||
β | Assets | β | β | β | β | β | β | β |
β | ||||||||
β | Current assets | β | β | β | β | 6 | β | β |
β | ||||||||
β | Property, plant and equipment, net | β | β | β | β | 414 | β | β |
β | ||||||||
β | Deferred income taxes | β | β | β | β | 28 | β | β |
β | Total Assets | β | β | β | β | 448 | β | β |
β | Liabilities | β | β | β | β | β | β | β |
β | ||||||||
β | Current liabilities | β | β | β | β | (30) | β | β |
β | ||||||||
β | Provisions | β | β | β | β | (35) | β | β |
β | Total Liabilities | β | β | β | β | (65) | β | β |
β | Net Assets | β | β | β | β | 383 | β | β |
13. Subsequent Events
Subsequent to MarchΒ 31, 2022, the company announced its plans to divest its wind and solar assets including its interests in wind farms located in Alberta and Ontario, with the Forty Mile Wind and Solar Power Project currently under construction and expected to be completed and operational in 2022. Suncor has commenced a sale process for these assets and expects a sale to close within the next twelveΒ months. The renewable energy business is reported within the Corporate segment.
On MayΒ 9, 2022, Suncorβs Board of Directors approved an increase in the companyβs quarterly dividend to $0.47 per common share from $0.42 per common share.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 57
Supplemental Financial and Operating Information
Quarterly Financial Summary
Quarterly Financial Summary
(unaudited)β
β | β | β | β | For the Quarter Ended | β | β | For the Year Ended | β | ||||||||||||||||||||||||||||||
β | ($ millions, except per share amounts) | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2021 | β | ||||||||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 13β487 | β | β | β | β | β | 11β149 | β | β | β | β | β | 10β145 | β | β | β | β | β | 9β159 | β | β | β | β | β | 8β679 | β | β | β | β | β | 39β132 | β | β |
β | Earnings (loss) before income taxes(A) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Oil Sands | β | β | β | β | 2β309 | β | β | β | β | β | 1β169 | β | β | β | β | β | 629 | β | β | β | β | β | 582 | β | β | β | β | β | 445 | β | β | β | β | β | 2β825 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Exploration and Production | β | β | β | β | 645 | β | β | β | β | β | 603 | β | β | β | β | β | 590 | β | β | β | β | β | 340 | β | β | β | β | β | 258 | β | β | β | β | β | 1β791 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refining and Marketing | β | β | β | β | 1β417 | β | β | β | β | β | 599 | β | β | β | β | β | 848 | β | β | β | β | β | 486 | β | β | β | β | β | 934 | β | β | β | β | β | 2β867 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Corporate and Eliminations | β | β | β | β | (523) | β | β | β | β | β | (317) | β | β | β | β | β | (753) | β | β | β | β | β | (320) | β | β | β | β | β | (523) | β | β | β | β | β | (1β913) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Income tax expense | β | β | β | β | (899) | β | β | β | β | β | (501) | β | β | β | β | β | (437) | β | β | β | β | β | (220) | β | β | β | β | β | (293) | β | β | β | β | β | (1β451) | β | β |
β | Net earnings | β | β | β | β | 2β949 | β | β | β | β | β | 1β553 | β | β | β | β | β | 877 | β | β | β | β | β | 868 | β | β | β | β | β | 821 | β | β | β | β | β | 4β119 | β | β |
β | Adjusted operating earnings (loss)(A)(B)(C) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Oil Sands | β | β | β | β | 2β256 | β | β | β | β | β | 1β172 | β | β | β | β | β | 635 | β | β | β | β | β | 613 | β | β | β | β | β | 409 | β | β | β | β | β | 2β829 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Exploration and Production | β | β | β | β | 645 | β | β | β | β | β | 376 | β | β | β | β | β | 369 | β | β | β | β | β | 340 | β | β | β | β | β | 258 | β | β | β | β | β | 1β343 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refining and Marketing | β | β | β | β | 1β395 | β | β | β | β | β | 582 | β | β | β | β | β | 864 | β | β | β | β | β | 468 | β | β | β | β | β | 943 | β | β | β | β | β | 2β857 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Corporate and Eliminations | β | β | β | β | (669) | β | β | β | β | β | (342) | β | β | β | β | β | (395) | β | β | β | β | β | (493) | β | β | β | β | β | (551) | β | β | β | β | β | (1β781) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Income tax expense included in adjusted operating earnings | β | β | β | β | (872) | β | οΏ½οΏ½οΏ½ | β | β | β | (494) | β | β | β | β | β | (430) | β | β | β | β | β | (206) | β | β | β | β | β | (313) | β | β | β | β | β | (1β443) | β | β |
β | Total | β | β | β | β | 2β755 | β | β | β | β | β | 1β294 | β | β | β | β | β | 1β043 | β | β | β | β | β | 722 | β | β | β | β | β | 746 | β | β | β | β | β | 3β805 | β | β |
β | Adjusted funds from (used in) operations(A)(B)(C) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Oil Sands | β | β | β | β | 3β414 | β | β | β | β | β | 2β459 | β | β | β | β | β | 1β745 | β | β | β | β | β | 1β844 | β | β | β | β | β | 1β527 | β | β | β | β | β | 7β575 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Exploration and Production | β | β | β | β | 724 | β | β | β | β | β | 565 | β | β | β | β | β | 521 | β | β | β | β | β | 500 | β | β | β | β | β | 365 | β | β | β | β | β | 1β951 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refining and Marketing | β | β | β | β | 1β597 | β | β | β | β | β | 869 | β | β | β | β | β | 1β113 | β | β | β | β | β | 677 | β | β | β | β | β | 1β172 | β | β | β | β | β | 3β831 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Corporate and Eliminations | β | β | β | β | (665) | β | β | β | β | β | (252) | β | β | β | β | β | (352) | β | β | β | β | β | (431) | β | β | β | β | β | (670) | β | β | β | β | β | (1β705) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Current income tax expense | β | β | β | β | (976) | β | β | β | β | β | (497) | β | β | β | β | β | (386) | β | β | β | β | β | (228) | β | β | β | β | β | (284) | β | β | β | β | β | (1β395) | β | β |
β | Total | β | β | β | β | 4β094 | β | β | β | β | β | 3β144 | β | β | β | β | β | 2β641 | β | β | β | β | β | 2β362 | β | β | β | β | β | 2β110 | β | β | β | β | β | 10β257 | β | β |
β | Change in non-cash working capital | β | β | β | β | (1β022) | β | β | β | β | β | (529) | β | β | β | β | β | 2β077 | β | β | β | β | β | (276) | β | β | β | β | β | 235 | β | β | β | β | β | 1β507 | β | β |
β | Cash flow provided by operating activities | β | β | β | β | 3β072 | β | β | β | β | β | 2β615 | β | β | β | β | β | 4β718 | β | β | β | β | β | 2β086 | β | β | β | β | β | 2β345 | β | β | β | β | β | 11β764 | β | β |
β | Per common share | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Net earnings(D) | β | β | β | β | 2.06 | β | β | β | β | β | 1.07 | β | β | β | β | β | 0.59 | β | β | β | β | β | 0.58 | β | β | β | β | β | 0.54 | β | β | β | β | β | 2.77 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Adjusted operating earnings (loss)(B)(C)(E) | β | β | β | β | 1.92 | β | β | β | β | β | 0.89 | β | β | β | β | β | 0.71 | β | β | β | β | β | 0.48 | β | β | β | β | β | 0.49 | β | β | β | β | β | 2.56 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Cash dividends(E) | β | β | β | β | 0.42 | β | β | β | β | β | 0.42 | β | β | β | β | β | 0.21 | β | β | β | β | β | 0.21 | β | β | β | β | β | 0.21 | β | β | β | β | β | 1.05 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Adjusted funds from operations(B)(C)(E) | β | β | β | β | 2.86 | β | β | β | β | β | 2.17 | β | β | β | β | β | 1.79 | β | β | β | β | β | 1.57 | β | β | β | β | β | 1.39 | β | β | β | β | β | 6.89 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Cash flow provided by operating activities(E) | β | β | β | β | 2.14 | β | β | β | β | β | 1.80 | β | β | β | β | β | 3.19 | β | β | β | β | β | 1.39 | β | β | β | β | β | 1.54 | β | β | β | β | β | 7.79 | β | β |
β | Capital and exploration expenditures (including capitalized interest) | β | ||||||||||||||||||||||||||||||||||||
β | ||||||||||||||||||||||||||||||||||||||
β | Oil Sands | β | β | β | β | 668 | β | β | β | β | β | 860 | β | β | β | β | β | 935 | β | β | β | β | β | 834 | β | β | β | β | β | 539 | β | β | β | β | β | 3β168 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Exploration and Production(F) | β | β | β | β | 83 | β | β | β | β | β | 73 | β | β | β | β | β | 64 | β | β | β | β | β | 64 | β | β | β | β | β | 69 | β | β | β | β | β | 270 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refining and Marketing | β | β | β | β | 132 | β | β | β | β | β | 188 | β | β | β | β | β | 142 | β | β | β | β | β | 375 | β | β | β | β | β | 120 | β | β | β | β | β | 825 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Corporate and Eliminations | β | β | β | β | 128 | β | β | β | β | β | 63 | β | β | β | β | β | 80 | β | β | β | β | β | 74 | β | β | β | β | β | 75 | β | β | β | β | β | 292 | β | β |
β | Total capital and exploration expenditures | β | β | β | β | 1β011 | β | β | β | β | β | 1β184 | β | β | β | β | β | 1β221 | β | β | β | β | β | 1β347 | β | β | β | β | β | 803 | β | β | β | β | β | 4β555 | β | β |
β
(A)
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.
β
(B)
Non-GAAP financial measures or contains non-GAAP financial measures. See the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
(C)
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.
β
(D)
Represents on a basic and diluted per share basis.
β
(E)
Represents on a basic per share basis.
