EX-99.3 4 a2242085zex-99_3.htm EX-99.3
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EXHIBIT 99.3

Unaudited Consolidated Financial Statements for the second quarter ended June 30, 2020

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(unaudited)

  Three months ended
June 30		   Six months ended
June 30		    

($ millions)

   2020   2019   2020   2019    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Revenues and Other Income

                    
​

Operating revenues, net of royalties (note 3)

   4 229   10 071   11 620   19 054    
​

Other income (note 4)

   16   27   381   441    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  4 245   10 098   12 001   19 495    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Expenses

                    
​

Purchases of crude oil and products

   1 419   3 286   4 599   5 907    
​

Operating, selling and general (note 10)

   2 156   2 799   5 123   5 631    
​

Transportation

   329   361   665   697    
​

Depreciation, depletion, amortization and impairment (note 11)

   1 522   1 513   5 668   2 975    
​

Exploration

   25   76   164   189    
​

Gain on disposal of assets

   (1 ) (158 ) (5 ) (163 )  
​

Financing (income) expenses (note 6)

   (136 ) 97   1 206   129    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  5 314   7 974   17 420   15 365    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(Loss) Earnings before Income Taxes

   (1 069 ) 2 124   (5 419 ) 4 130    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Income Tax (Recovery) Expense

  
 		  
 		  
 		  
 		  
 
​

Current

   (364 ) 395   (669 ) 928    
​

Deferred

   (91 ) (1 000 ) (611 ) (997 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  (455 ) (605 ) (1 280 ) (69 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net (Loss) Earnings

   (614 ) 2 729   (4 139 ) 4 199    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other Comprehensive Loss

  
 		  
 		  
 		  
 		  
 
​

Items That May be Subsequently Reclassified to Earnings:

                    
​

Foreign currency translation adjustment

   (109 ) (80 ) 132   (148 )  
​

Items That Will Not be Reclassified to Earnings:

                    
​

Actuarial loss on employee retirement benefit plans, net of income taxes

   (412 ) (177 ) (399 ) (313 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other Comprehensive Loss

   (521 ) (257 ) (267 ) (461 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Comprehensive (Loss) Income

  
(1 135
)
2 472		  
(4 406
)
3 738		  
 
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Per Common Share (dollars) (note 7)

  
 		  
 		  
 		  
 		  
 
​

Net (loss) earnings – basic

   (0.40 ) 1.74   (2.71 ) 2.67    
​

Net (loss) earnings – diluted

   (0.40 ) 1.74   (2.71 ) 2.66    
​

Cash dividends

   0.21   0.42   0.68   0.84    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

See accompanying notes to the condensed interim consolidated financial statements.

  
 		  
 
​ 48  2020 SECOND QUARTER   Suncor Energy Inc. ​ ​

CONSOLIDATED BALANCE SHEETS
(unaudited)

($ millions)

   June 30
2020		   December 31
2019		    

​

​ ​ ​ ​ ​ ​

Assets

            
​

Current assets

            
​

Cash and cash equivalents

   1 846   1 960    
​

Accounts receivable

   2 656   4 052    
​

Inventories (note 10)

   3 228   3 761    
​

Income taxes receivable

   646   133    
​ ​ ​ ​ ​ ​ ​

Total current assets

   8 376   9 906    
​

Property, plant and equipment, net (note 11)

   68 514   72 640    
​

Exploration and evaluation

   2 484   2 428    
​

Other assets

   1 242   1 194    
​

Goodwill and other intangible assets

   3 057   3 058    
​

Deferred income taxes

   156   209    
​ ​ ​ ​ ​ ​ ​

Total assets

   83 829   89 435    
​ ​ ​ ​ ​ ​ ​

Liabilities and Shareholders' Equity

  
 		  
 		  
 
​

Current liabilities

            
​

Short-term debt

   3 018   2 155    
​

Current portion of long-term lease liabilities

   288   310    
​

Accounts payable and accrued liabilities

   4 161   6 555    
​

Current portion of provisions

   634   631    
​

Income taxes payable

   97   886    
​ ​ ​ ​ ​ ​ ​

Total current liabilities

   8 198   10 537    
​

Long-term debt

   15 969   12 884    
​

Long-term lease liabilities

   2 605   2 621    
​

Other long-term liabilities

   2 993   2 499    
​

Provisions (note 12)

