Remarks by

Mark Little
President and Chief Executive Officer

and

Alister Cowan
EVP and Chief Financial Officer 

Annual General Meeting
Calgary, Alberta
May 6, 2020

Check against delivery

Mark Little, President and Chief Executive Officer

Thanks Mike. Good morning everyone and thank you for joining us today.

The fact that we’re gathering online for today’s AGM is certainly an indication that these are unprecedented times. To everyone listening our hope is that you, your families and your colleagues are keeping safe and healthy.

I’d also like to extend a special thank you to all of the essential workers from multiple industries who are working to keep us healthy, safe, and supplied. These individuals are a strong reminder that we are all part of a global community and effort to combat this pandemic. We, like many, have been part of that effort, and I’m grateful to work with many capable and dedicated people across Suncor.

This morning, I’d like to take a few moments to speak to what we have been doing during this time to keep people safe and healthy. Then Alister will outline the financial health of the company and then I will provide our perspective on the path forward.

But before I get into my remarks, I’d like to take a quick moment to recognize Eric Axford, our Chief Sustainability Officer – in fact our first Chief Sustainability Officer - who is retiring after today’s AGM. Eric has played a significant part in helping Suncor bring executive level focus and commitment to our sustainability initiatives over the years. And in recent weeks, his strategic focus has been particularly helpful as we’ve navigated the challenges of the pandemic and the market downturn. Eric - thank you for your contributions and support.

I’d also like to officially introduce Martha Hall Findlay as the Chief Sustainability Officer. Martha joined us in January and brings tremendous knowledge and experience.

As we think of the greater good and focus on working together, I’m reminded of the connection to Suncor’s purpose - To provide trusted energy, that enhances people’s lives, while caring for each other and the earth.

Over the years, we’ve strived to bring focus and clarity to how we operate our business, minimize our environmental footprint, and engage with communities. Our purpose is the standard we hold ourselves to every day and together with our values, has become the lens through which we make decisions and drive action across the company. This holds true during the pandemic.

For our employees, early on, we made the decision to have essential personnel only at worksites. As a result, the vast majority of our workforce have been working remotely.

For those workers that need to work at site, we have taken numerous steps to protect people by providing pre-screening surveys, conducting temperature screening, following physical distancing guidelines, and adhering to strict protocols.

At our lodges, we have enhanced cleaning, moved to full-serve cafeterias, and closed all gyms and common areas. We’ve also adjusted shift schedules to minimize the number and frequency of commuters to our sites. We continue to remind all of our workers, regardless of whether they are on site or working remotely, to take care of their mental health and we’re providing resources to assist with this.

The steps we’ve taken to protect employees, ensures we’re able to continue to provide critical energy for our customers.

For our customers, we also launched a $3 million program through Petro-Canada, designed to help meet the needs of local communities. It’s our way of saying “Thank you” to essential workers across the country. This includes ensuring truck drivers who deliver essential products have a place to rest, refuel and take a break as needed.

For our communities, we’re honouring all of our existing community investment and Suncor Energy Foundation commitments and looking at how we can work with our community partners to help address needs through this crisis. In addition, together with our employees through our SunCares program we have donated over $2 million to community organizations doing critical work in maintaining community well-being.

In some cases, we have also found unique ways to support communities. One example was our donation of masks to the federal government which we also delivered to remote communities in northern Canada.

All of these, and other efforts, come from an understanding that caring for each other will be critically important as we immediately respond to this crisis, help with the recovery effort, and ensure we remain resilient in the longer term.

Resilience continues to be top of mind for us as we navigate COVID-19, market challenges and even a flood that recently hit one of our critical communities, Fort McMurray.

Remaining strong as a company is vital to long term shareholder value creation and it’s also critically important, as we provide an essential service – the energy that our society needs to heat homes, provide lighting and move critical goods and services – like medical supplies.

Watching our employees respond across our company has been incredibly inspiring. I’m very proud and appreciative of their efforts.

As we navigate through the downturn, we’re continuing to prove our ability to weather the storm, building on a solid foundation of operational excellence, a strong balance sheet and capital discipline.

I’ll now turn it over to Alister who will speak about the financial health of the company.

Alister Cowan, EVP and Chief Financial Officer

Thanks, Mark.