β
(F)
Excludes capital expenditures related to assets held for sale ofβ $19 million in the first quarter of 2022.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
58Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Supplemental Financial and Operating Information (continued)
Quarterly Financial Summary
Quarterly Financial Summary
(unaudited)β
β | β | β | β | For the twelveΒ months ended | β | |||||||||||||||||||||||||||
β | β | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | |||||||||||||||
β | Return on capital employed(A) (%) | β | β | β | β | 12.7 | β | β | β | β | β | 8.6 | β | β | β | β | β | 4.5 | β | β | β | β | β | 1.9 | β | β | β | β | β | (1.4) | β | β |
β | ||||||||||||||||||||||||||||||||
β | Return on capital employedβββexcluding impairments and impairment reversals(A) (%) | β | β | β | β | 12.4 | β | β | β | β | β | 8.2 | β | β | β | β | β | 4.9 | β | β | β | β | β | 2.6 | β | β | β | β | β | (0.6) | β | β |
β
(A)
Non-GAAP financial measures or contains non-GAAP financial measures. See the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
See accompanying footnotes and definitions to the quarterly operating summaries.
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 59
Β
Quarterly Operating Summary
(unaudited)β
β | β | β | β | For the Quarter Ended | β | β | For the Year Ended | β | ||||||||||||||||||||||||||||||
β | Oil Sandsβ | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2021 | β | ||||||||||||||||||
οΏ½οΏ½οΏ½ | Production volumes (mbbls/d) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Total Oil Sands bitumen production | β | β | β | β | 827.7 | β | β | β | β | β | 787.4 | β | β | β | β | β | 713.7 | β | β | β | β | β | 753.5 | β | β | β | β | β | 827.8 | β | β | β | β | β | 770.3 | β | β |
β | Oil Sandsβββupgradedβββnet SCO and diesel | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Oil Sands operations | β | β | β | β | 333.8 | β | β | β | β | β | 332.7 | β | β | β | β | β | 221.0 | β | β | β | β | β | 326.8 | β | β | β | β | β | 329.6 | β | β | β | β | β | 301.6 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Syncrude | β | β | β | β | 181.5 | β | β | β | β | β | 182.3 | β | β | β | β | β | 184.5 | β | β | β | β | β | 110.4 | β | β | β | β | β | 190.3 | β | β | β | β | β | 167.0 | β | β |
β | Total Oil Sandsβββupgradedβββnet SCO and diesel production | β | β | β | β | 515.3 | β | β | β | β | β | 515.0 | β | β | β | β | β | 405.5 | β | β | β | β | β | 437.2 | β | β | β | β | β | 519.9 | β | β | β | β | β | 468.6 | β | β |
β | Oil Sandsβββnon-upgraded bitumen | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Oil Sands operations | β | β | β | β | 82.9 | β | β | β | β | β | 95.4 | β | β | β | β | β | 148.8 | β | β | β | β | β | 133.2 | β | β | β | β | β | 119.5 | β | β | β | β | β | 124.9 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Fort Hills | β | β | β | β | 87.5 | β | β | β | β | β | 55.5 | β | β | β | β | β | 50.8 | β | β | β | β | β | 45.3 | β | β | β | β | β | 51.2 | β | β | β | β | β | 50.7 | β | β |
β | Total Oil Sandsβββnon-upgraded bitumen production | β | β | β | β | 170.4 | β | β | β | β | β | 150.9 | β | β | β | β | β | 199.6 | β | β | β | β | β | 178.5 | β | β | β | β | β | 170.7 | β | β | β | β | β | 175.6 | β | β |
β | Total Oil Sands production volumes | β | β | β | β | 685.7 | β | β | β | β | β | 665.9 | β | β | β | β | β | 605.1 | β | β | β | β | β | 615.7 | β | β | β | β | β | 690.6 | β | β | β | β | β | 644.2 | β | β |
β | Oil Sands sales volumes (mbbls/d) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Upgradedβββnet SCO and diesel | β | β | β | β | 517.7 | β | β | β | β | β | 496.1 | β | β | β | β | β | 418.6 | β | β | β | β | β | 433.9 | β | β | β | β | β | 515.2 | β | β | β | β | β | 465.7 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Non-upgraded bitumen | β | β | β | β | 153.7 | β | β | β | β | β | 176.7 | β | β | β | β | β | 194.4 | β | β | β | β | β | 183.5 | β | β | β | β | β | 180.2 | β | β | β | β | β | 183.8 | β | β |
β | Total Oil Sands sales volumes | β | β | β | β | 671.4 | β | β | β | β | β | 672.8 | β | β | β | β | β | 613.0 | β | β | β | β | β | 617.4 | β | β | β | β | β | 695.4 | β | β | β | β | β | 649.5 | β | β |
β | Oil Sands operations cash operating costs(1)(A) ($ millions) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Cash costs | β | β | β | β | 922 | β | β | β | β | β | 952 | β | β | β | β | β | 884 | β | β | β | β | β | 910 | β | β | β | β | β | 857 | β | β | β | β | β | 3β603 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Natural gas | β | β | β | β | 189 | β | β | β | β | β | 193 | β | β | β | β | β | 135 | β | β | β | β | β | 111 | β | β | β | β | β | 115 | β | β | β | β | β | 554 | β | β |
β | β | β | β | β | β | 1β111 | β | β | β | β | β | 1β145 | β | β | β | β | β | 1β019 | β | β | β | β | β | 1β021 | β | β | β | β | β | 972 | β | β | β | β | β | 4β157 | β | β |
β | Oil Sands operations cash operating costs(1)(A) ($/bbl)* | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Cash costs | β | β | β | β | 23.80 | β | β | β | β | β | 23.40 | β | β | β | β | β | 25.20 | β | β | β | β | β | 21.25 | β | β | β | β | β | 20.60 | β | β | β | β | β | 22.45 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Natural gas | β | β | β | β | 4.90 | β | β | β | β | β | 4.70 | β | β | β | β | β | 3.85 | β | β | β | β | β | 2.60 | β | β | β | β | β | 2.70 | β | β | β | β | β | 3.45 | β | β |
β | β | β | β | β | β | 28.70 | β | β | β | β | β | 28.10 | β | β | β | β | β | 29.05 | β | β | β | β | β | 23.85 | β | β | β | β | β | 23.30 | β | β | β | β | β | 25.90 | β | β |
β | Fort Hills cash operating costs(1)(A) ($ millions) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Cash costs | β | β | β | β | 203 | β | β | β | β | β | 214 | β | β | β | β | β | 177 | β | β | β | β | β | 159 | β | β | β | β | β | 156 | β | β | β | β | β | 706 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Natural gas | β | β | β | β | 25 | β | β | β | β | β | 19 | β | β | β | β | β | 14 | β | β | β | β | β | 11 | β | β | β | β | β | 14 | β | β | β | β | β | 58 | β | β |
β | β | β | β | β | β | 228 | β | β | β | β | β | 233 | β | β | β | β | β | 191 | β | β | β | β | β | 170 | β | β | β | β | β | 170 | β | β | β | β | β | 764 | β | β |
β | Fort Hills cash operating costs(1)(A) ($/bbl)* | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Cash costs | β | β | β | β | 25.90 | β | β | β | β | β | 41.85 | β | β | β | β | β | 38.00 | β | β | β | β | β | 38.60 | β | β | β | β | β | 33.95 | β | β | β | β | β | 38.20 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Natural gas | β | β | β | β | 3.10 | β | β | β | β | β | 3.70 | β | β | β | β | β | 2.90 | β | β | β | β | β | 2.75 | β | β | β | β | β | 3.10 | β | β | β | β | β | 3.15 | β | β |
β | β | β | β | β | β | 29.00 | β | β | β | β | β | 45.55 | β | β | β | β | β | 40.90 | β | β | β | β | β | 41.35 | β | β | β | β | β | 37.05 | β | β | β | β | β | 41.35 | β | β |
β | Syncrude cash operating costs(1)(A) ($ millions) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Cash costs | β | β | β | β | 550 | β | β | β | β | β | 561 | β | β | β | β | β | 521 | β | β | β | β | β | 492 | β | β | β | β | β | 538 | β | β | β | β | β | 2β111 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Natural gas | β | β | β | β | 34 | β | β | β | β | β | 30 | β | β | β | β | β | 22 | β | β | β | β | β | 27 | β | β | β | β | β | 24 | β | β | β | β | β | 104 | β | β |
β | β | β | β | β | β | 584 | β | β | β | β | β | 591 | β | β | β | β | β | 543 | β | β | β | β | β | 519 | β | β | β | β | β | 562 | β | β | β | β | β | 2β215 | β | β |
β | Syncrude cash operating costs(1)(A) ($/bbl)* | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Cash costs | β | β | β | β | 32.65 | β | β | β | β | β | 31.80 | β | β | β | β | β | 29.75 | β | β | β | β | β | 47.65 | β | β | β | β | β | 30.85 | β | β | β | β | β | 33.55 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Natural gas | β | β | β | β | 2.05 | β | β | β | β | β | 1.70 | β | β | β | β | β | 1.30 | β | β | β | β | β | 2.60 | β | β | β | β | β | 1.40 | β | β | β | β | β | 1.65 | β | β |
β | β | β | β | β | β | 34.70 | β | β | β | β | β | 33.50 | β | β | β | β | β | 31.05 | β | β | β | β | β | 50.25 | β | β | β | β | β | 32.25 | β | β | β | β | β | 35.20 | β | β |
β
(A)
Non-GAAP financial measures or contains non-GAAP financial measures. See the Quarterly Operating Metrics Reconciliation and the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
60Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Quarterly Operating Summary (continued)
(unaudited)β
β | β | β | β | For the Quarter Ended | β | β | For the Year Ended | β | ||||||||||||||||||||||||||||||
β | Oil Sands Segment Operating Netbacks(A)(B)(C)β | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2021 | β | ||||||||||||||||||