   8 169   8 676    
​

Deferred income taxes

   9 379   10 176    
​

Equity

   36 516   42 042    
​ ​ ​ ​ ​ ​ ​

Total liabilities and shareholders' equity

   83 829   89 435    

​

​ ​ ​ ​ ​ ​

See accompanying notes to the condensed interim consolidated financial statements.

  
 		  
 		  
 
​ ​ ​ 2020 SECOND QUARTER   Suncor Energy Inc.  49

CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

  Three months ended
June 30		   Six months ended
June 30		    

($ millions)

   2020   2019   2020   2019    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating Activities

                    
​

Net (Loss) Earnings

   (614 ) 2 729   (4 139 ) 4 199    
​

Adjustments for:

                    
​

Depreciation, depletion, amortization and impairment (note 11)

   1 522   1 513   5 668   2 975    
​

Deferred income tax recovery

   (91 ) (1 000 ) (611 ) (997 )  
​

Accretion (note 6)

   69   68   138   139    
​

Unrealized foreign exchange (gain) loss on U.S. dollar denominated debt (note 6)

   (499 ) (231 ) 597   (511 )  
​

Change in fair value of financial instruments and inventory

   27   76   152   148    
​

Gain on disposal of assets

   (1 ) (158 ) (5 ) (163 )  
​

Share-based compensation

   37   24   (289 ) (85 )  
​

Exploration

   10   37   80   39    
​

Settlement of decommissioning and restoration liabilities

   (38 ) (76 ) (144 ) (190 )  
​

Other

   66   23   42   36    
​

(Increase) decrease in non-cash working capital

   (1 256 ) 428   (873 ) (609 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flow (used in) provided by operating activities

   (768 ) 3 433   616   4 981    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Investing Activities

                    
​

Capital and exploration expenditures

   (698 ) (1 364 ) (2 018 ) (2 267 )  
​

Proceeds from disposal of assets

   2   159   7   166    
​

Other investments

   (66 ) (42 ) (87 ) (99 )  
​

(Increase) decrease in non-cash working capital

   (364 ) 28   (544 ) (6 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flow used in investing activities

   (1 126 ) (1 219 ) (2 642 ) (2 206 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Financing Activities

                    
​

Net (decrease) increase in short-term debt

   (662 ) (1 281 ) 724   (955 )  
​

Net increase in long-term debt

   2 634   557   2 634   557    
​

Lease liability payments

   (89 ) (72 ) (171 ) (142 )  
​

Issuance of common shares under share option plans

   —   6   29   41    
​

Repurchase of common shares (note 8)

   —   (552 ) (307 ) (1 066 )  
​

Distributions relating to non-controlling interest

   (3 ) (2 ) (5 ) (4 )  
​

Dividends paid on common shares

   (320 ) (658 ) (1 029 ) (1 320 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash flow provided by (used in) financing activities

   1 560   (2 002 ) 1 875   (2 889 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(Decrease) Increase in Cash and Cash Equivalents

   (334 ) 212   (151 ) (114 )  
​

Effect of foreign exchange on cash and cash equivalents

   (46 ) (26 ) 37   (46 )  
​

Cash and cash equivalents at beginning of period

   2 226   1 875   1 960   2 221    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cash and Cash Equivalents at End of Period

   1 846   2 061   1 846   2 061    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Supplementary Cash Flow Information

                    
​

Interest paid

   361   352   508   506    
​

Income taxes (received) paid

   (173 ) 282   578   398    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

See accompanying notes to the condensed interim consolidated financial statements.

