Suncor Energy Inc. (TSX: SU) (NYSE: SU)

• Delivered adjusted funds from operations of $3.6 billion and adjusted operating earnings of $2.0 billion.

• Returned nearly $1.0 billion to shareholders through $676 million in dividends and $300 million in share repurchases.

• Delivered total upstream production of 690,500 barrels of oil equivalent per day (boe/d) which included combined upgrader utilization of over 100% outside of planned maintenance activities and continued strong In Situ performance, partially offset by asset divestments in Exploration and Production (E&P).

• Strong refinery operating performance resulted in refinery utilization of 99%.

• Successfully completed the first full plant turnaround at Fort Hills and, subsequent to the quarter, completed significant planned turnaround activities at Upgrader 2.

• Subsequent to the quarter, reached an agreement to acquire the remaining 31.23% working interest in Fort Hills for $1.468 billion.

"We generated over $3.6 billion in adjusted funds from operations and returned nearly $1.0 billion to shareholders this quarter," said Rich Kruger, Suncor's President and Chief Executive Officer. "Outside of planned maintenance activities, our upgrader and refinery utilizations were over 100%, highlighting our strong operating performance in the third quarter."

Third Quarter Results

(1) Represented on a basic per share basis.
(2) Non-GAAP financial measures or contains non-GAAP financial measures. See the Non-GAAP Financial Measures section of this news release.
(3) Excludes capitalized interest and capital expenditures related to assets previously held for sale.
(4) Share repurchases per common share are calculated as the total cost of share repurchases divided by the weighted average number of shares outstanding for the applicable period.
(5) Includes dividends paid on common shares and repurchases of common shares.

Financial Results

Adjusted Operating Earnings Reconciliation(1)

(1) Non-GAAP financial measure. All reconciling items are presented on a before-tax basis and adjusted for income taxes in the income tax recovery on adjusted operating earnings adjustments line. See the Non-GAAP Financial Measures section of this news release.

• Suncor's adjusted operating earnings were $1.980 billion ($1.52 per common share) in the third quarter of 2023, compared to $2.565 billion ($1.88 per common share) in the prior year quarter, primarily due to decreased crude oil price realizations reflecting a weaker business environment in the current quarter, increased royalties and decreased sales volumes in E&P due to asset divestments, partially offset by increased refining and marketing gross margins on a first-in, first-out (FIFO) basis due to the impacts of improving benchmark pricing through the quarter, increased sales volumes in Oil Sands and lower income taxes.

• Suncor's net earnings were $1.544 billion ($1.19 per common share) in the third quarter of 2023, compared to a net loss of $609 million ($0.45 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings, net earnings (loss) for the third quarter of 2023 and the prior year quarter were impacted by the reconciling items shown in the table above.

• Adjusted funds from operations were $3.634 billion ($2.80 per common share) in the third quarter of 2023, compared to $4.473 billion ($3.28 per common share) in the prior year quarter, and were influenced by the same factors impacting adjusted operating earnings described above. Adjusted funds from operations in the third quarter of 2022 were also impacted by the recognition of $147 million of insurance proceeds related to the company's assets in Libya recorded in other income (loss).

• Cash flow provided by operating activities, which includes changes in non-cash working capital, was $4.184 billion ($3.22 per common share) in the third quarter of 2023, compared to $4.449 billion ($3.26 per common share) in the prior year quarter.

• Suncor's total operating, selling and general (OS&G) expenses were $3.124 billion in the third quarter of 2023, compared to $3.075 billion in the prior year quarter, with the increase primarily due to a share-based compensation expense in the current quarter compared to a recovery in the prior year quarter, increased operating expenses associated with the company's additional working interest in Fort Hills that was acquired in the first quarter of 2023, and increased mining activity at the company's mines. The increase was partially offset by lower natural gas prices and reduced operating expenses as a result of international asset divestments at E&P.

