Unaudited Consolidated Financial Statements for the second quarter ended June 30, 2019


	Three months ended June 30				Six months ended June 30
($ millions)	2019		2018		2019		2018

Revenues and Other Income

Operating revenues, net of royalties (note 4)	10 071		10 327		19 054		19 134

Other income (note 5)	27		101		441		44

	10 098		10 428		19 495		19 178

Expenses

Purchases of crude oil and products	3 286		4 056		5 907		6 903

Operating, selling and general	2 799		2 612		5 631		5 232

Transportation	361		335		697		609

Depreciation, depletion, amortization and impairment	1 513		1 391		2 975		2 815

Exploration	76		19		189		51

Gain on asset exchange and disposals (note 16)	(158	)	(4	)	(163	)	(167	)

Financing expenses (note 7)	97		543		129		1 105

	7 974		8 952		15 365		16 548

Earnings before Income Taxes	2 124		1 476		4 130		2 630

Income Tax Expense (Recovery)

Current	395		413		928		749

Deferred (note 15)	(1 000	)	91		(997	)	120

	(605	)	504		(69	)	869

Net Earnings	2 729		972		4 199		1 761

Other Comprehensive (Loss) Income

Items That May be Subsequently Reclassified to Earnings:

Foreign currency translation adjustment	(80	)	36		(148	)	165

Items That Will Not be Reclassified to Earnings:

Actuarial (loss) gain on employee retirement benefit plans, net of income taxes	(177	)	129		(313	)	119

Other Comprehensive (Loss) Income	(257	)	165		(461	)	284

Total Comprehensive Income	2 472		1 137		3 738		2 045

Per Common Share (dollars) (note 8)

Net earnings – basic	1.74		0.60		2.67		1.08

Net earnings – diluted	1.74		0.59		2.66		1.07

Cash dividends	0.42		0.36		0.84		0.72

See accompanying notes to the condensed interim consolidated financial statements.


($ millions)	June 30 2019	December 31 2018

Assets

Current assets

Cash and cash equivalents	2 061	2 221

Accounts receivable	4 345	3 206

Inventories	3 734	3 159

Income taxes receivable	153	114

Total current assets	10 293	8 700

Property, plant and equipment, net (note 12)	76 398	74 245

Exploration and evaluation	2 374	2 319

Other assets	1 275	1 126

Goodwill and other intangible assets	3 059	3 061

Deferred income taxes	200	128

Total assets	93 599	89 579

Liabilities and Shareholders' Equity

Current liabilities

Short-term debt	2 198	3 231

Current portion of long-term debt	—	229

Current portion of long-term lease liabilities (note 3)	307	—

Accounts payable and accrued liabilities	6 214	5 647

Current portion of provisions	711	667

Income taxes payable	1 059	535

Total current liabilities	10 489	10 309

Long-term debt	12 984	13 890

Long-term lease liabilities (note 3)	2 693	—

Other long-term liabilities (note 10)	2 751	2 346

Provisions (note 11)	8 174	6 984

Deferred income taxes (note 15)	10 999	12 045

Equity	45 509	44 005

Total liabilities and shareholders' equity	93 599	89 579

See accompanying notes to the condensed interim consolidated financial statements.


	Three months ended June 30				Six months ended June 30
($ millions)	2019		2018		2019		2018

Operating Activities

Net Earnings	2 729		972		4 199		1 761

Adjustments for:

Depreciation, depletion, amortization and impairment	1 513		1 391		2 975		2 815

Deferred income tax (recovery) expense	(1 000	)	91		(997	)	120

Accretion	68		67		139		132

Unrealized foreign exchange (gain) loss on U.S. dollar denominated debt	(231	)	245		(511	)	618

Change in fair value of financial instruments and trading inventory	76		13		148		(38	)

Gain on asset exchange and disposals (note 16)	(158	)	(4	)	(163	)	(167	)

Share-based compensation	24		157		(85	)	(67	)

Exploration	37		—		39		—

Settlement of decommissioning and restoration liabilities	(76	)	(90	)	(190	)	(259	)