  
 		  
 		  
 		  
 		  
 
​ 50  2020 SECOND QUARTER   Suncor Energy Inc. ​ ​

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)

($ millions)

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

At December 31, 2018

   25 910   540   1 076   16 479   44 005   1 584 484    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Adoption of IFRS 16 impact

   —   —   —   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    
​ ​ ​

Repurchase of common shares for cancellation (note 8)

   (406 ) —   —   (660 ) (1 066 ) (24 952 )  
​ ​ ​

Change in liability for share repurchase commitment

   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    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

At December 31, 2019

   25 167   566   899   15 410   42 042   1 531 874    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net loss

   —   —   —   (4 139 ) (4 139 ) —    
​ ​ ​

Foreign currency translation adjustment

   —   —   132   —   132   —    
​ ​ ​

Actuarial loss on employee retirement benefit plans, net of income taxes of $124

   —   —   —   (399 ) (399 ) —    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total comprehensive income (loss)

   —   —   132   (4 538 ) (4 406 ) —    
​ ​ ​

Issued under share option plans

   36   (7 ) —   —   29   804    
​ ​ ​

Repurchase of common shares for cancellation (note 8)

   (124 ) —   —   (183 ) (307 ) (7 527 )  
​ ​ ​

Change in liability for share repurchase commitment

   65   —   —   103   168   —    
​ ​ ​

Share-based compensation

   —   19   —   —   19   —    
​ ​ ​

Dividends paid on common shares

   —   —   —   (1 029 ) (1 029 ) —    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

At June 30, 2020

   25 144   578   1 031   9 763   36 516   1 525 151    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

See accompanying notes to the condensed interim consolidated financial statements.

  
 		  
 		  
 		  
 
​ ​ ​ 2020 SECOND QUARTER   Suncor Energy Inc.  51

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 Calgary, Alberta. The company is focused on developing one of the world's largest petroleum resource basins – Canada's Athabasca oil sands. In addition, the company explores for, acquires, develops, produces and markets crude oil in Canada and internationally, transports and refines crude oil, and markets petroleum and petrochemical products primarily in Canada. The company also operates a renewable energy business and conducts energy trading activities focused principally on the marketing and trading of crude oil, natural gas, byproducts, refined products, and power.

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 (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, 2019.

(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, 2019.

(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, 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 company's consolidated financial statements for the year ended December 31, 2019.

On January 30, 2020, the World Health Organization declared the Coronavirus disease (COVID-19) outbreak a Public Health Emergency of International Concern and, on March 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 caused 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 Suncor's 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 downturn have been considered in management's estimates, and assumptions at period end have been reflected in our results with any significant changes described in the relevant financial statement note.

Market conditions have improved over the course of the second quarter of 2020 as nations began easing lockdown restrictions; however, the COVID-19 pandemic continues to present challenges to our operations and business environment. Management cannot reasonably estimate the length or severity of this pandemic but continues to monitor its impact on our operations.

(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.

​ 52  2020 SECOND QUARTER   Suncor Energy Inc. ​ ​


(f) Government Grants

Government grants are recognized when the company has reasonable assurance that it has complied with the relevant conditions of the grant and that it will be received. The company recognizes the grant against the financial statement line item that it is intended to compensate, or to other income if the grant is recognized in a different period than the underlying transaction.

(g) Adoption of New IFRS Standards

Definition of a Business

In October 2018, the IASB issued Definition of a Business (Amendments to IFRS 3). The amendments narrowed and clarified the definition of a business. The amendments include an election to use a concentration test. This is a simplified assessment that results in treatment of an acquisition as an asset acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of similar identifiable assets. If an election to use a concentration test is not made, or the test failed, then the assessment focuses on the existence of a substantive process. One important distinction is that "goodwill" can only be recognized as a result of acquiring a business, but not as a result of an asset acquisition. The company adopted the amendments prospectively on the effective date of January 1, 2020, and there was no impact to the company's consolidated financial statements as a result of the initial application.

