EX-99.3 4 a2224493zex-99_3.htm EXHIBIT 99.3
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EXHIBIT 99.3

Unaudited Consolidated Financial Statements for the first quarter ended March 31, 2015

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

			Three months ended March 31
($ millions)			2015		2014
Revenues and Other Income
	Operating revenues, net of royalties (note 3)		7 129		10 342
	Other income (note 4)		257		135
			7 386		10 477
Expenses
	Purchases of crude oil and products		2 772		3 729
	Operating, selling and general		2 295		2 456
	Transportation		267		257
	Depreciation, depletion, amortization and impairment		1 333		1 140
	Exploration		183		126
	Loss on disposal of assets		2		—
	Financing expenses (note 7)		1 138		471
			7 990		8 179
(Loss) Earnings before Income Taxes			(604	)	2 298
Income Taxes
	Current		184		811
	Deferred (note 8)		(447	)	2
			(263	)	813
Net (Loss) Earnings			(341	)	1 485
Other Comprehensive Income
Items that may be subsequently reclassified to earnings
	Foreign currency translation adjustment		386		192
Items that will not be reclassified to earnings
	Actuarial loss on employee retirement benefit plans, net of income taxes of $10 (three months ended March 31, 2014 – $20)		(30	)	(60	)
Other Comprehensive Income			356		132
Total Comprehensive Income			15		1 617
Per Common Share (dollars) (note 9)
	Net (loss) earnings – basic		(0.24	)	1.01
	Net (loss) earnings – diluted		(0.24	)	1.01
	Cash dividends		0.28		0.23

See accompanying notes to the interim consolidated financial statements.

SUNCOR ENERGY INC. 2015 FIRST QUARTER    37

CONSOLIDATED BALANCE SHEETS
(unaudited)

($ millions)				Mar 31 2015		Dec 31 2014
Assets
	Current assets
		Cash and cash equivalents		4 825		5 495
		Accounts receivable		4 154		4 275
		Inventories		3 366		3 466
		Income taxes receivable		1 197		680
	Total current assets			13 542		13 916
	Property, plant and equipment, net			60 455		59 800
	Exploration and evaluation			2 276		2 248
	Other assets			608		598
	Goodwill and other intangible assets			3 083		3 083
	Deferred income taxes			29		26
Total assets				79 993		79 671
Liabilities and Shareholders' Equity
	Current liabilities
		Short-term debt		948		806
		Current portion of long-term debt		35		34
		Accounts payable and accrued liabilities		5 331		5 704
		Current portion of provisions		757		752
		Income taxes payable		1 023		1 058
	Total current liabilities			8 094		8 354
	Long-term debt			13 364		12 489
	Other long-term liabilities			1 762		1 787
	Provisions (note 12)			5 301		4 895
	Deferred income taxes			10 200		10 543
	Shareholders' equity			41 272		41 603
	Total liabilities and shareholders' equity			79 993		79 671

See accompanying notes to the interim consolidated financial statements.

38   SUNCOR ENERGY INC. 2015 FIRST QUARTER

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

			Three months ended March 31
($ millions)			2015		2014
Operating Activities
Net (loss) earnings			(341	)	1 485
Adjustments for:
	Depreciation, depletion, amortization and impairment		1 333		1 140
	Deferred income taxes		(447	)	2
	Accretion		52		51
	Unrealized foreign exchange loss on U.S. dollar denominated debt		962		357
	Change in fair value of derivative contracts		148		11
	Loss on disposal of assets		2		—
	Share-based compensation		(148	)	(54	)
	Exploration		49		22
	Settlement of decommissioning and restoration liabilities		(133	)	(110	)
	Other		(2	)	(24	)
(Increase) in non-cash working capital			(599	)	(1 147	)
Cash flow provided by operating activities			876		1 733
Investing Activities
Capital and exploration expenditures			(1 326	)	(1 490	)
Proceeds from disposal of assets			40		16
Other investments			(4	)	(9	)
(Increase) decrease in non-cash working capital			(47	)	15
Cash flow used in investing activities			(1 337	)	(1 468	)
Financing Activities
Net change in debt			58		(5	)
Issuance of common shares under share option plans			34		53
Purchase of common shares for cancellation (note 6)			—		(384	)
Dividends paid on common shares			(405	)	(338	)
Cash flow used in financing activities			(313	)	(674	)
(Decrease) in Cash and Cash Equivalents			(774	)	(409	)
Effect of foreign exchange on cash and cash equivalents			104		53
Cash and cash equivalents at beginning of period			5 495		5 202
Cash and Cash Equivalents at End of Period			4 825		4 846
Supplementary Cash Flow Information
Interest paid			76		72
Income taxes paid			792		1 125

See accompanying notes to the interim consolidated financial statements.