β | Non-upgraded bitumen ($/bbl) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Average price realized | β | β | β | β | 102.78 | β | β | β | β | β | 67.47 | β | β | β | β | β | 65.53 | β | β | β | β | β | 55.54 | β | β | β | β | β | 47.57 | β | β | β | β | β | 59.16 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Royalties | β | β | β | β | (15.17) | β | β | β | β | β | (9.50) | β | β | β | β | β | (7.99) | β | β | β | β | β | (3.65) | β | β | β | β | β | (0.83) | β | β | β | β | β | (5.53) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution costs | β | β | β | β | (6.29) | β | β | β | β | β | (5.42) | β | β | β | β | β | (5.62) | β | β | β | β | β | (5.34) | β | β | β | β | β | (5.04) | β | β | β | β | β | (5.36) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Net operating expenses | β | β | β | β | (21.37) | β | β | β | β | β | (22.54) | β | β | β | β | β | (19.61) | β | β | β | β | β | (16.91) | β | β | β | β | β | (14.91) | β | β | β | β | β | (18.52) | β | β |
β | Operating netback | β | β | β | β | 59.95 | β | β | β | β | β | 30.01 | β | β | β | β | β | 32.31 | β | β | β | β | β | 29.64 | β | β | β | β | β | 26.79 | β | β | β | β | β | 29.75 | β | β |
β | Upgradedβββnet SCO and diesel ($/bbl) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Average price realized | β | β | β | β | 118.80 | β | β | β | β | β | 93.87 | β | β | β | β | β | 84.80 | β | β | β | β | β | 81.34 | β | β | β | β | β | 69.40 | β | β | β | β | β | 82.24 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Royalties | β | β | β | β | (16.60) | β | β | β | β | β | (10.64) | β | β | β | β | β | (9.33) | β | β | β | β | β | (4.01) | β | β | β | β | β | (3.10) | β | β | β | β | β | (6.75) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution costs | β | β | β | β | (4.43) | β | β | β | β | β | (4.49) | β | β | β | β | β | (4.59) | β | β | β | β | β | (4.84) | β | β | β | β | β | (4.18) | β | β | β | β | β | (4.51) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Net operating expenses | β | β | β | β | (34.63) | β | β | β | β | β | (33.18) | β | β | β | β | β | (37.36) | β | β | β | β | β | (36.07) | β | β | β | β | β | (30.44) | β | β | β | β | β | (34.06) | β | β |
β | Operating netback | β | β | β | β | 63.14 | β | β | β | β | β | 45.56 | β | β | β | β | β | 33.52 | β | β | β | β | β | 36.42 | β | β | β | β | β | 31.68 | β | β | β | β | β | 36.92 | β | β |
β | Average Oil Sands segment ($/bbl) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Average price realized | β | β | β | β | 115.13 | β | β | β | β | β | 86.94 | β | β | β | β | β | 78.69 | β | β | β | β | β | 73.67 | β | β | β | β | β | 63.73 | β | β | β | β | β | 75.71 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Royalties | β | β | β | β | (16.28) | β | β | β | β | β | (10.36) | β | β | β | β | β | (8.91) | β | β | β | β | β | (3.90) | β | β | β | β | β | (2.50) | β | β | β | β | β | (6.41) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution costs | β | β | β | β | (4.86) | β | β | β | β | β | (4.74) | β | β | β | β | β | (4.91) | β | β | β | β | β | (4.99) | β | β | β | β | β | (4.41) | β | β | β | β | β | (4.75) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Net operating expenses | β | β | β | β | (31.59) | β | β | β | β | β | (30.37) | β | β | β | β | β | (31.74) | β | β | β | β | β | (30.37) | β | β | β | β | β | (26.41) | β | β | β | β | β | (29.65) | β | β |
β | Operating netback | β | β | β | β | 62.40 | β | β | β | β | β | 41.47 | β | β | β | β | β | 33.13 | β | β | β | β | β | 34.41 | β | β | β | β | β | 30.41 | β | β | β | β | β | 34.90 | β | β |
β
(A)
Contains non-GAAP financial measures. See the Quarterly Operating Metrics Reconciliation and the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
(B)
Netbacks are based on sales volumes. Impact of inventory write-down is excluded until product is sold.
β
(C)
Beginning in the first quarter of 2022, to align with how management evaluates performance and to better align with the calculation methodology of Oil Sands cash operating costs, another non-GAAP financial measure used by the company, the company revised its calculation of net operating expenses included in Oil Sands operating netbacks. Comparative periods have been restated to reflect this change.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 61
Β
Quarterly Operating Summary (continued)
(unaudited)β
β | β | β | β | For the Quarter Ended | β | β | For the Year Ended | β | ||||||||||||||||||||||||||||||
β | Exploration and Productionβ | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2021 | β | ||||||||||||||||||
β | Production volumes | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | E&P Canada (mbbs/d) | β | β | β | β | 51.2 | β | β | β | β | β | 47.6 | β | β | β | β | β | 54.4 | β | β | β | β | β | 57.5 | β | β | β | β | β | 58.0 | β | β | β | β | β | 54.4 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | E&P International (mboe/d) | β | β | β | β | 29.2 | β | β | β | β | β | 29.8 | β | β | β | β | β | 39.1 | β | β | β | β | β | 26.5 | β | β | β | β | β | 37.3 | β | β | β | β | β | 33.1 | β | β |
β | Total production volumes (mboe/d) | β | β | β | β | 80.4 | β | β | β | β | β | 77.4 | β | β | β | β | β | 93.5 | β | β | β | β | β | 84.0 | β | β | β | β | β | 95.3 | β | β | β | β | β | 87.5 | β | β |
β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Total sales volumes (mboe/d) | β | β | β | β | 79.5 | β | β | β | β | β | 67.2 | β | β | β | β | β | 76.3 | β | β | β | β | β | 103.8 | β | β | β | β | β | 84.2 | β | β | β | β | β | 82.8 | β | β |
β | Operating netbacks(A)(B) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | E&P Canada ($/bbl) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Average price realized | β | β | β | β | 126.15 | β | β | β | β | β | 101.87 | β | β | β | β | β | 92.88 | β | β | β | β | β | 82.24 | β | β | β | β | β | 76.09 | β | β | β | β | β | 87.04 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Royalties | β | β | β | β | (19.47) | β | β | β | β | β | (14.59) | β | β | β | β | β | (11.88) | β | β | β | β | β | (13.26) | β | β | β | β | β | (9.24) | β | β | β | β | β | (12.20) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution costs | β | β | β | β | (4.02) | β | β | β | β | β | (3.45) | β | β | β | β | β | (2.65) | β | β | β | β | β | (1.59) | β | β | β | β | β | (2.18) | β | β | β | β | β | (2.34) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Operating costs | β | β | β | β | (13.15) | β | β | β | β | β | (13.42) | β | β | β | β | β | (12.87) | β | β | β | β | β | (10.27) | β | β | β | β | β | (11.27) | β | β | β | β | β | (11.74) | β | β |
β | Operating netback | β | β | β | β | 89.51 | β | β | β | β | β | 70.41 | β | β | β | β | β | 65.48 | β | β | β | β | β | 57.12 | β | β | β | β | β | 53.40 | β | β | β | β | β | 60.76 | β | β |
β | E&P International (excluding Libya) ($/boe) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Average price realized | β | β | β | β | 116.25 | β | β | β | β | β | 102.80 | β | β | β | β | β | 89.19 | β | β | β | β | β | 80.41 | β | β | β | β | β | 72.05 | β | β | β | β | β | 84.76 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution costs | β | β | β | β | (2.65) | β | β | β | β | β | (2.66) | β | β | β | β | β | (3.90) | β | β | β | β | β | (1.59) | β | β | β | β | β | (2.54) | β | β | β | β | β | (2.60) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Operating costs | β | β | β | β | (8.79) | β | β | β | β | β | (10.19) | β | β | β | β | β | (10.30) | β | β | β | β | β | (13.20) | β | β | β | β | β | (8.05) | β | β | β | β | β | (10.40) | β | β |
β | Operating netback | β | β | β | β | 104.81 | β | β | β | β | β | 89.95 | β | β | β | β | β | 74.99 | β | β | β | β | β | 65.62 | β | β | β | β | β | 61.46 | β | β | β | β | β | 71.76 | β | β |
β
(A)
Contains non-GAAP financial measures. See the Quarterly Operating Metrics Reconciliation and the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
(B)
Netbacks are based on sales volumes.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
62Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Quarterly Operating Summary (continued)
(unaudited)β
β | β | β | β | For the Quarter Ended | β | β | For the Year Ended | β | ||||||||||||||||||||||||||||||
β | Refining and Marketingβ | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2021 | β | ||||||||||||||||||
β | Refined product sales (mbbls/d) | β | β | β | β | 551.9 | β | β | β | β | β | 550.1 | β | β | β | β | β | 551.5 | β | β | β | β | β | 463.3 | β | β | β | β | β | 548.1 | β | β | β | β | β | 528.4 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Crude oil processed (mbbls/d) | β | β | β | β | 436.5 | β | β | β | β | β | 447.0 | β | β | β | β | β | 460.3 | β | β | β | β | β | 325.3 | β | β | β | β | β | 428.4 | β | β | β | β | β | 415.5 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Rack forward sales volume (ML) | β | β | β | β | 5β180 | β | β | β | β | β | 5β359 | β | β | β | β | β | 5β414 | β | β | β | β | β | 4β791 | β | β | β | β | β | 4β866 | β | β | β | β | β | 20β430 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Utilization of refining capacity (%) | β | β | β | β | 94 | β | β | β | β | β | 96 | β | β | β | β | β | 99 | β | β | β | β | β | 70 | β | β | β | β | β | 92 | β | β | β | β | β | 89 | β | β |