Other	23		20		36		111

Decrease (increase) in non-cash working capital	428		(416	)	(609	)	(1 856	)

Cash flow provided by operating activities	3 433		2 446		4 981		3 170

Investing Activities

Capital and exploration expenditures	(1 364	)	(1 762	)	(2 267	)	(3 053	)

Acquisitions (notes 13 and 14)	—		(123	)	—		(1 191	)

Proceeds from disposal of assets (note 16)	159		4		166		4

Other investments (note 16)	(42	)	(27	)	(99	)	(84	)

Decrease (increase) in non-cash working capital	28		145		(6	)	388

Cash flow used in investing activities	(1 219	)	(1 763	)	(2 206	)	(3 936	)

Financing Activities

Net (decrease) increase in short-term debt	(1 281	)	234		(955	)	1 979

Net increase (decrease) in long-term debt	557		(18	)	557		(35	)

Lease liability payments	(72	)	—		(142	)	—

Issuance of common shares under share option plans	6		187		41		256

Purchase of common shares (note 9)	(552	)	(609	)	(1 066	)	(998	)

Distributions relating to non-controlling interest	(2	)	(2	)	(4	)	(2	)

Dividends paid on common shares	(658	)	(587	)	(1 320	)	(1 177	)

Cash flow (used in) provided by financing activities	(2 002	)	(795	)	(2 889	)	23

Increase (Decrease) in Cash and Cash Equivalents	212		(112	)	(114	)	(743	)

Effect of foreign exchange on cash and cash equivalents	(26	)	12		(46	)	54

Cash and cash equivalents at beginning of period	1 875		2 083		2 221		2 672

Cash and Cash Equivalents at End of Period	2 061		1 983		2 061		1 983

Supplementary Cash Flow Information

Interest paid	352		306		506		413

Income taxes paid	282		47		398		664

See accompanying notes to the condensed interim consolidated financial statements.


($ millions)	Share Capital		Contributed Surplus		Accumulated Other Comprehensive Income		Retained Earnings		Total		Number of Common Shares (thousands)

At December 31, 2017	26 606		567		809		17 401		45 383		1 640 983

Net earnings	—		—		—		1 761		1 761		—

Foreign currency translation adjustment	—		—		165		—		165		—

Actuarial gain on employee retirement benefit plans, net of income taxes of $44	—		—		—		119		119		—

Total comprehensive income	—		—		165		1 880		2 045		—

Issued under share option plans	321		(66	)	—		—		255		7 098

Purchase of common shares for cancellation (note 9)	(337	)	—		—		(661	)	(998	)	(20 859	)

Change in liability for share purchase commitment (note 9)	15		—		—		(10	)	5		—

Share-based compensation	—		30		—		—		30		—

Dividends paid on common shares	—		—		—		(1 177	)	(1 177	)	—

At June 30, 2018	26 605		531		974		17 433		45 543		1 627 222

At December 31, 2018	25 910		540		1 076		16 479		44 005		1 584 484

At January 1, 2019	25 910		540		1 076		16 479		44 005		1 584 484

Adoption of IFRS 16 impact (note 3)	—		—		—		14		14		—

At January 1, 2019, adjusted	25 910		540		1 076		16 493		44 019		1 584 484

Net earnings	—		—		—		4 199		4 199		—

Foreign currency translation adjustment	—		—		(148	)	—		(148	)	—

Actuarial loss on employee retirement benefit plans, net of income taxes of $107	—		—		—		(313	)	(313	)	—

Total comprehensive (loss) income	—		—		(148	)	3 886		3 738		—

Issued under share option plans	53		(11	)	—		—		42		1 197

Purchase of common shares for cancellation (note 9)	(406	)	—		—		(660	)	(1 066	)	(24 952	)

Change in liability for share purchase commitment (note 9)	30		—		—		33		63		—

Share-based compensation	—		33		—		—		33		—

Dividends paid on common shares	—		—		—		(1 320	)	(1 320	)	—

At June 30, 2019	25 587		562		928		18 432		45 509		1 560 729

See accompanying notes to the condensed interim consolidated financial statements.