SUNCOR ENERGY INC. 2015 FIRST QUARTER    39

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)

($ millions)		Share Capital		Contributed Surplus		Accumulated Other Comprehensive Income		Retained Earnings		Total		Number of Common Shares (thousands)
At December 31, 2013		19 395		598		115		21 072		41 180		1 478 315
Net earnings		—		—		—		1 485		1 485		—
Foreign currency translation adjustment		—		—		192		—		192		—
Actuarial loss on employee retirement benefit plans, net of income taxes of $20		—		—		—		(60	)	(60	)	—
Total comprehensive income		—		—		192		1 425		1 617		—
Issued under share option plans		61		(3	)	—		—		58		1 740
Issued under dividend reinvestment plan		6		—		—		(6	)	—		—
Purchase of common shares for cancellation (note 6)		(137	)	—		—		(247	)	(384	)	(10 454	)
Change in liability for share purchase commitment		40		—		—		67		107		—
Share-based compensation		—		18		—		—		18		—
Dividends paid on common shares		—		—		—		(338	)	(338	)	—
At March 31, 2014		19 365		613		307		21 973		42 258		1 469 601
At December 31, 2014		19 311		609		504		21 179		41 603		1 444 119
Net loss		—		—		—		(341	)	(341	)	—
Foreign currency translation adjustment		—		—		386		—		386		—
Actuarial loss on employee retirement benefit plans, net of income taxes of $10		—		—		—		(30	)	(30	)	—
Total comprehensive income		—		—		386		(371	)	15		—
Issued under share option plans		44		(5	)	—		—		39		1 150
Issued under dividend reinvestment plan		10		—		—		(10	)	—		—
Share-based compensation		—		20		—		—		20		—
Dividends paid on common shares		—		—		—		(405	)	(405	)	—
At March 31, 2015		19 365		624		890		20 393		41 272		1 445 269

See accompanying notes to the interim consolidated financial statements.

40   SUNCOR ENERGY INC. 2015 FIRST QUARTER

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. REPORTING ENTITY AND DESCRIPTION OF THE BUSINESS

Suncor Energy Inc. (Suncor or the company) is an integrated energy company headquartered in Canada. Suncor's operations include oil sands development and upgrading, onshore and offshore oil and gas production, petroleum refining, and product marketing primarily under the Petro-Canada brand. The consolidated financial statements of the company comprise the company and its subsidiaries and the company's interests in associates and jointly controlled entities.

The address of the company's registered office is 150 – 6th Avenue S.W., Calgary, Alberta, Canada, T2P 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 (IFRS), specifically International Accounting Standard (IAS) 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 consolidated financial statements for the year ended December 31, 2014.

The policies applied in these condensed interim consolidated financial statements are based on IFRS issued and outstanding as at December 31, 2014.

Comparative figures have been reclassified to conform to the current year financial statement presentation for certain gas purchases consumed in the secondary upgrading process in the Oil Sands segment, which are now classified as Purchases rather than Operating, Selling and General, and shipping related charges in the Refining and Marketing segment, which are now classified as Transportation rather than Operating, Selling and General.

(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 company's consolidated financial statements for the year ended December 31, 2014.

(c) Functional Currency and Presentation Currency

These consolidated financial statements are presented in Canadian dollars, which is the company's functional currency.

(d) Use of Estimates and Judgment

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 company's consolidated financial statements for the year ended December 31, 2014.

(e) Income taxes

The company recognizes the impacts of income tax rate changes in earnings in the period the rate change is substantively enacted.

SUNCOR ENERGY INC. 2015 FIRST QUARTER    41

3. SEGMENTED INFORMATION

The company's 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.