β | Refining and marketing gross marginβββfirst-in, first-out (FIFO) ($/bbl)(A) | β | β | β | β | 53.20 | β | β | β | β | β | 33.60 | β | β | β | β | β | 35.75 | β | β | β | β | β | 38.00 | β | β | β | β | β | 40.75 | β | β | β | β | β | 36.85 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refining and marketing gross marginβββlast-in, first-out (LIFO) ($/bbl)(A) | β | β | β | β | 35.95 | β | β | β | β | β | 30.00 | β | β | β | β | β | 33.80 | β | β | β | β | β | 29.05 | β | β | β | β | β | 30.30 | β | β | β | β | β | 30.90 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Rack forward gross margin (cpl)(A)(B) | β | β | β | β | 7.35 | β | β | β | β | β | 6.40 | β | β | β | β | β | 7.10 | β | β | β | β | β | 8.30 | β | β | β | β | β | 6.75 | β | β | β | β | β | 7.10 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refining operating expense ($/bbl)(A) | β | β | β | β | 6.25 | β | β | β | β | β | 6.10 | β | β | β | β | β | 5.45 | β | β | β | β | β | 6.65 | β | β | β | β | β | 5.75 | β | β | β | β | β | 5.95 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Rack forward operating expense (cpl)(A)(B) | β | β | β | β | 2.95 | β | β | β | β | β | 2.95 | β | β | β | β | β | 2.80 | β | β | β | β | β | 3.10 | β | β | β | β | β | 2.80 | β | β | β | β | β | 2.90 | β | β |
β | Eastern North America | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refined product sales (mbbls/d) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation fuels | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Gasoline | β | β | β | β | 106.9 | β | β | β | β | β | 113.5 | β | β | β | β | β | 114.1 | β | β | β | β | β | 97.5 | β | β | β | β | β | 115.6 | β | β | β | β | β | 110.2 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Distillate | β | β | β | β | 99.8 | β | β | β | β | β | 103.1 | β | β | β | β | β | 93.7 | β | β | β | β | β | 86.4 | β | β | β | β | β | 95.8 | β | β | β | β | β | 94.7 | β | β |
β | Total transportation fuel sales | β | β | β | β | 206.7 | β | β | β | β | β | 216.6 | β | β | β | β | β | 207.8 | β | β | β | β | β | 183.9 | β | β | β | β | β | 211.4 | β | β | β | β | β | 204.9 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Petrochemicals | β | β | β | β | 10.6 | β | β | β | β | β | 13.8 | β | β | β | β | β | 10.3 | β | β | β | β | β | 12.4 | β | β | β | β | β | 12.9 | β | β | β | β | β | 12.4 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Asphalt | β | β | β | β | 14.8 | β | β | β | β | β | 20.6 | β | β | β | β | β | 22.4 | β | β | β | β | β | 16.5 | β | β | β | β | β | 12.0 | β | β | β | β | β | 17.9 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Other | β | β | β | β | 30.1 | β | β | β | β | β | 21.2 | β | β | β | β | β | 21.7 | β | β | β | β | β | 15.4 | β | β | β | β | β | 25.6 | β | β | β | β | β | 21.0 | β | β |
β | Total refined product sales | β | β | β | β | 262.2 | β | β | β | β | β | 272.2 | β | β | β | β | β | 262.2 | β | β | β | β | β | 228.2 | β | β | β | β | β | 261.9 | β | β | β | β | β | 256.2 | β | β |
β | Crude oil supply and refining | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Processed at refineries (mbbls/d) | β | β | β | β | 209.6 | β | β | β | β | β | 214.3 | β | β | β | β | β | 212.3 | β | β | β | β | β | 183.7 | β | β | β | β | β | 200.5 | β | β | β | β | β | 202.8 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Utilization of refining capacity (%) | β | β | β | β | 94 | β | β | β | β | β | 97 | β | β | β | β | β | 96 | β | β | β | β | β | 83 | β | β | β | β | β | 90 | β | β | β | β | β | 91 | β | β |
β | Western North America | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refined product sales (mbbls/d) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation fuels | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Gasoline | β | β | β | β | 119.3 | β | β | β | β | β | 119.2 | β | β | β | β | β | 122.4 | β | β | β | β | β | 103.5 | β | β | β | β | β | 117.0 | β | β | β | β | β | 115.6 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Distillate | β | β | β | β | 154.5 | β | β | β | β | β | 134.8 | β | β | β | β | β | 140.1 | β | β | β | β | β | 110.5 | β | β | β | β | β | 149.9 | β | β | β | β | β | 133.8 | β | β |
β | Total transportation fuel sales | β | β | β | β | 273.8 | β | β | β | β | β | 254.0 | β | β | β | β | β | 262.5 | β | β | β | β | β | 214.0 | β | β | β | β | β | 266.9 | β | β | β | β | β | 249.4 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Asphalt | β | β | β | β | 7.0 | β | β | β | β | β | 10.1 | β | β | β | β | β | 13.8 | β | β | β | β | β | 8.8 | β | β | β | β | β | 6.0 | β | β | β | β | β | 9.7 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Other | β | β | β | β | 8.9 | β | β | β | β | β | 13.8 | β | β | β | β | β | 13.0 | β | β | β | β | β | 12.3 | β | β | β | β | β | 13.3 | β | β | β | β | β | 13.1 | β | β |
β | Total refined product sales | β | β | β | β | 289.7 | β | β | β | β | β | 277.9 | β | β | β | β | β | 289.3 | β | β | β | β | β | 235.1 | β | β | β | β | β | 286.2 | β | β | β | β | β | 272.2 | β | β |
β | Crude oil supply and refining | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Processed at refineries (mbbls/d) | β | β | β | β | 226.9 | β | β | β | β | β | 232.7 | β | β | β | β | β | 248.0 | β | β | β | β | β | 141.6 | β | β | β | β | β | 227.9 | β | β | β | β | β | 212.7 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Utilization of refining capacity (%) | β | β | β | β | 93 | β | β | β | β | β | 95 | β | β | β | β | β | 102 | β | β | β | β | β | 58 | β | β | β | β | β | 93 | β | β | β | β | β | 87 | β | β |
β
(A)
Contains non-GAAP financial measures. See the Quarterly Operating Metrics Reconciliation and the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
(B)
In Q2β2021, the company began disclosing refinery rack forward margin and operating expenses to increase transparency into Suncorβs integrated model and align with how management evaluates the performance of the business. Rack forward encompasses Suncorβs retail and wholesale business. As an integrated oil and gas company, transfer prices are used to attribute margin to the value chain. The companyβs transfer prices affecting the refining, supply and rack forward businesses employ replacement cost methodology, which may differ from those subject to supply agreements negotiated by independent market participants. Rack forward margins may include any incremental location differentials above replacement supply cost, as well as the applicable retail and wholesale channel margins generated within those markets.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 63
Β
Quarterly Operating Metrics Reconciliation
(unaudited)β
Oil Sands Operating Netbacks(A)(B)(C)
($ millions, except per barrel amounts)β
β | β | β | β | MarchΒ 31, 2022 | β | β | DecemberΒ 31, 2021 | β | ||||||||||||||||||||||||||||||
β | For the quarter ended | β | β | Non- Upgraded Bitumen | β | β | Upgradedβββ Net SCO and Diesel | β | β | Oil Sands Segment | β | β | Non- Upgraded Bitumen | β | β | Upgradedβββ Net SCO and Diesel | β | β | Oil Sands Segment | β | ||||||||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 1β571 | β | β | β | β | β | 4β914 | β | β | β | β | β | 6β485 | β | β | β | β | β | 1β344 | β | β | β | β | β | 3β971 | β | β | β | β | β | 5β315 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Add: royalties | β | β | β | β | 211 | β | β | β | β | β | 774 | β | β | β | β | β | 985 | β | β | β | β | β | 155 | β | β | β | β | β | 486 | β | β | β | β | β | 641 | β | β |
β | Operating revenues | β | β | β | β | 1β782 | β | β | β | β | β | 5β688 | β | β | β | β | β | 7β470 | β | β | β | β | β | 1β499 | β | β | β | β | β | 4β457 | β | β | β | β | β | 5β956 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Other (loss) income | β | β | β | β | (37) | β | β | β | β | β | 44 | β | β | β | β | β | 7 | β | β | β | β | β | 7 | β | β | β | β | β | 4 | β | β | β | β | β | 11 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | (390) | β | β | β | β | β | (63) | β | β | β | β | β | (453) | β | β | β | β | β | (320) | β | β | β | β | β | (87) | β | β | β | β | β | (407) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Gross realization adjustment(2) | β | β | β | β | 67 | β | β | β | β | β | (136) | β | β | β | β | β | β | β | β | β | β | β | (88) | β | β | β | β | β | (92) | β | β | β | β | β | β | β | β |
β | Gross realization | β | β | β | β | 1β422 | β | β | β | β | β | 5β533 | β | β | β | β | β | β | β | β | β | β | β | 1β098 | β | β | β | β | β | 4β282 | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Royalties | β | β | β | β | (211) | β | β | β | β | β | (774) | β | β | β | β | β | (985) | β | β | β | β | β | (155) | β | β | β | β | β | (486) | β | β | β | β | β | (641) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (87) | β | β | β | β | β | (206) | β | β | β | β | β | (293) | β | β | β | β | β | (88) | β | β | β | β | β | (205) | β | β | β | β | β | (293) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Operating, selling and general (OS&G) | β | β | β | β | (364) | β | β | β | β | β | (1β848) | β | β | β | β | β | (2β212) | β | β | β | β | β | (434) | β | β | β | β | β | (1β700) | β | β | β | β | β | (2β134) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | OS&G adjustment(3) | β | β | β | β | 68 | β | β | β | β | β | 236 | β | β | β | β | β | β | β | β | β | β | β | 67 | β | β | β | β | β | 186 | β | β | β | β | β | β | β | β |
β | Net operating expenses | β | β | β | β | (295) | β | β | β | β | β | (1β613) | β | β | β | β | β | β | β | β | β | β | β | (367) | β | β | β | β | β | (1β514) | β | β | β | β | β | β | β | β |