Suncor Energy Inc. (Suncor or the company) is an integrated energy company headquartered in Canada. Suncor's operations include oil sands development and upgrading, offshore oil and gas production, petroleum refining, and product marketing, primarily under the Petro-Canada brand.

The address of the company's registered office is 150 – 6th Avenue S.W., Calgary, Alberta, Canada, T2P 3E3.

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 (IASB). 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 of the company for the year ended December 31, 2018.

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, 2018. Adoption of the new accounting pronouncements are described in note 3.

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

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, 2018.

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.

Effective January 1, 2019, the company adopted IFRS 16 Leases (IFRS 16) which replaces IAS 17 Leases (IAS 17) and requires the recognition of most leases on the balance sheet. IFRS 16 effectively removes the classification of leases as either finance or operating leases and treats all leases as finance leases for lessees with optional exemptions for short-term leases where the term is twelve months or less. The accounting treatment for lessors remains essentially unchanged, with the requirement to classify leases as either finance or operating.

The company has selected the modified retrospective transition approach, electing to adjust opening retained earnings with no restatement of comparative figures. As such, comparative information continues to be reported under IAS 17 and International Financial Reporting Interpretations Committee (IFRIC) 4. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately if they are different from those under IFRS 16 and the impact of the change is disclosed below.

At inception of a contract, the company assesses whether a contract is, or contains, a lease based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

The company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured based on the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The assets are depreciated to the earlier of the end of the useful life of the right-of-use asset or the lease term using the straight-line method as this most closely reflects the expected pattern of consumption of the future economic benefits. In addition, the right-of-use assets may be periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the company's incremental borrowing rate. The company uses its incremental borrowing rate as the discount rate. Lease payments include fixed payments, and variable payments that are based on an index or a rate.

Cash payments for the principal portion of the lease liability are presented within the financing activities and the interest portion of the lease liability is presented within the operating activities of the statement of cash flows. Short-term lease payments and variable lease payments not included in the measurement of the lease liability are presented within the operating activities of the statement of cash flows.

The lease liability is measured at amortized cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the company's estimate of the amount expected to be payable under a residual value guarantee, or if the company changes its assessment of whether it will exercise a purchase, extension or termination option.

When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

In the comparative period, the company classified leases that transfer substantially all of the risks and rewards of ownership as finance leases. When this was the case, the leased assets were measured initially at an amount equal to the lower of their fair value and the present value of minimum lease payments. Minimum lease payments were the payments over the lease term that the lessee was required to make, excluding any contingent rent.

Subsequently, the assets were accounted for in accordance with the accounting policy applicable to that asset.

Assets held under other leases were classified as operating leases and were not recognized in the company's statement of financial position. Payments made under operating leases were recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognized as an integral part of the total lease expense over the term of the lease.

As part of the initial application of IFRS 16, the company also chose to apply the following transitional provisions:

The company applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

The following table reconciles the company's operating lease obligations at December 31, 2018, as previously disclosed in the company's consolidated financial statements, to the lease obligations recognized on initial application of IFRS 16 at January 1, 2019.

The following table summarizes the impact of adopting IFRS 16 on the company's consolidated balance sheets at January 1, 2019. Prior period amounts have not been restated. The effects of the transition have been recognized through retained earnings in equity.


($ millions) increase (decrease)	December 31 2018	Adjustments due to IFRS 16	January 1 2019

Assets

Current assets

Accounts receivable	3 206	(2)	3 204

Property, plant and equipment, net	74 245	(1 267)	72 978

Right-of-use assets, net	—	3 059	3 059

Liabilities and Shareholders' Equity

Current liabilities

Current portion of long-term debt	229	(38)	191

Current portion of lease liabilities	—	276	276

Current portion of provisions	667	(1)	666

Long-term debt	13 890	(1 222)	12 668

Long-term lease liabilities	—	2 777	2 777

Other long-term liabilities	2 346	(1)	2 345

Provisions	6 984	(20)	6 964

Deferred income taxes	12 045	5	12 050

Equity	44 005	14	44 019

For leases that were classified as finance leases under IAS 17, the carrying amount of the right-of-use asset and the lease liability at January 1, 2019 were determined as the carrying amount of the lease asset and lease liability under IAS 17 immediately before that date.