​ ​ ​ 2020 SECOND QUARTER   Suncor Energy Inc.  53

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 June 30        Oil Sands
 		           Exploration
       and Production
 		       Refining and
       Marketing
 		           Corporate and
       Eliminations
 		           Total
 		   
($ millions)     2020     2019     2020     2019     2020     2019     2020     2019     2020     2019    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Revenues and Other Income

                                                          
​

Gross revenues

     1 215     3 985     293     994     2 737     5 592     6     6     4 251     10 577    
​

Intersegment revenues

     437     1 155     —     —     22     34     (459 )   (1 189 )   —     —    
​

Less: Royalties

     (16 )   (341 )   (6 )   (165 )   —     —     —     —     (22 )   (506 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating revenues, net of royalties

     1 636     4 799     287     829     2 759     5 626     (453 )   (1 183 )   4 229     10 071    
​

Other income (loss)

     23     1     24     9     (26 )   14     (5 )   3     16     27    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

    1 659     4 800     311     838     2 733     5 640     (458 )   (1 180 )   4 245     10 098    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Expenses

                                                                
​

Purchases of crude oil and products

     91     404     —     —     1 701     3 979     (373 )   (1 097 )   1 419     3 286    
​

Operating, selling and general

     1 528     2 060     111     114     417     530     100     95     2 156     2 799    
​

Transportation

     272     326     33     21     34     27     (10 )   (13 )   329     361    
​

Depreciation, depletion, amortization and impairment

     1 065     1 060     223     235     214     200     20     18     1 522     1 513    
​

Exploration

     1     10     24     66     —     —     —     —     25     76    
​

Loss (gain) on disposal of assets

     1     (6 )   —     (151 )   (1 )   (1 )   (1 )   —     (1 )   (158 )  
​

Financing expenses (income)

     92     74     14     14     15     14     (257 )   (5 )   (136 )   97    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

    3 050     3 928     405     299     2 380     4 749     (521 )   (1 002 )   5 314     7 974    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(Loss) Earnings before Income Taxes

     (1 391 )   872     (94 )   539     353     891     63     (178 )   (1 069 )   2 124    
​

Income Tax (Recovery) Expense

                                                                
​

Current

     (314 )   108     (19 )   172     57     192     (88 )   (77 )   (364 )   395    
​

Deferred

     (58 )   (797 )   (24 )   (89 )   27     (66 )   (36 )   (48 )   (91 )   (1 000 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

    (372 )   (689 )   (43 )   83     84     126     (124 )   (125 )   (455 )   (605 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net (Loss) Earnings

     (1 019 )   1 561     (51 )   456     269     765     187     (53 )   (614 )   2 729    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Capital and Exploration Expenditures

     437     856     131     268     86     220     44     20     698     1 364    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ 54  2020 SECOND QUARTER   Suncor Energy Inc. ​ ​

 

Six months ended June 30        Oil Sands
 		           Exploration
       and Production
 		       Refining and
       Marketing
 		           Corporate and
       Eliminations
 		           Total
 		   
($ millions)     2020     2019     2020     2019     2020     2019     2020     2019     2020     2019    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Revenues and Other Income

                                                          
​

Gross revenues

     3 542     7 204     832     1 931     7 300     10 782     15     14     11 689     19 931    
​

Intersegment revenues

     1 427     2 117     —     —     46     48     (1 473 )   (2 165 )   —     —    
​

Less: Royalties

     (41 )   (539 )   (28 )   (338 )   —     —     —     —     (69 )   (877 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Operating revenues, net of royalties

     4 928     8 782     804     1 593     7 346     10 830     (1 458 )   (2 151 )   11 620     19 054    
​

Other income (loss)

     271     11     57     395     60     29     (7 )   6     381     441    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

    5 199     8 793     861     1 988     7 406     10 859     (1 465 )   (2 145 )   12 001     19 495    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Expenses

                                                                
​

Purchases of crude oil and products

     498     677     —     —     5 659     7 043     (1 558 )   (1 813 )   4 599     5 907    
​

Operating, selling and general

     3 780     4 033     244     262     928     1 066     171     270     5 123     5 631    
​

Transportation

     561     624     56     40     70     56     (22 )   (23 )   665     697    
​

Depreciation, depletion, amortization and impairment

     4 130     2 052     1 051     482     446     403     41     38     5 668     2 975    
​