β | Operating netback | β | β | β | β | 829 | β | β | β | β | β | 2β940 | β | β | β | β | β | β | β | β | β | β | β | 488 | β | β | β | β | β | 2β077 | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Sales volumes (mbbls) | β | β | β | β | 13β830 | β | β | β | β | β | 46β592 | β | β | β | β | β | β | β | β | β | β | β | 16β260 | β | β | β | β | β | 45β644 | β | β | β | β | β | β | β | β |
β | Operating netback per barrel | β | β | β | β | 59.95 | β | β | β | β | β | 63.14 | β | β | β | β | β | β | β | β | β | β | β | 30.01 | β | β | β | β | β | 45.56 | β | β | β | β | β | β | β | β |
β | β | β | β | SeptemberΒ 30, 2021 | β | β | JuneΒ 30, 2021 | β | ||||||||||||||||||||||||||||||
β | For the quarter ended | β | β | Non- Upgraded Bitumen | β | β | Upgradedβββ Net SCO and Diesel | β | β | Oil Sands Segment | β | β | Non- Upgraded Bitumen | β | β | Upgradedβββ Net SCO and Diesel | β | β | Oil Sands Segment | β | ||||||||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 1β478 | β | β | β | β | β | 2β995 | β | β | β | β | β | 4β473 | β | β | β | β | β | 1β280 | β | β | β | β | β | 3β136 | β | β | β | β | β | 4β416 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Add: royalties | β | β | β | β | 145 | β | β | β | β | β | 359 | β | β | β | β | β | 504 | β | β | β | β | β | 62 | β | β | β | β | β | 158 | β | β | β | β | β | 220 | β | β |
β | Operating revenues | β | β | β | β | 1β623 | β | β | β | β | β | 3β354 | β | β | β | β | β | 4β977 | β | β | β | β | β | 1β342 | β | β | β | β | β | 3β294 | β | β | β | β | β | 4β636 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Other (loss) income | β | β | β | β | 1 | β | β | β | β | β | 75 | β | β | β | β | β | 76 | β | β | β | β | β | (71) | β | β | β | β | β | (8) | β | β | β | β | β | (79) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | (387) | β | β | β | β | β | (55) | β | β | β | β | β | (442) | β | β | β | β | β | (321) | β | β | β | β | β | (24) | β | β | β | β | β | (345) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Gross realization adjustment(2) | β | β | β | β | (65) | β | β | β | β | β | (109) | β | β | β | β | β | β | β | β | β | β | β | (22) | β | β | β | β | β | (50) | β | β | β | β | β | β | β | β |
β | Gross realizations | β | β | β | β | 1β172 | β | β | β | β | β | 3β265 | β | β | β | β | β | β | β | β | β | β | β | 928 | β | β | β | β | β | 3β212 | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Royalties | β | β | β | β | (145) | β | β | β | β | β | (359) | β | β | β | β | β | (504) | β | β | β | β | β | (62) | β | β | β | β | β | (158) | β | β | β | β | β | (220) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (100) | β | β | β | β | β | (177) | β | β | β | β | β | (277) | β | β | β | β | β | (89) | β | β | β | β | β | (191) | β | β | β | β | β | (280) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | OS&G | β | β | β | β | (422) | β | β | β | β | β | (1β582) | β | β | β | β | β | (2β004) | β | β | β | β | β | (360) | β | β | β | β | β | (1β585) | β | β | β | β | β | (1β945) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | OS&G adjustment(3) | β | β | β | β | 73 | β | β | β | β | β | 143 | β | β | β | β | β | β | β | β | β | β | β | 78 | β | β | β | β | β | 160 | β | β | β | β | β | β | β | β |
β | Net operating expenses | β | β | β | β | (349) | β | β | β | β | β | (1β439) | β | β | β | β | β | β | β | β | β | β | β | (282) | β | β | β | β | β | (1β425) | β | β | β | β | β | β | β | β |
β | Operating netback | β | β | β | β | 578 | β | β | β | β | β | 1β290 | β | β | β | β | β | β | β | β | β | β | β | 495 | β | β | β | β | β | 1β438 | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Sales volumes (mbbls) | β | β | β | β | 17β888 | β | β | β | β | β | 38β507 | β | β | β | β | β | β | β | β | β | β | β | 16β700 | β | β | β | β | β | 39β489 | β | β | β | β | β | β | β | β |
β | Operating netback per barrel | β | β | β | β | 32.31 | β | β | β | β | β | 33.52 | β | β | β | β | β | β | β | β | β | β | β | 29.64 | β | β | β | β | β | 36.42 | β | β | β | β | β | β | β | β |
β
(A)
Non-GAAP financial measures. See the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
(B)
Impact of inventory write-down is excluded until product is sold.
β
(C)
Beginning in the first quarter of 2022, to align with how management evaluates performance and to better align with the calculation methodology of Oil Sands cash operating costs, another non-GAAP financial measure used by the company, the company revised its calculation of net operating expenses included in Oil Sands operating netbacks. Comparative periods have been restated to reflect this change.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
64Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Quarterly Operating Metrics Reconciliation (continued)
(unaudited)β
Oil Sands Operating Netbacks(A)(B)(C)
($ millions, except per barrel amounts)β
β | β | β | β | MarchΒ 31, 2021 | β | |||||||||||||||
β | For the quarter ended | β | β | Non- Upgraded Bitumen | β | β | Upgradedβββ Net SCO and Diesel | β | β | Oil Sands Segment | β | |||||||||
β | Operating revenues, net of royalties | β | β | β | β | 990 | β | β | β | β | β | 3β203 | β | β | β | β | β | 4β193 | β | β |
β | ||||||||||||||||||||
β | Add: royalties | β | β | β | β | 14 | β | β | β | β | β | 144 | β | β | β | β | β | 158 | β | β |
β | Operating revenues | β | β | β | β | 1β004 | β | β | β | β | β | 3β347 | β | β | β | β | β | 4β351 | β | β |
β | ||||||||||||||||||||
β | Other (loss) income | β | β | β | β | 7 | β | β | β | β | β | (9) | β | β | β | β | β | (2) | β | β |
β | ||||||||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | (203) | β | β | β | β | β | (47) | β | β | β | β | β | (250) | β | β |
β | ||||||||||||||||||||
β | Gross realization adjustment(2) | β | β | β | β | (35) | β | β | β | β | β | (74) | β | β | β | β | β | β | β | β |
β | Gross realizations | β | β | β | β | 773 | β | β | β | β | β | 3β217 | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Royalties | β | β | β | β | (14) | β | β | β | β | β | (144) | β | β | β | β | β | (158) | β | β |
β | ||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (82) | β | β | β | β | β | (194) | β | β | β | β | β | (276) | β | β |
β | ||||||||||||||||||||
β | OS&G | β | β | β | β | (325) | β | β | β | β | β | (1β648) | β | β | β | β | β | (1β973) | β | β |
β | ||||||||||||||||||||
β | OS&G adjustment(3) | β | β | β | β | 81 | β | β | β | β | β | 239 | β | β | β | β | β | β | β | β |
β | Net operating expenses | β | β | β | β | (244) | β | β | β | β | β | (1β409) | β | β | β | β | β | β | β | β |
β | Operating netback | β | β | β | β | 433 | β | β | β | β | β | 1β470 | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Sales volumes (mbbls) | β | β | β | β | 16β246 | β | β | β | β | β | 46β343 | β | β | β | β | β | β | β | β |
β | Operating netback per barrel | β | β | β | β | 26.79 | β | β | β | β | β | 31.68 | β | β | β | β | β | β | β | β |
β | β | β | β | DecemberΒ 31, 2021 | β | |||||||||||||||
β | For the year ended | β | β | Non- Upgraded Bitumen | β | β | Upgradedβββ Net SCO and Diesel | β | β | Oil Sands Segment | β | |||||||||
β | Operating revenues, net of royalties | β | β | β | β | 5β092 | β | β | β | β | β | 13β305 | β | β | β | β | β | 18β397 | β | β |
β | ||||||||||||||||||||
β | Add: royalties | β | β | β | β | 376 | β | β | β | β | β | 1β147 | β | β | β | β | β | 1β523 | β | β |
β | Operating revenues | β | β | β | β | 5β468 | β | β | β | β | β | 14β452 | β | β | β | β | β | 19β920 | β | β |
β | ||||||||||||||||||||
β | Other (loss) income | β | β | β | β | (56) | β | β | β | β | β | 62 | β | β | β | β | β | 6 | β | β |
β | ||||||||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | (1β231) | β | β | β | β | β | (213) | β | β | β | β | β | (1β444) | β | β |
β | ||||||||||||||||||||
β | Gross realization adjustment(2) | β | β | β | β | (210) | β | β | β | β | β | (325) | β | β | β | β | β | β | β | β |
β | Gross realizations | β | β | β | β | 3β971 | β | β | β | β | β | 13β976 | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Royalties | β | β | β | β | (376) | β | β | β | β | β | (1β147) | β | β | β | β | β | (1β523) | β | β |
β | ||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (359) | β | β | β | β | β | (767) | β | β | β | β | β | (1β126) | β | β |
β | ||||||||||||||||||||
β | OS&G | β | β | β | β | (1β541) | β | β | β | β | β | (6β515) | β | β | β | β | β | (8β056) | β | β |
β | ||||||||||||||||||||
β | OS&G adjustment(3) | β | β | β | β | 299 | β | β | β | β | β | 728 | β | β | β | β | β | β | β | β |
β | Net operating expenses | β | β | β | β | (1β242) | β | β | β | β | β | (5β787) | β | β | β | β | β | β | β | β |
β | Operating netback | β | β | β | β | 1β994 | β | β | β | β | β | 6β275 | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||
β | Sales volumes (mbbls) | β | β | β | β | 67β094 | β | β | β | β | β | 169β983 | β | β | β | β | β | β | β | β |
β | Operating netback per barrel | β | β | β | β | 29.75 | β | β | β | β | β | 36.92 | β | β | β | β | β | β | β | β |
β
(A)
Non-GAAP financial measures. See the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
(B)
Impact of inventory write-down is excluded until product is sold.