Our focus is to create shareholder value by maximizing the margin for each barrel produced through our integrated operations from the reservoir to the end customer.

In 2019, our upstream production totaled 777,000 barrels of oil equivalent per day, an increase of 6% over 2018, in a year when our upstream production in Alberta was reduced by the Government of Alberta’s mandatory production curtailment orders. That production included over 485,000 barrels per day of high value synthetic crude oil - a 14% increase from 2018, 106,000 barrels per day of Brent priced offshore crude, and 185,000 barrels per day of bitumen.

Our upgraders ran at a combined utilization of 88% and our refinery utilization was 95%, allowing us to maximize high value synthetic crude oil and minimize lower value bitumen sales.

Turning to our financial performance, we again demonstrated our proven ability to generate cash. In 2019, funds from operations were a record $10.8 billion, surpassing the $10.1 billion we achieved in 2018.

Our capital expenditures were $5.4 billion in 2019, which included $3.2 billion spent on asset sustainment and maintenance and $2.2 billion in economic investments.

Our strength was also highlighted by the $4.9 billion in discretionary free funds flow we generated during the year. This allowed us to return $4.9 billion in cash to shareholders, $2.6 billion in dividends and $2.3 billion in stock buybacks. In total, we returned 45% of funds from operations to shareholders.

Our financial discipline and focus on capital allocation also include our balance sheet. As of December 31, 2019, net debt to funds from operations stood at 1.5 times, with total debt to capital at 30% and liquidity of $6.7 billion. Our performance demonstrates the strength of our integrated model and the flexibility of our assets, as well as our strong marketing expertise and mid-stream logistics assets and capabilities.

This combination of attributes together with our financial and capital allocation discipline enables Suncor to be more agile than many others in the industry.

As Mark described, 2020 is a significantly more challenging year. I think it’s important to note that as we move through this and the resulting economic downturn, we’ve been focused on mitigating the impacts of lower demand, from the end customer need for refined products, back up though the integrated chain to upstream production.

Our focus on cost reduction opportunities and lowering capital spend remain key levers for us to respond to the economic downturn and we’ll continue to keep a close eye on market conditions and make further adjustments as required.

That’s why we announced a $1 billion or 10% reduction in operating costs from 2019 levels. We have also reduced our total capital expenditures by $1.9 billion or 33% from the mid point of our initial guidance range. Our revised 2020 capital spend is concentrated on sustaining capital and continuing with a limited number of low capital intensity, value creating projects like the interconnecting pipeline between Suncor Base Plant and Syncrude, the deployment of autonomous haul trucks at Fort Hills and improving the underlying systems and processes to drive further operating and sustaining capital reductions. We will also complete some high value offshore production wells that are currently underway.

Our financial strength, which includes access to liquidity, is a key element in our strategy. In early 2020, we took proactive steps to enhance that liquidity, securing an additional $2.8 billion of 24-month term credit facilities with key banking partners.

At the beginning of April, we also completed a $1.25 billion 10-year medium term note offering. It was the largest offering in Canadian oil and gas history during an unprecedented time in the markets, which we believe reflects well on Suncor. This additional liquidity will help to ensure the financial health of our company through these volatile times.

Based on recent events, the resulting economic downturn and its impact on crude oil demand and pricing, management and the Board believe it is necessary to lower our crude oil cash break-even price required to cover operating costs, sustaining capital and the dividend to WTI US$35. As a result, combined with the significant actions taken on operating costs and capital expenditure, management and the Board believe it is also necessary to reduce the dividend. We will not compromise the long-term financial health or value of the company by over leveraging.

Therefore, effective for the June 25 payment, we will reduce the dividend by 55%. Taking this proactive measure will preserve balance sheet strength and the company’s financial health and drive down the crude oil cash break-even of the company.

Management and the Board recognize the importance of cash returns to shareholders, including the dividend to our shareholders, but we also recognize that maintaining the financial strength and health of the company is an equally important objective. Our commitment to creating shareholder value and returning cash to shareholders via dividends and stock buybacks remains unchanged. We will continue to balance both objectives as the economic downturn evolves.

To conclude, our 2019 performance demonstrates the strength of Suncor’s integrated business model and our ability to continue to deliver value for shareholders. We remain one of just a few Canadian producers in this position – which continues to affirm our competitive advantage, even in these challenging times.