Exploration

     58     112     106     77     —     —     —     —     164     189    
​

Gain on disposal of assets

     —     (10 )   —     (151 )   (4 )   (2 )   (1 )   —     (5 )   (163 )  
​

Financing expenses (income)

     173     143     17     28     15     27     1 001     (69 )   1 206     129    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

    9 200     7 631     1 474     738     7 114     8 593     (368 )   (1 597 )   17 420     15 365    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(Loss) Earnings before Income Taxes

     (4 001 )   1 162     (613 )   1 250     292     2 266     (1 097 )   (548 )   (5 419 )   4 130    
​

Income Tax (Recovery) Expense

                                                                
​

Current

     (527 )   149     17     424     61     553     (220 )   (198 )   (669 )   928    
​

Deferred

     (502 )   (737 )   (152 )   (122 )   17     (61 )   26     (77 )   (611 )   (997 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

    (1 029 )   (588 )   (135 )   302     78     492     (194 )   (275 )   (1 280 )   (69 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net (Loss) Earnings

     (2 972 )   1 750     (478 )   948     214     1 774     (903 )   (273 )   (4 139 )   4 199    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Capital and Exploration Expenditures

     1 447     1 440     310     496     178     302     83     29     2 018     2 267    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ 2020 SECOND QUARTER   Suncor Energy Inc.  55

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

   2020
   2019
 		   

($ millions)

   North America   International   Total   North America   International   Total    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Oil Sands(1)

                            
​

SCO and diesel

   1 312   —   1 312   3 699   —   3 699    
​

Bitumen

   340   —   340   1 441   —   1 441    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  1 652   —   1 652   5 140   —   5 140    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Exploration and Production

                            
​

Crude oil and natural gas liquids

   160   132   292   507   486   993    
​

Natural gas

   —   1   1   —   1   1    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  160   133   293   507   487   994    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Refining and Marketing

                            
​

Gasoline

   1 132   —   1 132   2 660   —   2 660    
​

Distillate

   1 148   —   1 148   2 255   —   2 255    
​

Other

   479   —   479   711   —   711    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  2 759   —   2 759   5 626   —   5 626    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Corporate and Eliminations

                            
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  (453 ) —   (453 ) (1 183 ) —   (1 183 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Revenue from Contracts with Customers

   4 118   133   4 251   10 090   487   10 577    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(1)
Prior period amounts have been reclassified to conform with current period presentation.


Six months ended June 30

   2020
   2019
 		   

($ millions)

   North America   International   Total   North America   International   Total    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Oil Sands(1)

                            
​

SCO and diesel

   4 091   —   4 091   7 040   —   7 040    
​

Bitumen

   878   —   878   2 281   —   2 281    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  4 969   —   4 969   9 321   —   9 321    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Exploration and Production

                            
​

Crude oil and natural gas liquids

   479   351   830   998   930   1 928    
​

Natural gas

   —   2   2   —   3   3    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  479   353   832   998   933   1 931    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Refining and Marketing

                            
​

Gasoline

   3 026   —   3 026   4 766   —   4 766    
​

Distillate

   3 264   —   3 264   4 638   —   4 638    
​

Other

   1 056   —   1 056   1 426   —   1 426    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  7 346   —   7 346   10 830   —   10 830    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Corporate and Eliminations

                            
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  (1 458 ) —   (1 458 ) (2 151 ) —   (2 151 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Total Revenue from Contracts with Customers

   11 336   353   11 689   18 998   933   19 931    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(1)
Prior period amounts have been reclassified to conform with current period presentation.
​ 56  2020 SECOND QUARTER   Suncor Energy Inc. ​ ​

4. OTHER INCOME

Other income consists of the following:

  Three months ended
June 30		   Six months ended
June 30		    

($ millions)

   2020   2019   2020   2019    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Energy trading activities

                    
​

(Losses) gains recognized in earnings

   (69 ) 15   167   110    
​

Gains (losses) on inventory valuation

   87   (12 ) (10 ) (35 )  
​

Short-term commodity risk management

   (86 ) 11   99   (46 )  
​

Investment and interest income

   13   —   49   50    
​

Insurance proceeds(1)

   49   34   49   397    
​

Other

   22   (21 ) 27   (35 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  16   27   381   441    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(1)
Three months ended June 30, 2020 and June 30, 2019 include insurance proceeds for MacKay River and Syncrude, respectively, within the Oil Sands segment, and six months ended June 30, 2019 includes insurance proceeds for Libyan assets within the Exploration and Production segment.