β
(C)
Beginning in the first quarter of 2022, to align with how management evaluates performance and to better align with the calculation methodology of Oil Sands cash operating costs, another non-GAAP financial measure used by the company, the company revised its calculation of net operating expenses included in Oil Sands operating netbacks. Comparative periods have been restated to reflect this change.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 65
Β
Quarterly Operating Metrics Reconciliation (continued)
(unaudited)β
Exploration and Production Operating Netbacks(A)
($ millions, except per barrel amounts)β
β | β | β | β | MarchΒ 31, 2022 | β | β | DecemberΒ 31, 2021 | β | ||||||||||||||||||||||||||||||||||||||||||
β | For the quarter ended | β | β | E&P International | β | β | E&P Canada | β | β | Other(4)(5) | β | β | E&P Segment | β | β | E&P International | β | β | E&P Canada | β | β | Other(4)(5) | β | β | E&P Segment | β | ||||||||||||||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 272 | β | β | β | β | β | 476 | β | β | β | β | β | 120 | β | β | β | β | β | 868 | β | β | β | β | β | 215 | β | β | β | β | β | 324 | β | β | β | β | β | 92 | β | β | β | β | β | 631 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Add: royalties | β | β | β | β | β | β | β | β | β | β | 87 | β | β | β | β | β | 60 | β | β | β | β | β | 147 | β | β | β | β | β | β | β | β | β | β | β | 54 | β | β | β | β | β | 53 | β | β | β | β | β | 107 | β | β |
β | Operating revenues | β | β | β | β | 272 | β | β | β | β | β | 563 | β | β | β | β | β | 180 | β | β | β | β | β | 1β015 | β | β | β | β | β | 215 | β | β | β | β | β | 378 | β | β | β | β | β | 145 | β | β | β | β | β | 738 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Royalties | β | β | β | β | β | β | β | β | β | β | (87) | β | β | β | β | β | (60) | β | β | β | β | β | (147) | β | β | β | β | β | β | β | β | β | β | β | (54) | β | β | β | β | β | (53) | β | β | β | β | β | (107) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (6) | β | β | β | β | β | (17) | β | β | β | β | β | β | β | β | β | β | β | (23) | β | β | β | β | β | (6) | β | β | β | β | β | (11) | β | β | β | β | β | β | β | β | β | β | β | (17) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | OS&G | β | β | β | β | (31) | β | β | β | β | β | (72) | β | β | β | β | β | (5) | β | β | β | β | β | (108) | β | β | β | β | β | (28) | β | β | β | β | β | (61) | β | β | β | β | β | (7) | β | β | β | β | β | (96) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Non-production costs(6) | β | β | β | β | 9 | β | β | β | β | β | 14 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 8 | β | β | β | β | β | 11 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Operating netback | β | β | β | β | 244 | β | β | β | β | β | 401 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 189 | β | β | β | β | β | 263 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Sales volumes (mboe) | β | β | β | β | 2β336 | β | β | β | β | β | 4β460 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 2β111 | β | β | β | β | β | 3β724 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Operating netback per barrel | β | β | β | β | 104.81 | β | β | β | β | β | 89.51 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 89.95 | β | β | β | β | β | 70.41 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | β | β | β | SeptemberΒ 30, 2021 | β | β | JuneΒ 30, 2021 | β | ||||||||||||||||||||||||||||||||||||||||||
β | For the quarter ended | β | β | E&P International | β | β | E&P Canada | β | β | Other(4)(5) | β | β | E&P Segment | β | β | E&P International | β | β | E&P Canada | β | β | Other(4)(5) | β | β | E&P Segment | β | ||||||||||||||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 185 | β | β | β | β | β | 372 | β | β | β | β | β | 78 | β | β | β | β | β | 635 | β | β | β | β | β | 211 | β | β | β | β | β | 434 | β | β | β | β | β | 43 | β | β | β | β | β | 688 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Add: royalties | β | β | β | β | β | β | β | β | β | β | 55 | β | β | β | β | β | 54 | β | β | β | β | β | 109 | β | β | β | β | β | β | β | β | β | β | β | 84 | β | β | β | β | β | 134 | β | β | β | β | β | 218 | β | β |
β | Operating revenues | β | β | β | β | 185 | β | β | β | β | β | 427 | β | β | β | β | β | 132 | β | β | β | β | β | 744 | β | β | β | β | β | 211 | β | β | β | β | β | 518 | β | β | β | β | β | 177 | β | β | β | β | β | 906 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Royalties | β | β | β | β | β | β | β | β | β | β | (55) | β | β | β | β | β | (54) | β | β | β | β | β | (109) | β | β | β | β | β | β | β | β | β | β | β | (84) | β | β | β | β | β | (134) | β | β | β | β | β | (218) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (8) | β | β | β | β | β | (13) | β | β | β | β | β | (2) | β | β | β | β | β | (23) | β | β | β | β | β | (4) | β | β | β | β | β | (10) | β | β | β | β | β | (6) | β | β | β | β | β | (20) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | OS&G | β | β | β | β | (29) | β | β | β | β | β | (66) | β | β | β | β | β | (6) | β | β | β | β | β | (101) | β | β | β | β | β | (43) | β | β | β | β | β | (75) | β | β | β | β | β | (4) | β | β | β | β | β | (122) | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Non-production costs(6) | β | β | β | β | 7 | β | β | β | β | β | 9 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 8 | β | β | β | β | β | 11 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Operating netback | β | β | β | β | 155 | β | β | β | β | β | 302 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 172 | β | β | β | β | β | 360 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||||||||
β | Sales volumes (mboe) | β | β | β | β | 2β058 | β | β | β | β | β | 4β613 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 2β619 | β | β | β | β | β | 6β301 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Operating netback per barrel | β | β | β | β | 74.99 | β | β | β | β | β | 65.48 | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | 65.62 | β | β | β | β | β | 57.12 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | β | β | β | MarchΒ 31, 2021 | β | |||||||||||||||||||||
β | For the quarter ended | β | β | E&P International | β | β | E&P Canada | β | β | Other(4)(5) | β | β | E&P Segment | β | ||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 204 | β | β | β | β | β | 317 | β | β | β | β | β | 25 | β | β | β | β | β | 546 | β | β |
β | ||||||||||||||||||||||||||
β | Add: royalties | β | β | β | β | β | β | β | β | β | β | 44 | β | β | β | β | β | β | β | β | β | β | β | 44 | β | β |
β | Operating revenues | β | β | β | β | 204 | β | β | β | β | β | 361 | β | β | β | β | β | 25 | β | β | β | β | β | 590 | β | β |
β | ||||||||||||||||||||||||||
β | Royalties | β | β | β | β | β | β | β | β | β | β | (44) | β | β | β | β | β | β | β | β | β | β | β | (44) | β | β |
β | ||||||||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (7) | β | β | β | β | β | (10) | β | β | β | β | β | (35) | β | β | β | β | β | (52) | β | β |
β | ||||||||||||||||||||||||||
β | OS&G | β | β | β | β | (33) | β | β | β | β | β | (66) | β | β | β | β | β | (11) | β | β | β | β | β | (110) | β | β |
β | ||||||||||||||||||||||||||
β | Non-production costs(6) | β | β | β | β | 10 | β | β | β | β | β | 12 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Operating netback | β | β | β | β | 174 | β | β | β | β | β | 253 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||
β | Sales volumes (mboe) | β | β | β | β | 2β828 | β | β | β | β | β | 4β748 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Operating netback per barrel | β | β | β | β | 61.46 | β | β | β | β | β | 53.40 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β
(A)
Non-GAAP financial measures. See the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
66Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Quarterly Operating Metrics Reconciliation (continued)
(unaudited)β
Exploration and Production Operating Netbacks(A)
($ millions, except per barrel amounts)β
β | β | β | β | DecemberΒ 31, 2021 | β | |||||||||||||||||||||
β | For the year ended | β | β | E&P International | β | β | E&P Canada | β | β | Other(4)(5) | β | β | E&P Segment | β | ||||||||||||
β | Operating revenues, net of royalties | β | β | β | β | 815 | β | β | β | β | β | 1β447 | β | β | β | β | β | 238 | β | β | β | β | β | 2β500 | β | β |
β | ||||||||||||||||||||||||||
β | Add: royalties | β | β | β | β | β | β | β | β | β | β | 237 | β | β | β | β | β | 241 | β | β | β | β | β | 478 | β | β |
β | Operating revenues | β | β | β | β | 815 | β | β | β | β | β | 1β684 | β | β | β | β | β | 479 | β | β | β | β | β | 2β978 | β | β |
β | ||||||||||||||||||||||||||
β | Royalties | β | β | β | β | β | β | β | β | β | β | (237) | β | β | β | β | β | (241) | β | β | β | β | β | (478) | β | β |
β | ||||||||||||||||||||||||||
β | Transportation and distribution | β | β | β | β | (25) | β | β | β | β | β | (44) | β | β | β | β | β | (43) | β | β | β | β | β | (112) | β | β |
β | ||||||||||||||||||||||||||
β | OS&G | β | β | β | β | (133) | β | β | β | β | β | (268) | β | β | β | β | β | (28) | β | β | β | β | β | (429) | β | β |
β | ||||||||||||||||||||||||||
β | Non-production costs(6) | β | β | β | β | 33 | β | β | β | β | β | 43 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Operating netback | β | β | β | β | 690 | β | β | β | β | β | 1β178 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||
β | Sales volumes (mboe) | β | β | β | β | 9β616 | β | β | β | β | β | 19β386 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | Operating netback per barrel | β | β | β | β | 71.76 | β | β | β | β | β | 60.76 | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β
(A)
Non-GAAP financial measures. See the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 67
Β
Quarterly Operating Metrics Reconciliation (continued)
(unaudited)β
Refining and Marketing
($ millions, except as noted)β
β | β | β | β | For the Quarter Ended | β | β | For the Year Ended | β | ||||||||||||||||||||||||||||||
β | Refining and marketing gross margin reconciliation | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2021 | β | ||||||||||||||||||
β | Operating revenues | β | β | β | β | 7β855 | β | β | β | β | β | 6β623 | β | β | β | β | β | 6β341 | β | β | β | β | β | 4β938 | β | β | β | β | β | 5β013 | β | β | β | β | β | 22β915 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Purchases of crude oil and products | β | β | β | β | (5β482) | β | β | β | β | β | (5β110) | β | β | β | β | β | (4β710) | β | β | β | β | β | (3β712) | β | β | β | β | β | (3β275) | β | β | β | β | β | (16β807) | β | β |