Thanks, and I’ll now turn the microphone back to Mark.

Mark Little, President and Chief Executive Officer

Thanks, Alister

Alister spoke to the actions we’ve taken to maintain the financial strength of the company. We’ll continue to strengthen the company as we progress 4.0 – the next phase of the company in which we are leveraging digital technologies and transforming our culture to accelerate operational excellence and
drive value.

In 2019, we made further investments in technology development and deployment, including digital transformation, progressed a number of initiatives already underway – and in fact during this period of COVID-19, we were even able to accelerate some of these initiatives. I’m looking forward to the possibilities ahead.

As we’ve said before, technology alone won’t get us to where we want to be – it’s the people and culture that will help us achieve our ambition. We know that continued success for Suncor requires us to take a long view and leadership role – and that means maintaining our deep commitment to sustainability. Our purpose holds us to that commitment.

Energy is at the core of our business. And we know it helps create quality of life in terms of heating, cooling, mobility and overall economic prosperity. On its own, moving barrels of oil and electrons to consumers isn’t enough. Society is looking for us to do more. They expect us to leverage technology and innovation to reduce our environmental footprint. They want us to collaborate. And they want us to find meaningful ways to engage with Indigenous Peoples and businesses, as well as communities and stakeholders.

The good news is that we’re well down that path. That said, some might question whether the market downturn and pandemic have altered our plans. As you’ve heard, we’ve had to delay the timing of some initiatives, like the replacement of our coke-fired boilers and the Forty Mile wind project to protect the financial health of the business.

But let me be clear – our commitment to creating shareholder value, our strategy and sustainability has not changed and continue to be at the heart of everything we do.

One of the biggest challenges of our time - climate change - remains a focus for Suncor as we plan for the future. Canada has a strong, diversified and resource-rich economy. We also have a world-leading financial sector and excellent capacity for innovation.

By harnessing these advantages, Canada can be among the leaders in the global transition to a low-emissions future. I have no doubt we can be a trusted source of climate-smart solutions, expertise and investment. Suncor will continue to evolve our climate ambition. And we remain committed to our climate targets we’ve set to lead through this transition.

We’ll also build on our long history of technology and innovation at our existing assets and invest in new sources of energy to drive down our environmental footprint. We’ll lead the way, with initiatives like our announcement of Canada’s first electric highway.

We’ll continue to collaborate with others through organizations like Canada’s Oil Sands Innovation Alliance and the Clean Resource Innovation Network. And we’ll engage with all levels of government when it comes to meaningful public policy dialogue.

We know that delivering economic and environmental benefit can’t come without attention to the health and well-being of communities. With that in mind, we’ll continue to work with others across society through the Suncor Energy Foundation in an effort to address complex social challenges.

Through our social goal - which is focused on changing the way we think and act towards Indigenous Peoples - we’ll continue to listen and learn. A key part of our effort will be to explore innovative ways to engage with Indigenous communities. We’ll also maintain our focus on finding new business opportunities with Indigenous partners. One example which comes to mind is the Fort McKay First Nation and Mikisew Cree First Nation’s investment in our East Tank Farm. Another is the 39 Petro-
Canada stations owned and operated by First Nations across the country – including two that are part of Canada’s electric highway.

As we continue on our sustainability journey, we know you’ll want to see how we’re doing and where we’re headed. We’ll report on our efforts through our Report on Sustainability, our Climate Risk Report and through our financial reports. And we’ll provide context and our perspective on the opportunities and challenges ahead.

The progress we’ve made over the years is certainly due to our commitment to sustainability, our integrated model, and our focus on operational excellence.

In closing, I have seen through the pandemic and economic downturn what an incredible team we have here at Suncor. It’s been truly inspiring to see our team respond with such tremendous energy, enthusiasm, and professionalism. They’re living our purpose through their everyday actions. Seeing our employees in action makes me proud to lead this company. They have demonstrated remarkable innovation and resilience when faced with both adversity and opportunity. Given that, I remain optimistic about the days, months and years ahead.

We will emerge from these extraordinary circumstances – stronger … together. On behalf of our leadership team and all of us at Suncor, thank you for your support. I’ll now turn the floor back to Mike.