5. SHARE-BASED COMPENSATION

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

  Three months ended
June 30		   Six months ended
June 30		    

($ millions)

   2020   2019   2020   2019    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Equity-settled plans

   6   9   19   33    
​

Cash-settled plans

   31   15   (69 ) 153    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  37   24   (50 ) 186    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

6. FINANCING (INCOME) EXPENSES

   Three months ended
June 30		   Six months ended
June 30		    

($ millions)

   2020   2019   2020   2019    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest on debt

   225   202   441   412    
​

Interest on lease liabilities

   42   43   84   88    
​

Capitalized interest

   (27 ) (28 ) (65 ) (56 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Interest expense

   240   217   460   444    
​

Interest on partnership liability

   13   14   26   28    
​

Interest on pension and other post-retirement benefits

   13   15   27   30    
​

Accretion

   69   68   138   139    
​

Foreign exchange (gain) loss on U.S. dollar denominated debt

   (499 ) (231 ) 597   (511 )  
​

Operational foreign exchange and other

   28   14   (42 ) (1 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

  (136 ) 97   1 206   129    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ 2020 SECOND QUARTER   Suncor Energy Inc.  57

The company issued $1.25 billion of senior unsecured Series 7 Medium Term Notes maturing on April 9, 2030 during the second quarter of 2020. The Series 7 Medium Term Notes have a coupon of 5.00% and were priced at $99.697 per $100 principal amount for an effective yield of 5.039%. Interest on the Series 7 Medium Term Notes is paid semi-annually.

During the second quarter of 2020, the company issued US$450 million of senior unsecured notes maturing on May 15, 2023. The notes have a coupon of 2.80% and were priced at US$99.903 per US$100 principal amount for an effective yield of 2.834%. The company also issued US$550 million of senior unsecured notes maturing on May 15, 2025. The notes have a coupon of 3.10% and were priced at US$99.949 per US$100 principal amount for an effective yield of 3.111%. Interest on the 2.80% and 3.10% notes is paid semi-annually.

The company secured an additional $2.5 billion and $300 million of credit facilities in the first and second quarters of 2020, respectively, with its key banking partners under new credit agreements. These agreements have the same terms and covenants as our existing credit facilities.

7. (LOSS) EARNINGS PER COMMON SHARE

   Three months ended
June 30		   Six months ended
June 30		    

($ millions)

   2020   2019   2020   2019    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Net (loss) earnings

   (614 ) 2 729   (4 139 ) 4 199    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(millions of common shares)

  
 		  
 		  
 		  
 		  
 

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Weighted average number of common shares

   1 525   1 569   1 527   1 574    
​

Dilutive securities:

                    
​

Effect of share options

   —   3   —   3    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Weighted average number of diluted common shares

   1 525   1 572   1 527   1 577    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

(dollars per common share)

  
 		  
 		  
 		  
 		  
 

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Basic (loss) earnings per share

   (0.40 ) 1.74   (2.71 ) 2.67    
​

Diluted (loss) earnings per share

   (0.40 ) 1.74   (2.71 ) 2.66    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

8. NORMAL COURSE ISSUER BID

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 Toronto Stock Exchange, the New York Stock Exchange and/or alternative trading platforms. Pursuant to the 2019 NCIB, the company was permitted to purchase for cancellation up to 50,252,231 of its common shares between May 6, 2019 and May 5, 2020. On December 23, 2019, Suncor announced an amendment to the 2019 NCIB, effective as of December 30, 2019, which allowed the company to increase the maximum number of common shares that could have been repurchased between May 6, 2019 and May 5, 2020 to 78,549,178. The COVID-19 pandemic has created significant uncertainly in the business environment and, consistent with our capital allocation strategy, the share buyback program has been suspended.