β | β | β | β | β | β | 2β373 | β | β | β | β | β | 1β513 | β | β | β | β | β | 1β631 | β | β | β | β | β | 1β226 | β | β | β | β | β | 1β738 | β | β | β | β | β | 6β108 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Other (loss) income | β | β | β | β | (110) | β | β | β | β | β | (2) | β | β | β | β | β | (9) | β | β | β | β | β | 6 | β | β | β | β | β | (45) | β | β | β | β | β | (50) | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Non-refining and marketing margin(7) | β | β | β | β | (13) | β | β | β | β | β | (14) | β | β | β | β | β | (13) | β | β | β | β | β | (14) | β | β | β | β | β | (13) | β | β | β | β | β | (54) | β | β |
β | Refining and marketing gross marginβββFIFO(A) | β | β | β | β | 2β250 | β | β | β | β | β | 1β497 | β | β | β | β | β | 1β609 | β | β | β | β | β | 1β218 | β | β | β | β | β | 1β680 | β | β | β | β | β | 6β004 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refinery production (mbbls)(8) | β | β | β | β | 42β311 | β | β | β | β | β | 44β575 | β | β | β | β | β | 45β026 | β | β | β | β | β | 32β050 | β | β | β | β | β | 41β211 | β | β | β | β | β | 162β862 | β | β |
β | Refining and marketing gross marginβββFIFO ($/bbl)(A) | β | β | β | β | 53.20 | β | β | β | β | β | 33.60 | β | β | β | β | β | 35.75 | β | β | β | β | β | 38.00 | β | β | β | β | β | 40.75 | β | β | β | β | β | 36.85 | β | β |
β | FIFO and risk management activities adjustment(B) | β | β | β | β | (729) | β | β | β | β | β | (161) | β | β | β | β | β | (91) | β | β | β | β | β | (288) | β | β | β | β | β | (432) | β | β | β | β | β | (972) | β | β |
β | Refining and marketing gross marginβββLIFO(A)(B) | β | β | β | β | 1β521 | β | β | β | β | β | 1β336 | β | β | β | β | β | 1β518 | β | β | β | β | β | 930 | β | β | β | β | β | 1β248 | β | β | β | β | β | 5β032 | β | β |
β | Refining and marketing gross marginβββLIFO ($/bbl)(A)(B)(C) | β | β | β | β | 35.95 | β | β | β | β | β | 30.00 | β | β | β | β | β | 33.80 | β | β | β | β | β | 29.05 | β | β | β | β | β | 30.30 | β | β | β | β | β | 30.90 | β | β |
β | Rack forward gross margin(D) | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refining and marketing gross marginβββFIFO(A) | β | β | β | β | 2β250 | β | β | β | β | β | 1β497 | β | β | β | β | β | 1β609 | β | β | β | β | β | 1β218 | β | β | β | β | β | 1β680 | β | β | β | β | β | 6β004 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refining and supply gross margin | β | β | β | β | (1β869) | β | β | β | β | β | (1β154) | β | β | β | β | β | (1β225) | β | β | β | β | β | (820) | β | β | β | β | β | (1β351) | β | β | β | β | β | (4β550) | β | β |
β | Rack forward gross margin(A)(9) | β | β | β | β | 381 | β | β | β | β | β | 343 | β | β | β | β | β | 384 | β | β | β | β | β | 398 | β | β | β | β | β | 329 | β | β | β | β | β | 1β454 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Sales volume (ML) | β | β | β | β | 5β180 | β | β | β | β | β | 5β359 | β | β | β | β | β | 5β414 | β | β | β | β | β | 4β791 | β | β | β | β | β | 4β866 | β | β | β | β | β | 20β430 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Rack forward gross margin (cpl)(A) | β | β | β | β | 7.35 | β | β | β | β | β | 6.40 | β | β | β | β | β | 7.10 | β | β | β | β | β | 8.30 | β | β | β | β | β | 6.75 | β | β | β | β | β | 7.10 | β | β |
β | Refining and rack forward operating expense reconciliation | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Operating, selling and general | β | β | β | β | 559 | β | β | β | β | β | 566 | β | β | β | β | β | 502 | β | β | β | β | β | 472 | β | β | β | β | β | 479 | β | β | β | β | β | 2β019 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Less: Rack forward operating expense(A)(D)(10) | β | β | β | β | 153 | β | β | β | β | β | 159 | β | β | β | β | β | 151 | β | β | β | β | β | 148 | β | β | β | β | β | 136 | β | β | β | β | β | 594 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Less: Other operating expenses(11) | β | β | β | β | 141 | β | β | β | β | β | 135 | β | β | β | β | β | 105 | β | β | β | β | β | 111 | β | β | β | β | β | 106 | β | β | β | β | β | 457 | β | β |
β | Refining operating expense(A) | β | β | β | β | 265 | β | β | β | β | β | 272 | β | β | β | β | β | 246 | β | β | β | β | β | 213 | β | β | β | β | β | 237 | β | β | β | β | β | 968 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Refinery production (mbbls)(8) | β | β | β | β | 42β311 | β | β | β | β | β | 44β575 | β | β | β | β | β | 45β026 | β | β | β | β | β | 32β050 | β | β | β | β | β | 41β211 | β | β | β | β | β | 162β862 | β | β |
β | Refining operating expense ($/bbl)(A) | β | β | β | β | 6.25 | β | β | β | β | β | 6.10 | β | β | β | β | β | 5.45 | β | β | β | β | β | 6.65 | β | β | β | β | β | 5.75 | β | β | β | β | β | 5.95 | β | β |
β | Sales volume (ML) | β | β | β | β | 5β180 | β | β | β | β | β | 5β359 | β | β | β | β | β | 5β414 | β | β | β | β | β | 4β791 | β | β | β | β | β | 4β866 | β | β | β | β | β | 20β430 | β | β |
β | ||||||||||||||||||||||||||||||||||||||
β | Rack forward operating expense (cpl)(A)(D) | β | β | β | β | 2.95 | β | β | β | β | β | 2.95 | β | β | β | β | β | 2.80 | β | β | β | β | β | 3.10 | β | β | β | β | β | 2.80 | β | β | β | β | β | 2.90 | β | β |
β
(A)
Non-GAAP financial measures or contains non-GAAP financial measures. See the Operating Summary InformationβββNon-GAAP Financial Measures section of this Quarterly Report.
β
(B)
Refining and marketing marginβββLIFO excludes the impact of risk management activities.
β
(C)
The Suncor 5-2-2-1 index is most comparable to the companyβs realized refining and marketing margin presented on a LIFO basis.
β
(D)
In Q2β2021, the company began disclosing refinery rack forward margin and operating expenses to increase transparency into Suncorβs integrated model and align with how management evaluates the performance of the business. Rack forward encompasses Suncorβs retail and wholesale business. As an integrated oil and gas company, transfer prices are used to attribute margin to the value chain. The companyβs transfer prices affecting the refining, supply and rack forward businesses employ replacement cost methodology, which may differ from those subject to supply agreements negotiated by independent market participants. Rack forward margins may include any incremental location differentials above replacement supply cost, as well as the applicable retail and wholesale channel margins generated within those markets.
β
See accompanying footnotes and definitions to the quarterly operating summaries.
68Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
Quarterly Operating Metrics Reconciliation (continued)
(unaudited)β
Refining and Marketing
Suncor custom 5-2-2-1 index(A)(12)
Suncor custom 5-2-2-1 index(A)(12)
β | (US$/bbl, except as noted)β | β | β | β | β | β | β | β | β | For the Quarter Ended | β | β | For the Year Ended | β | ||||||||||||||||||||||||||||||
β | (average for the quarter and year ended)β | β | β | β | β | β | β | β | β | MarΒ 31 2022 | β | β | DecΒ 31 2021 | β | β | SepΒ 30 2021 | β | β | JunΒ 30 2021 | β | β | MarΒ 31 2021 | β | β | DecΒ 31 2021 | β | ||||||||||||||||||
β | WTI crude oil at Cushing | β | β | β | β | β | β | β | β | β | β | 94.40 | β | β | β | β | β | 77.15 | β | β | β | β | β | 70.55 | β | β | β | β | β | 66.05 | β | β | β | β | β | 57.80 | β | β | β | β | β | 67.95 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | SYN crude oil at Edmonton | β | β | β | β | β | β | β | β | β | β | 93.10 | β | β | β | β | β | 75.35 | β | β | β | β | β | 68.95 | β | β | β | β | β | 66.40 | β | β | β | β | β | 54.30 | β | β | β | β | β | 66.30 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | WCS at Hardisty | β | β | β | β | β | β | β | β | β | β | 79.80 | β | β | β | β | β | 62.50 | β | β | β | β | β | 56.95 | β | β | β | β | β | 54.60 | β | β | β | β | β | 45.40 | β | β | β | β | β | 54.90 | β | β |
β | New York Harbor 2-1-1 crack(B) | β | β | β | β | β | β | β | β | β | β | 28.25 | β | β | β | β | β | 20.65 | β | β | β | β | β | 20.90 | β | β | β | β | β | 20.35 | β | β | β | β | β | 15.60 | β | β | β | β | β | 19.40 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | Chicago 2-1-1 crack(B) | β | β | β | β | β | β | β | β | β | β | 20.20 | β | β | β | β | β | 16.90 | β | β | β | β | β | 20.45 | β | β | β | β | β | 20.25 | β | β | β | β | β | 13.40 | β | β | β | β | β | 17.75 | β | β |
β | Product value | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | New York Harbor 2-1-1 crack(C) | β | β | β | β | 40% | β | β | β | β | β | 49.05 | β | β | β | β | β | 39.10 | β | β | β | β | β | 36.60 | β | β | β | β | β | 34.55 | β | β | β | β | β | 29.35 | β | β | β | β | β | 34.95 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | Chicago 2-1-1 crack(D) | β | β | β | β | 40% | β | β | β | β | β | 45.85 | β | β | β | β | β | 37.60 | β | β | β | β | β | 36.40 | β | β | β | β | β | 34.50 | β | β | β | β | β | 28.50 | β | β | β | β | β | 34.30 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | WTI | β | β | β | β | 20% | β | β | β | β | β | 18.90 | β | β | β | β | β | 15.45 | β | β | β | β | β | 14.10 | β | β | β | β | β | 13.20 | β | β | β | β | β | 11.55 | β | β | β | β | β | 13.60 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | Seasonality factor | β | β | β | β | β | β | β | β | β | β | 6.50 | β | β | β | β | β | 6.50 | β | β | β | β | β | 5.00 | β | β | β | β | β | 5.00 | β | β | β | β | β | 6.50 | β | β | β | β | β | 5.75 | β | β |
β | β | β | β | β | β | β | β | β | β | β | β | 120.30 | β | β | β | β | β | 98.65 | β | β | β | β | β | 92.10 | β | β | β | β | β | 87.25 | β | β | β | β | β | 75.90 | β | β | β | β | β | 88.60 | β | β |
β | Crude value | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | SYN | β | β | β | β | 40% | β | β | β | β | β | 37.25 | β | β | β | β | β | 30.15 | β | β | β | β | β | 27.60 | β | β | β | β | β | 26.55 | β | β | β | β | β | 21.70 | β | β | β | β | β | 26.50 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | WCS | β | β | β | β | 40% | β | β | β | β | β | 31.90 | β | β | β | β | β | 25.00 | β | β | β | β | β | 22.80 | β | β | β | β | β | 21.85 | β | β | β | β | β | 18.15 | β | β | β | β | β | 21.95 | β | β |
β | ||||||||||||||||||||||||||||||||||||||||||||
β | WTI | β | β | β | β | 20% | β | β | β | β | β | 18.90 | β | β | β | β | β | 15.45 | β | β | β | β | β | 14.10 | β | β | β | β | β | 13.20 | β | β | β | β | β | 11.55 | β | β | β | β | β | 13.60 | β | β |
β | β | β | β | β | β | β | β | β | β | β | β | 88.05 | β | β | β | β | β | 70.60 | β | β | β | β | β | 64.50 | β | β | β | β | β | 61.60 | β | β | β | β | β | 51.40 | β | β | β | β | β | 62.05 | β | β |
β | Suncor custom 5-2-2-1 index | β | β | β | β | β | β | β | β | β | β | 32.25 | β | β | β | β | β | 28.05 | β | β | β | β | β | 27.60 | β | β | β | β | β | 25.65 | β | β | β | β | β | 24.50 | β | β | β | β | β | 26.55 | β | β |
β | Suncor custom 5-2-2-1 index (Cdn$/bbl)(A) | β | β | β | β | β | β | β | β | β | β | 40.85 | β | β | β | β | β | 35.35 | β | β | β | β | β | 34.80 | β | β | β | β | β | 31.50 | β | β | β | β | β | 31.05 | β | β | β | β | β | 33.30 | β | β |
β
(A)
The Suncor 5-2-2-1 index is most comparable to the companyβs realized refining and marketing margin presented on a LIFO basis.