The lease liabilities recognized in accordance with IFRS 16 were discounted using the company's incremental borrowing rate upon adoption. The weighted average rate of additional leases recognized in accordance with IFRS 16 was 3.85% as at January 1, 2019.

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 June 30	Oil Sands				Exploration and Production				Refining and Marketing				Corporate and Eliminations				Total
($ millions)	2019		2018		2019		2018		2019		2018		2019		2018		2019		2018

Revenues and Other Income

Gross revenues	3 985		3 602		994		1 132		5 592		5 898		6		6		10 577		10 638

Intersegment revenues	1 155		578		—		—		34		23		(1 189	)	(601	)	—		—

Less: Royalties	(341	)	(124	)	(165	)	(187	)	—		—		—		—		(506	)	(311	)

Operating revenues, net of royalties	4 799		4 056		829		945		5 626		5 921		(1 183	)	(595	)	10 071		10 327

Other income (loss)	1		53		9		—		14		(15	)	3		63		27		101

	4 800		4 109		838		945		5 640		5 906		(1 180	)	(532	)	10 098		10 428

Expenses

Purchases of crude oil and products	404		400		—		—		3 979		4 282		(1 097	)	(626	)	3 286		4 056

Operating, selling and general	2 060		1 849		114		114		530		494		95		155		2 799		2 612

Transportation	326		291		21		22		27		32		(13	)	(10	)	361		335

Depreciation, depletion, amortization and impairment	1 060		954		235		249		200		174		18		14		1 513		1 391

Exploration	10		4		66		15		—		—		—		—		76		19

Gain on asset exchange and disposals	(6	)	—		(151	)	—		(1	)	(4	)	—		—		(158	)	(4	)

Financing expenses (income)	74		79		14		11		14		8		(5	)	445		97		543

	3 928		3 577		299		411		4 749		4 986		(1 002	)	(22	)	7 974		8 952

Earnings (Loss) before Income Taxes	872		532		539		534		891		920		(178	)	(510	)	2 124		1 476

Income Tax (Recovery) Expense

Current	108		45		172		252		192		223		(77	)	(107	)	395		413

Deferred	(797	)	84		(89	)	(30	)	(66	)	26		(48	)	11		(1 000	)	91

	(689	)	129		83		222		126		249		(125	)	(96	)	(605	)	504

Net Earnings (Loss)	1 561		403		456		312		765		671		(53	)	(414	)	2 729		972

Capital and Exploration Expenditures	856		1 121		268		251		220		370		20		20		1 364		1 762

(1): The company adopted IFRS 16 on January 1, 2019 using the modified retrospective transition approach and, therefore, prior periods have not been restated. Refer to note 3 for further information.
(2): Beginning in the first quarter of 2019, results from the company's Energy Trading business are included within each of the respective operating business segments to which the respective trade relates. The Energy Trading business was previously reported within the Corporate, Energy Trading and Eliminations segment. Prior periods have been restated to reflect this change. The results from the company's Renewable Energy business are included within the Corporate and Eliminations segment.