​ 58  2020 SECOND QUARTER   Suncor Energy Inc. ​ ​

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

  Three months ended
June 30		   Six months ended
June 30		    

($ millions, except as noted)

   2020   2019   2020   2019    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Share repurchase activities (thousands of common shares)

                    
​

Shares repurchased

   —   13 001   7 527   24 952    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Amounts charged to

                    
​

Share capital

   —   213   124   406    
​

Retained earnings

   —   339   183   660    
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Share repurchase cost

   —   552   307   1 066    

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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, short-term 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:

($ millions)

   Total    

​

​ ​ ​ ​

Fair value outstanding at December 31, 2019

   (39 )  
​

Cash Settlements – received during the year

   (363 )  
​

Changes in fair value recognized in earnings during the year

   266    
​ ​ ​ ​ ​

Fair value outstanding at June 30, 2020

   (136 )  

​

​ ​ ​ ​

(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:

•
Level 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.

•
Level 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.

•
Level 3 consists of instruments with a fair value that is determined by prices with significant unobservable inputs. As at June 30, 2020, the company does not have any derivative instruments measured at fair value Level 3.

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.

​ ​ ​ 2020 SECOND QUARTER   Suncor Energy Inc.  59

The following table presents the company's non-designated derivative financial instruments measured at fair value for each hierarchy level as at June 30, 2020:

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

Accounts receivable

 ​ 74 ​ 71 ​ — ​ 145 ​  
​

Accounts payable

 ​ (140 ) (141 ) — ​ (281 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ (66 ) (70 ) — ​ (136 )  
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

During the second quarter of 2020, there were no transfers between Level 1 and Level 2 fair value measurements.

A substantial portion of the company's 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 Suncor's customers are large and established downstream companies with investment grade credit ratings.

Non-Derivative Financial Instruments

At June 30, 2020, the carrying value of fixed-term debt accounted for under amortized cost was $16.0 billion (December 31, 2019 – $12.9 billion) and the fair value was $18.7 billion (December 31, 2019 – $16.1 billion). The increase in carrying value and fair value of debt is mainly due to issuance of new debt during the second quarter of this year. The estimated fair value of long-term debt is based on pricing sourced from market data.

10. INVENTORIES

($ millions)

   June 30
2020		   December 31
2019		    

​

​ ​ ​ ​ ​ ​

Crude Oil(1)

   1 350   1 689    
​

Refined products

   1 030   1 290    
​

Materials, supplies and merchandise

   848   782    
​ ​ ​ ​ ​ ​ ​

  3 228   3 761    

​

​ ​ ​ ​ ​ ​
(1)
Includes $219 million of inventories held for trading purposes (December 31, 2019 – $210 million) which are measured at fair value less costs of disposal based on Level 1 and Level 2 fair value inputs.

As a result of lower crude oil and refined products prices, the company recorded a $61 million ($45 million after-tax) write-down of crude oil inventories to their respective net realizable values during the three months ended June 30, 2020 within purchases of crude oil products, operating, selling and general, and depreciation, depletion, amortization and impairment expenses.

At March 31, 2020, the company recorded a hydrocarbon inventory write-down to net realizable value of $536 million ($397 million after-tax) which was subsequently sold in the second quarter.

11. ASSET IMPAIRMENT

The COVID-19 pandemic has resulted in a significant decrease in global demand for crude oil and commodity prices. In response, the company announced plans to reduce capital and operating costs. As a result of these events, the company performed asset impairment tests on certain cash generating units (CGUs) in its Oil Sands and Exploration and Production segments as at March 31, 2020 as the recoverable amounts of these CGUs were most sensitive to the combined reduction in crude oil prices and changes to their respective capital and operating plans. The impairment tests were performed using

​ 60  2020 SECOND QUARTER   Suncor Energy Inc. ​ ​

recoverable amounts based on the fair value less cost of disposal. An expected cash flow approach was used with the key assumptions discussed below (Level 3 fair value inputs):