Three months ended March 31		Oil Sands				Exploration and                      Production				Refining and                      Marketing				Corporate,                      Energy Trading                      and Eliminations				Total
($ millions)		2015		2014		2015		2014		2015		2014		2015		2014		2015		2014
Revenues and Other Income
Gross revenues		1 777		2 700		732		1 229		4 740		6 742		24		26		7 273		10 697
Intersegment revenues		507		1 190		37		212		22		18		(566	)	(1 420	)	—		—
Less: Royalties		(18	)	(192	)	(126	)	(163	)	—		—		—		—		(144	)	(355	)
Operating revenues, net of royalties		2 266		3 698		643		1 278		4 762		6 760		(542	)	(1 394	)	7 129		10 342
Other income		58		9		116		2		17		7		66		117		257		135
		2 324		3 707		759		1 280		4 779		6 767		(476	)	(1 277	)	7 386		10 477
Expenses
Purchases of crude oil and products		70		82		1		152		3 296		4 823		(595	)	(1 328	)	2 772		3 729
Operating, selling and general		1 372		1 501		131		153		560		609		232		193		2 295		2 456
Transportation		152		140		27		26		98		101		(10	)	(10	)	267		257
Depreciation, depletion, amortization and impairment		773		669		365		299		163		152		32		20		1 333		1 140
Exploration		105		75		78		51		—		—		—		—		183		126
Loss (gain) on disposal of assets		8		—		1		—		—		—		(7	)	—		2		—
Financing expenses (income)		39		28		38		9		(7	)	2		1 068		432		1 138		471
		2 519		2 495		641		690		4 110		5 687		720		(693	)	7 990		8 179
(Loss) Earnings before Income Taxes		(195	)	1 212		118		590		669		1 080		(1 196	)	(584	)	(604	)	2 298
Income Taxes
Current		(4	)	298		101		328		205		285		(118	)	(100	)	184		811
Deferred		(45	)	15		(445	)	(32	)	(28	)	8		71		11		(447	)	2
		(49	)	313		(344	)	296		177		293		(47	)	(89	)	(263	)	813
Net (Loss) Earnings		(146	)	899		462		294		492		787		(1 149	)	(495	)	(341	)	1 485
Capital and Exploration Expenditures		793		911		356		444		84		105		93		30		1 326		1 490

42   SUNCOR ENERGY INC. 2015 FIRST QUARTER

4. OTHER INCOME

Other income consists of the following:

			Three months ended March 31
($ millions)			2015		2014
Energy trading activities
	Change in fair value of contracts		7		112
	Gains on inventory valuation		75		5
Risk management activities(1)			8		(6	)
Investment and interest income			18		27
Renewable energy grants			5		6
Risk mitigation and insurance proceeds(2)			104		—
Change in value of pipeline commitments and other			40		(9	)
			257		135

(1)

Includes fair value changes related to short-term derivative contracts in the Oil Sands and Refining and Marketing segments.

(2)

Includes business interruption proceeds for insurance on the Terra Nova assets in the Exploration and Production segment.

5. SHARE-BASED COMPENSATION

The following table summarizes the share-based compensation expense recorded for all plans within Operating, Selling and General expense.

		Three months ended March 31
($ millions)		2015		2014
Equity-settled plans		20		18
Cash-settled plans		97		101
		117		119

6. NORMAL COURSE ISSUER BID

Pursuant to Suncor's normal course issuer bid, Suncor repurchased 10.5 million common shares for total consideration of $384 million in the first quarter of 2014. Repurchases under the program were suspended on January 1, 2015 in response to the lower crude price environment.

The following table summarizes the share repurchase activities during the period:

			Three months ended March 31
($ millions, except as noted)			2015		2014
Share repurchase activities (thousands of common shares)
	Shares repurchased		—		10 454
Amounts charged to
	Share capital		—		137
	Retained earnings		—		247
Share repurchase cost			—		384

SUNCOR ENERGY INC. 2015 FIRST QUARTER    43

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:

($ millions)			Mar 31 2015		Mar 31 2014
Amounts charged to
	Share capital		—		68
	Retained earnings		—		131
Liability for share purchase commitment			—		199

7. FINANCING EXPENSES

			Three months ended March 31
($ millions)			2015		2014
Interest on debt			210		183
Capitalized interest			(93	)	(108	)
	Interest expense		117		75
	Interest on pension and other post-retirement benefits		15		14
	Accretion		52		51
	Foreign exchange loss on U.S. dollar denominated debt		962		357
	Foreign exchange and other		(8	)	(26	)
			1 138		471

In March 2015, the company entered into a syndicated credit facility agreement for US$2 billion that matures in April 2019.

8. INCOME TAXES

In the first quarter of 2015, the United Kingdom (U.K.) government enacted a decrease in the supplementary charge rate on oil and gas profits in the North Sea that decreased the statutory tax rate on Suncor's earnings in the U.K. from 62% to 50%. The company revalued its deferred income tax balances, resulting in a one-time decrease to deferred income tax liabilities of $406 million.

Pursuant to the previously disclosed 2013 proposal letter from the Canada Revenue Agency (CRA), the company received a Notice of Reassessment (NOR) from the CRA during the second quarter of 2014, regarding the income tax treatment of realized losses in 2007 on the settlement of certain derivative contracts. The total amount of the NOR, including tax, penalty and interest, was approximately $920 million. The company strongly disagrees with the CRA's position and continues to firmly believe it will be able to successfully defend its original filing position and will take the appropriate actions to resolve this matter. In addition to the above, the company has:

•

Received NORs related to the derivative contracts from the Provinces of Alberta, Ontario and Quebec for approximately $124 million, $100 million and $42 million, respectively;

•

Provided security to the CRA and the Provinces of Quebec and Ontario for approximately $610 million;

•

Filed Notices of Objection with the CRA and the Provinces of Alberta, Ontario and Quebec; and

•

Filed a Notice of Appeal with the Tax Court of Canada in November 2014 and is now pursuing its Appeal to that Court.