Six months ended June 30	Oil Sands				Exploration and Production				Refining and Marketing				Corporate and Eliminations				Total
($ millions)	2019		2018		2019		2018		2019		2018		2019		2018		2019		2018

Revenues and Other Income

Gross revenues	7 204		6 173		1 931		2 149		10 782		11 315		14		15		19 931		19 652

Intersegment revenues	2 117		1 606		—		—		48		44		(2 165	)	(1 650	)	—		—

Less: Royalties	(539	)	(170	)	(338	)	(348	)	—		—		—		—		(877	)	(518	)

Operating revenues, net of royalties	8 782		7 609		1 593		1 801		10 830		11 359		(2 151	)	(1 635	)	19 054		19 134

Other income (loss)	11		68		395		(58	)	29		(32	)	6		66		441		44

	8 793		7 677		1 988		1 743		10 859		11 327		(2 145	)	(1 569	)	19 495		19 178

Expenses

Purchases of crude oil and products	677		670		—		—		7 043		7 935		(1 813	)	(1 702	)	5 907		6 903

Operating, selling and general	4 033		3 724		262		225		1 066		986		270		297		5 631		5 232

Transportation	624		517		40		46		56		70		(23	)	(24	)	697		609

Depreciation, depletion, amortization and impairment	2 052		1 928		482		528		403		328		38		31		2 975		2 815

Exploration	112		27		77		24		—		—		—		—		189		51

Gain on asset exchange and disposals	(10	)	(1	)	(151	)	(162	)	(2	)	(4	)	—		—		(163	)	(167	)

Financing expenses (income)	143		156		28		12		27		11		(69	)	926		129		1 105

	7 631		7 021		738		673		8 593		9 326		(1 597	)	(472	)	15 365		16 548

Earnings (Loss) before Income Taxes	1 162		656		1 250		1 070		2 266		2 001		(548	)	(1 097	)	4 130		2 630

Income Tax (Recovery) Expense

Current	149		15		424		455		553		492		(198	)	(213	)	928		749

Deferred	(737	)	141		(122	)	(85	)	(61	)	49		(77	)	15		(997	)	120

	(588	)	156		302		370		492		541		(275	)	(198	)	(69	)	869

Net Earnings (Loss)	1 750		500		948		700		1 774		1 460		(273	)	(899	)	4 199		1 761

Capital and Exploration Expenditures	1 440		2 113		496		416		302		487		29		37		2 267		3 053

(1): The company adopted IFRS 16 on January 1, 2019 using the modified retrospective transition approach and, therefore, prior periods have not been restated. Refer to note 3 for further information.
(2): Beginning in the first quarter of 2019, results from the company's Energy Trading business are included within each of the respective operating business segments to which the respective trade relates. The Energy Trading business was previously reported within the Corporate, Energy Trading and Eliminations segment. Prior periods have been restated to reflect this change. The results from the company's Renewable Energy business are included within the Corporate and Eliminations segment.

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:


Three months ended June 30	2019					2018
($ millions)	North America		International	Total		North America		International	Total

Oil Sands

SCO and diesel	3 660		—	3 660		2 919		—	2 919

Bitumen	1 480		—	1 480		1 261		—	1 261

	5 140		—	5 140		4 180		—	4 180

Exploration and Production

Crude oil and natural gas liquids	507		486	993		485		644	1 129

Natural gas	—		1	1		—		3	3

	507		487	994		485		647	1 132

Refining and Marketing

Gasoline	2 660		—	2 660		2 920		—	2 920

Distillate	2 255		—	2 255		2 234		—	2 234

Other	711		—	711		767		—	767

	5 626		—	5 626		5 921		—	5 921

Corporate and Eliminations

	(1 183	)	—	(1 183	)	(595	)	—	(595	)

Total Revenue from Contracts with Customers	10 090		487	10 577		9 991		647	10 638


Six months ended June 30	2019					2018
($ millions)	North America		International	Total		North America		International	Total

Oil Sands

SCO and diesel	6 938		—	6 938		5 869		—	5 869

Bitumen	2 383		—	2 383		1 910		—	1 910

	9 321		—	9 321		7 779		—	7 779

Exploration and Production

Crude oil and natural gas liquids	998		930	1 928		966		1 173	2 139

Natural gas	—		3	3		3		7	10

	998		933	1 931		969		1 180	2 149

Refining and Marketing

Gasoline	4 766		—	4 766		5 308		—	5 308

Distillate	4 638		—	4 638		4 524		—	4 524

Other	1 426		—	1 426		1 527		—	1 527

	10 830		—	10 830		11 359		—	11 359

Corporate, Energy Trading and Eliminations

	(2 151	)	—	(2 151	)	(1 635	)	—	(1 635	)

Total Revenue from Contracts with Customers	18 998		933	19 931		18 472		1 180	19 652

(1): The company adopted IFRS 16 on January 1, 2019 using the modified retrospective transition approach and, therefore, prior periods have not been restated. Refer to note 3 for further information.