Oil Sands

During the first quarter of 2020, the company recorded an impairment of $1.38 billion (net of taxes of $0.44 billion) on its share of the Fort Hills project in the Oil Sands segment using the following asset-specific assumptions:

•
WCS price forecast of US$9.00/bbl for the remainder of 2020, US$13.60/bbl in 2021, US$32.00/bbl in 2022, US$51.55/bbl in 2023 and US$52.90/bbl in 2024, escalating at 2% per year thereafter over the life of the project up to 2061, adjusted for asset-specific location and quality differentials;

•
the company's share of production of 47,000 bbls/d while the Fort Hills project operates on one primary extraction train for the remainder of 2020 through to 2021, and ramping up to two primary extraction trains during 2022 and then ranging from 96,000 to 106,000 bbls/d over the remaining life of the project;

•
cash operating costs averaging $32.00/bbl to $37.00/bbl while the Fort Hills project operates on one primary extraction train for the remainder of 2020 through to 2021, and ranging from $22.00/bbl to $24.00/bbl thereafter, as the project returns to two primary extraction trains over the remaining life of the project (expressed in real dollars). Cash operating costs reflect operating, selling and general expense adjusted for non-production costs, including share-based compensation, research costs, and excess power revenue; and

•
risk-adjusted discount rate of 7.5% (after-tax).

The recoverable amount of the Fort Hills CGU was $6.4 billion as at March 31, 2020. The recoverable amount estimate is most sensitive to price and discount rate. A 5% average decrease in price over the life of the project would have resulted in an increase to the impairment charge of approximately $1.1 billion (after-tax) on the company's share of the Fort Hills assets. A 1% increase in the discount rate would have resulted in an increase to the impairment charge of approximately $1.1 billion (after-tax) on the company's share of the Fort Hills assets.

Exploration and Production

During the first quarter of 2020, the company recorded an impairment of $285 million (net of taxes of $93 million) on its share of the Terra Nova assets and $137 million (net of taxes of $45 million) on its share of the White Rose assets in the Exploration and Production segment using the following asset-specific assumptions:

Terra Nova assets:

•
Brent price forecast of US$30.00/bbl for the remainder of 2020, US$35.00/bbl in 2021, US$50.00/bbl in 2022 and US$69.00/bbl in 2023, escalating at 2% per year thereafter over the life of the project to 2031 and adjusted for asset-specific location and quality differentials;

•
the company's share of production of approximately 6,200 bbls/d over the life of the project, including the benefit of the asset life extension project; and

•
risk-adjusted discount rate of 9.0% (after-tax).

The recoverable amount of the Terra Nova CGU was $24 million as at March 31, 2020.

White Rose assets:

•
Brent price forecast of US$30.00/bbl for the remainder of 2020, US$35.00/bbl in 2021, US$50.00/bbl in 2022 and US$69.00/bbl in 2023, escalating at 2% per year thereafter over the life of the project to 2036 and adjusted for asset-specific location and quality differentials;

•
the company's share of production of approximately 9,800 bbls/d over the life of the project;

•
the company's share of future capital expenditures of $1.435 billion, including the West White Rose expansion; and

•
risk-adjusted discount rate of 9.0% (after-tax).

The recoverable amount of the White Rose CGU was $185 million as at March 31, 2020. The recoverable amount estimate is most sensitive to price and discount rate. A 5% average decrease in price over the life of the project would have resulted in an increase to the impairment charge of approximately $83 million (after-tax) on the company's share of the White Rose assets. A 1% increase in the discount rate would have resulted in an increase to the impairment charge of approximately $45 million (after-tax) on the company's share of the White Rose assets.

No indicators of impairment were identified as at June 30, 2020.

12. PROVISIONS

Suncor's decommissioning and restoration provision decreased by $526 million for the six months ended June 30, 2020. The decrease was primarily due to an increase in the credit-adjusted risk-free interest rate to 3.60% (December 31, 2019 – 3.30%).

​ ​ ​ 2020 SECOND QUARTER   Suncor Energy Inc.  61



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EXHIBIT 99.3