If the company is unsuccessful in defending its tax filing position, it could be subject to an earnings and cash impact of up to $1.2 billion.

44   SUNCOR ENERGY INC. 2015 FIRST QUARTER

9. EARNINGS PER COMMON SHARE

			Three months ended March 31
($ millions)			2015		2014
Net (loss) earnings			(341	)	1 485
(millions of common shares)
Weighted average number of common shares			1 445		1 471
Dilutive securities:
	Effect of share options		—		2
Weighted average number of diluted common shares			1 445		1 473
(dollars per common share)
Basic (loss) earnings per share			(0.24	)	1.01
Diluted (loss) earnings per share			(0.24	)	1.01

10. FINANCIAL INSTRUMENTS

Derivative Financial Instruments

(a) Non-Designated Derivative Financial Instruments

The following table presents the company's non-designated Energy Trading, Risk Management and Available for Sale derivatives measured at fair value as at March 31, 2015.

($ millions)			Energy Trading		Risk Management		Assets Available for Sale		Total
Fair value outstanding at December 31, 2014			20		110		183		313
	Fair value of contracts realized in earnings during the quarter		(37	)	(124	)	—		(161	)
	Changes in fair value during the quarter (Note 4)		7		8		—		15
Fair value outstanding at March 31, 2015			(10	)	(6	)	183		167

Assets Available for Sale relate to the company's investment in Pioneer Energy. As a result of the third-party agreement to sell the company's share of its assets of Pioneer Energy, Suncor increased the fair value of its investment in Pioneer Energy by $98 million to $183 million in the third quarter of 2014 based on the agreed upon selling price.

(b) Fair Value Hierarchy

The following table presents the company's financial instruments measured at fair value for each hierarchy level as at March 31, 2015.

($ millions)			Level 1		Level 2		Level 3		Total Fair Value
	Accounts receivable		15		28		—		43
	Accounts payable		(19	)	(40	)	—		(59	)
	Other assets		—		183		—		183
			(4	)	171		—		167

SUNCOR ENERGY INC. 2015 FIRST QUARTER    45

During the first quarter of 2015, there were no transfers between Level 1 and Level 2 fair value measurements and no transfers into and out of Level 3 fair value measurements.

The company uses forward starting interest rate swaps to mitigate its exposure to the effect of future interest rate movements on future debt issuances. As at March 31, 2015, the company had executed US$400 million in forward swaps.

Non-Derivative Financial Instruments

At March 31, 2015, the carrying value of fixed-term debt accounted for under amortized cost was $12.4 billion (December 31, 2014 – $11.5 billion) and the fair value was $14.9 billion (December 31, 2014 – $13.5 billion). The estimated fair value of long-term debt is based on pricing sourced from market data.

11. PIONEER DISPOSITION

During the third quarter of 2014, the company announced that, along with The Pioneer Group Inc., it had reached an agreement to sell the assets of Pioneer Energy, including retail gas stations in Ontario and Manitoba. The company, as a 50% owner of Pioneer Energy, will receive $182.5 million before closing adjustments for its share of the assets and liabilities. The transaction is expected to close in the second quarter of 2015 and is subject to closing conditions including regulatory approval under the Competition Act. An unrealized fair value adjustment resulted in an $85 million after-tax increase to Other Comprehensive Income during the third quarter of 2014.

12. PROVISIONS

During the first quarter of 2015, there was a net increase in provisions of $411 million, primarily due to a $382 million increase in the decommissioning and restoration provision as a result of a decrease in the credit-adjusted risk-free interest rate to 3.43% (December 31, 2014 – 3.93%).

46   SUNCOR ENERGY INC. 2015 FIRST QUARTER

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EXHIBIT 99.3
1. REPORTING ENTITY AND DESCRIPTION OF THE BUSINESS
2. BASIS OF PREPARATION
3. SEGMENTED INFORMATION
4. OTHER INCOME
5. SHARE-BASED COMPENSATION
6. NORMAL COURSE ISSUER BID
7. FINANCING EXPENSES
8. INCOME TAXES
9. EARNINGS PER COMMON SHARE
10. FINANCIAL INSTRUMENTS
11. PIONEER DISPOSITION
12. PROVISIONS