	Three months ended June 30				Six months ended June 30
($ millions)	2019		2018		2019		2018

Energy trading activities

Unrealized gains recognized in earnings	15		35		110		21

(Losses) gains on inventory valuation	(12	)	3		(35	)	19

Risk management activities⁽¹⁾	11		(44	)	(46	)	(69	)

Investment and interest income	—		(3	)	50		6

Insurance proceeds⁽²⁾	34		33		397		33

Other⁽³⁾	(21	)	77		(35	)	34

	27		101		441		44

(1): Includes fair value changes related to short-term derivative contracts in the Oil Sands and Refining and Marketing segments.
(2): 2019 and 2018 includes insurance proceeds for Syncrude within Oil Sands segment, and six months ended June 30, 2019 includes insurance proceeds for Libyan assets within Exploration and Production segment (note 16).
(3): Includes $60 million of interest income related to prior period tax settlement recorded in the second quarter of 2018.

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


	Three months ended June 30				Six months ended June 30
($ millions)	2019		2018		2019		2018

Interest on debt	202		234		412		443

Interest on lease liabilities (note 3)	43		—		88		—

Capitalized interest	(28	)	(25	)	(56	)	(102	)

Interest expense	217		209		444		341

Interest on partnership liability	14		14		28		28

Interest on pension and other post-retirement benefits	15		15		30		29

Accretion	68		67		139		132

Foreign exchange (gain) loss on U.S. dollar denominated debt	(231	)	245		(511	)	618

Foreign exchange and other	14		(7	)	(1	)	(43	)

	97		543		129		1 105

During the second quarter of 2019, the company re-paid its US$140 million (book value of $188 million) senior unsecured notes at maturity, with a coupon of 7.75%, for US$145 million ($195 million), including US$5 million ($7 million) of accrued interest.

In May 2019, the company issued $750 million of senior unsecured Series 6 Medium Term Notes maturing on May 24, 2029. The Series 6 Medium Term Notes have a coupon of 3.10% and were priced at $99.761 per $100 principal amount for an effective yield of 3.128%. Interest is paid semi-annually.


	Three months ended June 30		Six months ended June 30
($ millions)	2019	2018	2019	2018

Net earnings	2 729	972	4 199	1 761

(millions of common shares)

Weighted average number of common shares	1 569	1 633	1 574	1 636

Dilutive securities:

Effect of share options	3	8	3	7

Weighted average number of diluted common shares	1 572	1 641	1 577	1 643

(dollars per common share)

Basic earnings per share	1.74	0.60	2.67	1.08

Diluted earnings per share	1.74	0.59	2.66	1.07

On May 1, 2018, the company announced its intention to renew its existing normal course issuer bid (the 2018 NCIB) to continue to repurchase shares through the facilities of the Toronto Stock Exchange (TSX), New York Stock Exchange (NYSE) and/or alternative trading platforms. Pursuant to the 2018 NCIB, the company was permitted to purchase for cancellation up to 52,285,330 of its common shares between May 4, 2018 and May 3, 2019. On November 14, 2018, Suncor announced an amendment to the 2018 NCIB, effective as of November 19, 2018, which allowed the company to increase the maximum number of aggregate common shares that it was permitted to repurchase for cancellation between May 4, 2018 and May 3, 2019 to 81,695,830.

On May 1, 2019, the company announced its intention to renew its existing normal course issuer bid (the 2019 NCIB) to continue to repurchase shares under its previously announced buyback program through the facilities of the TSX, NYSE and/or alternative trading platforms. Pursuant to the 2019 NCIB, the company is permitted to purchase for cancellation up to 50,252,231 of its common shares between May 6, 2019 and May 5, 2020.