β
(B)
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.
β
(C)
Product value of the New York Harbor 2-1-1 crack is calculated by adding the values of the New York Harbor 2-1-1 crack and WTI, multiplying it by 40% and rounding to the nearest nickel.
β
(D)
Product value of the Chicago 2-1-1 crack is calculated by adding the values of the Chicago 2-1-1 crack and WTI, multiplying it by 40% and rounding to the nearest nickel.
β
See accompanying footnotes and definitions to the quarterly operating summaries.β
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 69
Operating Summary Information
Non-GAAP Financial Measures
Certain financial measures in this documentβββnamely adjusted operating earnings (loss), adjusted funds from (used in) operations, Oil Sands operations cash operating costs, Fort Hills cash operating costs, Syncrude cash operating costs, refining and marketing gross margin, rack forward gross margin, refining operating expense, rack forward operating expense and operating netbacksβββare not prescribed by generally accepted accounting principles (GAAP). Suncor uses this information to analyze business performance, leverage and liquidity and includes these financial measures because investors may find such measures useful on the same basis. These non-GAAP financial measures do not have any standardized meaning and, therefore, are unlikely to be comparable to similar measures presented by other companies. The additional information should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Adjusted operating earnings (loss), Oil Sands operations cash operating costs, Fort Hills cash operating costs and Syncrude cash operating costs are defined in the Non-GAAP Financial Measures Advisory section and reconciled to GAAP measures in the Consolidated Financial Information and Segment Results and Analysis sections of each respective quarterly Report to Shareholders in respect of the relevant quarter (Quarterly Reports). Adjusted funds from (used in) operations is defined and reconciled to GAAP measures in the Non-GAAP Financial Measures Advisory section of each respective Quarterly Report. Refining and marketing gross margin, rack forward gross margin, refining operating expense and rack forward operating expense are defined in the Non-GAAP Financial Measures Advisory section and reconciled to GAAP measures in the Operating Metrics Reconciliation section of each respective Quarterly Report. Operating netbacks are defined below and are reconciled to GAAP measures in the Quarterly Operating Metrics Reconciliation section of each respective Quarterly Report. The remainder of the non-GAAP financial measures not otherwise mentioned in this paragraph are defined and reconciled in this Quarterly Report.
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 the non-GAAP financial measures from the comparable GAAP measures and better reflect the purpose of the measures. The composition of the measures remains unchanged and therefore no prior periods were restated.
Oil Sands Operating Netbacks
Oil Sands operating netbacks are a non-GAAP measure, presented on a crude product and sales barrel basis, and are derived from the Oil Sands segmented statement of net earnings (loss), after adjusting for items not directly attributable to the revenues and costs associated with production and delivery. Management uses Oil Sands operating netbacks to measure crude product profitability on a sales barrel basis.
Exploration and Production (E&P) Operating Netbacks
E&P operating netbacks are a non-GAAP measure, presented on an asset location and sales barrel basis, and are derived from the E&P segmented statement of net earnings (loss), after adjusting for items not directly attributable to the revenues and costs associated with production and delivery. Management uses E&P operating netbacks to measure asset profitability by location on a sales barrel basis.
Definitions
(1)
Cash operating costs are calculated by adjusting Oil Sands segment operating, selling and general expense for i)Β non-production costs that management believes do not relate to production performance, including, but not limited to, share-based compensation adjustments, research costs, safe-mode costs associated with the deferral of capital projects, additional costs incurred in response to the COVID-19 pandemic, adjustments to reflect the cost of internal transfers in the receiving asset at the cost of production and the expense recorded as part of a non-monetary arrangement involving a third-party processor; ii)Β revenues associated with excess capacity, including excess power generated and sold that is recorded in operating revenue; iii)Β project startup costs; and iv)Β the impacts of changes in inventory levels and valuation, such that the company is able to present cost information based on production volumes. Oil Sands operations and Syncrude production volumes are gross of internally consumed diesel and feedstock transfers between assets through the interconnecting pipelines.
β
(2)
Reflects the items not directly attributed to revenues received from the sale of proprietary crude and net non-proprietary activity at its deemed point of sale.
β
(3)
Reflects adjustments for general and administrative costs not directly attributed to the production of each crude product type, as well as the revenues associated with excess power from cogenerationΒ units.
β
(4)
Reflects other E&P assets, such as Libya, for which netbacks are not provided.
β
(5)
Production from the companyβs Libya operations has been presented in this document on an economic basis. Revenue and royalties from the companyβs Libya operations are presented under the working-interest basis, which is required for presentation purposes in the companyβs financial statements. Under the working-interest basis, revenue includes a gross-up amount with offsetting amounts presented in royalties in the E&P segment and income tax expense reported at the total consolidated level.
β
(6)
Reflects adjustments for general and administrative costs not directly attributed to production.
β
(7)
Reflects adjustments for intersegment marketing fees.
β
β
70Β Β Β 2022 First QuarterΒ Β Β Suncor Energy Inc.
(8)
Refinery production is the output of the refining process and differs from crude oil processed as a result of volumetric adjustments for non-crude feedstock, volumetric gain associated with the refining process and changes in unfinished product inventories.
β
(9)
Rack forward operating revenues, other income less purchases of crude oil and products.
β
(10)
Rack forward operating expense reflects operating, selling and general expenses associated with retail and wholesale operations.
β
(11)
Reflects operating, selling and general expenses associated with the companyβs ethanol businesses and certain general and administrative costs not directly attributable to refinery production.
β
(12)
The custom 5-2-2-1 index is designed to represent Suncorβs Refining and Marketing business based on publicly available pricing data and approximates the gross margin on five barrels of crude oil of varying grades that is refined to produce two barrels of both gasoline and distillate and one barrel of secondary product. The index is a single value that is calculated by taking the product value of refined products less the crude value of refinery feedstock incorporating the companyβs refining, product supply and rack forward businesses, but excluding the impact of first-in, first-out accounting. The product value is influenced by New York Harbor 2-1-1 crack, Chicago 2-1-1 crack, WTI benchmarks and seasonal factors. The seasonal factor is an estimate and reflects the location, quality and grade differentials for refined products sold in the companyβs core markets during the winter and summerΒ months. The crude value is influenced by SYN, WCS and WTI benchmarks.
β
Explanatory Notes
*
Users are cautioned that the Oil Sands operations, Fort Hills and Syncrude cash operating costs per barrel measures may not be fully comparable to one another or to similar information calculated by other entities due to the differing operations of each entity as well as other entitiesβ respective accounting policy choices.
β
Abbreviations
β | bbl | β | β | βΒ Β Β barrel | β |
β | bbls/d | β | β | βΒ Β Β barrels per day | β |
β | mbbls | β | β | βΒ Β Β thousands of barrels | β |
β | mbbls/d | β | β | βΒ Β Β thousands of barrels per day | β |
β | boe | β | β | βΒ Β Β barrels of oil equivalent | β |
β | boe/d | β | β | βΒ Β Β barrels of oil equivalent per day | β |
β | mboe | β | β | βΒ Β Β thousands of barrels of oil equivalent | β |
β | mboe/d | β | β | βΒ Β Β thousands of barrels of oil equivalent per day | β |
β | cpl | β | β | βΒ Β Β cents per litre | β |
β | ML | β | β | βΒ Β Β million litres | β |
β | WTI | β | β | βΒ Β Β West Texas Intermediate | β |
β | SYN | β | β | βΒ Β Β Synthetic crude oil benchmark | β |
β | WCS | β | β | βΒ Β Β Western Canadian Select | β |
Metric Conversion
1 m3 (cubic metre) = approximately 6.29 barrels
2022 First QuarterΒ Β Β Suncor Energy Inc.Β Β Β 71