• As at September 30, 2023, Suncor's net debt was $12.995 billion, a reduction of $1.399 billion compared to June 30, 2023, with the decrease in net debt primarily due to a decrease in short-term indebtedness. The company anticipates an increase in its net debt balances in the fourth quarter of 2023 as a result of the anticipated acquisition of the remaining working interest in Fort Hills.

Operating Results

• Total Oil Sands bitumen production increased in the third quarter of 2023 compared to the prior year quarter, primarily due to the impact of significant planned turnaround activities at Syncrude in the prior year quarter and continued strong performance from the company's In Situ assets, partially offset by decreased bitumen production at Oil Sands Base as a result of planned turnaround activities, and at Fort Hills, where the impact of planned turnaround activities more than offset the company's increased working interest.

• The company's net SCO production increased to 469,300 bbls/d in the third quarter of 2023, representing combined upgrader utilizations of 88%, compared to 405,100 bbls/d and 75% in the prior year quarter, reflecting lower planned maintenance activities in the current period and over 100% utilizations outside of planned maintenance activities.

• The company's saleable non-upgraded bitumen production decreased to 176,800 bbls/d in the third quarter of 2023, compared to 240,900 bbls/d in the prior year quarter, as the company leveraged its regional flexibility to maximize higher upgrader availability for In Situ and Fort Hills bitumen production in the current quarter.

• At Fort Hills, the first full plant turnaround was successfully completed during the quarter, and the asset safely ramped up to normal operating rates within the quarter. Subsequent to the quarter, significant planned turnaround activities at Upgrader 2 and planned maintenance activities at Firebag were successfully completed, and both assets have safely ramped up to normal operating rates.

• E&P production during the third quarter of 2023 decreased compared to the prior year quarter, primarily due to international asset divestments.

• Refinery crude throughput was 463,200 bbls/d and refinery utilization was 99% in the third quarter of 2023, compared to 466,600 bbls/d and 100% in the prior year quarter, reflecting strong utilizations across all refineries in both periods.

• Refined product sales of 574,100 bbls/d in the third quarter of 2023 were comparable to 577,300 bbls/d in the prior year quarter.

Corporate and Strategy Updates

• Agreement reached to acquire the remainder of Fort Hills. Subsequent to the third quarter of 2023, Suncor reached an agreement to acquire TotalEnergies EP Canada Ltd., which holds a 31.23% working interest in Fort Hills, for $1.468 billion before closing adjustments and other closing costs. All necessary regulatory approvals have been received and the transaction will have an effective date of April 1, 2023, subject to closing, which is anticipated to occur in the fourth quarter of 2023.

• Terra Nova to return to service. Commissioning activities are nearing completion at the Terra Nova Floating, Production, Storage and Offloading vessel following the completion of the Terra Nova Asset Life Extension project. The asset is expected to safely restart production in the fourth quarter.

"I am pleased to be acquiring the remaining working interest in Fort Hills," said Kruger. "This transaction adds 61,000 bbls/d of high-quality bitumen production capacity to our portfolio, advances our long-term strategy by securing bitumen supply to fill our Base Plant upgraders, and builds on our best-in-class integrated model. We will continue to maximize value through regional synergy opportunities across our oil sands asset base, adding long-term value for shareholders."

Corporate Guidance Updates

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

For further details and advisories regarding Suncor's 2023 corporate guidance, see suncor.com.

Adjusted Operating Earnings

Adjusted operating earnings is a non-GAAP financial measure that adjusts net earnings for significant items that are not indicative of operating performance. Management uses adjusted operating earnings to evaluate operating performance because management believes it provides better comparability between periods. Adjusted operating earnings is reconciled to net earnings in the news release above.

Adjusted Funds From (Used In) Operations

Adjusted funds from (used in) operations is a non-GAAP financial measure that adjusts a GAAP measure - cash flow provided by operating activities - for 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.

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 Suncor's business.

(1) Excludes capital expenditures related to assets previously held for sale of nil and $108 million in the third quarter and first nine months of 2023, respectively, compared to $38 million and $93 million in the third quarter and first nine months of 2022, respectively.

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).