During the second quarter of 2019, the company repurchased 13.0 million common shares under the 2019 NCIB at an average price of $42.46 per share, for a total repurchase cost of $552 million.

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

Under an automatic repurchase plan agreement with an independent broker, the company recorded the following liability for share repurchases that could have taken place during its internal blackout period:

The changes in the fair value of non-designated Energy Trading and Risk Management derivatives are as follows:

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:

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 company's financial instruments measured at fair value for each hierarchy level as at June 30, 2019:

During the second quarter of 2019, there were no transfers between Level 1 and Level 2 fair value measurements.

The company uses foreign exchange forwards to mitigate its exposure to the effect of future foreign exchange movements on future debt issuance or settlements. As at June 30, 2019, the fair value of foreign exchange forward contracts was $95 million.

At June 30, 2019, the carrying value of fixed-term debt accounted for under amortized cost was $13.0 billion (December 31, 2018 – $12.9 billion) and the fair value was $15.8 billion (December 31, 2018 – $14.2 billion). The estimated fair value of long-term debt is based on pricing sourced from market data.

Suncor's decommissioning and restoration provision increased by $1.2 billion for the six months ended June 30, 2019. The increase was primarily due to a decrease in the credit-adjusted risk-free interest rate to 3.30% (December 31, 2018 – 4.20%). This increase was partially offset by the liabilities settled during the period.

The company has lease contracts which include storage tanks, railway cars, vessels, buildings, land and mobile equipment for the purpose of production, storage and transportation of crude oil and related products.


($ millions)	Plant and Equipment

Cost

At January 1, 2019	3 326

Additions and adjustments	88

Foreign exchange	(6	)

At June 30, 2019	3 408

Accumulated provision

At January 1, 2019	267

Depreciation	163

At June 30, 2019	430

Net ROU assets

At January 1, 2019	3 059

At June 30, 2019	2 978

During the first quarter of 2018, Suncor acquired an additional 1.05% interest in the Fort Hills project for consideration of $145 million. The additional interest was an outcome of the commercial dispute settlement agreement reached among the Fort Hills partners in December 2017. Teck Resources Limited (Teck) also acquired an additional 0.42% in the project. Suncor's share in the project has increased to 54.11% and Teck's has increased to 21.31%, with Total E&P Canada Ltd.'s share decreasing to 24.58%.

On February 23, 2018, Suncor completed the purchase of an additional 5% working interest in the Syncrude project from Mocal Energy Limited for $923 million cash. Suncor's share in the Syncrude project has increased to 58.74%.

The acquisition has been accounted for as a business combination using the acquisition method. The purchase price allocation is based on management's best estimates of fair values of Syncrude's assets and liabilities as at February 23, 2018.


($ millions)

Accounts receivable	2

Inventory	15

Property, plant and equipment	998

Exploration and evaluation	163

Total assets acquired	1 178

Accounts payable and accrued liabilities	(51	)

Employee future benefits	(33	)

Decommissioning provision	(169	)

Deferred income taxes	(2	)

Total liabilities assumed	(255	)

Net assets acquired	923

The fair values of accounts receivable and accounts payable approximate their carrying values due to the short-term maturity of the instruments. The fair value of materials and supplies inventory approximates book value due to short-term turnover rates. The fair values of property, plant and equipment, and the decommissioning provision were determined using an expected future cash flow approach. Key assumptions used in the calculations were discount rates, future commodity prices and costs, timing of development activities, projections of oil reserves, and cost estimates to abandon and reclaim the mine and facilities.

The additional working interest in Syncrude contributed $109 million to gross revenues and a $2 million net loss to consolidated net earnings (loss) from the acquisition date to June 30, 2018.

Had the acquisition occurred on January 1, 2018, the additional working interest would have contributed an additional $64 million to gross revenues and $4 million to consolidated net earnings, which would have resulted in gross revenues of $19.72 billion and consolidated net earnings of $1.77 billion for the six months ended June 30, 2018.

In the second quarter of 2019, Suncor recognized a deferred income tax recovery of $1.116 billion related to a decrease in the Alberta corporate tax rate from 12% to 8%. The tax rate decrease will be phased in as follows: 11% effective July 1, 2019, 10% effective January 1, 2020, 9% effective January 1, 2021, and 8% effective January 1, 2022. The deferred income tax recovery of $1.116 billion was comprised of $910 million recovery in the Oil Sands segment, $88 million recovery in the Refining and Marketing segment, $70 million recovery in the Exploration and Production segment and $48 million recovery in the Corporate and Eliminations segment.

On June 28, 2019, the company completed a transaction to sell its 37% equity interest in Canbriam Energy Inc. (Canbriam) and recognized a gain on sale for the full proceeds of $151 million ($139 million after-tax) in the Exploration and Production segment. The investment in Canbriam was acquired early in 2018 through the exchange of Suncor's northeast British Columbia mineral landholdings, including associated production, and consideration of $52 million. Subsequently, the company

wrote down its investment in Canbriam to nil in the fourth quarter of 2018, following an assessment of expected future commodity prices and net cash flows relative to the value of its investment.

During the first quarter of 2019, the company received $363 million in insurance proceeds for its Libyan assets ($264 million after-tax). The proceeds may be subject to a provisional repayment, which may be dependent on the future performance and cash flows from Suncor's Libyan assets.

On September 29, 2018, Suncor along with the other working interest partners in the Joslyn Oil Sands Mining Project, agreed to sell 100% of their respective working interests to Canadian Natural Resources Limited for gross proceeds of $225 million, $82.7 million net to Suncor. Suncor held a 36.75% working interest in Joslyn prior to the transaction. The working-interest partners received cash proceeds of $100 million ($36.8 million net to Suncor) upon closing with the remaining $125 million ($45.9 million net to Suncor) to be received in equal instalments over the next five years. As a result, Suncor has recorded a long-term receivable of $36.7 million within the Other Assets line item and the first instalment of $9.2 million is recorded within the Accounts Receivable line item. The transaction resulted in a gain of $83 million in the Oil Sands segment.

On May 31, 2018, the company completed the previously announced transaction to acquire a 17.5% interest in the Fenja development project in Norway from Faroe Petroleum Norge AS for acquisition costs of US$55 million (approximately $70 million), plus interim settlement costs of $22 million under the acquisition method. This project was sanctioned by its owners in December 2017.


($ millions)	January 1 2019

Operating leases as at December 31, 2018⁽¹⁾	2 457

Exemption for short-term leases	(42	)

Discounting	(623	)

Additional lease liabilities recognized due to adoption of IFRS 16 as at January 1, 2019	1 792


	Three months ended June 30		Six months ended June 30
($ millions, except as noted)	2019	2018	2019	2018

Share repurchase activities (thousands of common shares)

Shares repurchased	13 001	11 860	24 952	20 859

Amounts charged to

Share capital	213	192	406	337

Retained earnings	339	417	660	661

Share repurchase cost	552	609	1 066	998


($ millions)	June 30 2019	December 31 2018

Amounts charged to

Share capital	81	111

Retained earnings	119	152

Liability for share purchase commitment	200	263


($ millions)	Energy Trading		Risk Management		Total

Fair value outstanding at December 31, 2018	1		59		60

Cash Settlements – received during the year	(153	)	(23	)	(176	)

Unrealized gains (losses) recognized in earnings during the year (note 5)	110		(46	)	64

Fair value outstanding at June 30, 2019	(42	)	(10	)	(52	)


($ millions)	Level 1		Level 2		Level 3	Total Fair Value

Accounts receivable	9		118		—	127

Accounts payable	(97	)	(82	)	—	(179	)

	(88	)	36		—	(52	)


($ millions)		June 30 2019

Property, plant and equipment, net – excluding ROU assets		73 420

ROU assets		2 978

		76 398