Suncor Energy Reports 2011 Fourth Quarter Results

All financial figures are unaudited and in Canadian dollars (Cdn$) unless noted otherwise. All financial information, unless otherwise noted, has been prepared in accordance with Canadian generally accepted accounting principles (GAAP), specifically International Accounting Standard (IAS) 34 Interim Financial Reporting, within Part 1 of the Canadian Institute of Chartered Accountants Handbook, which is within the framework of International Financial Reporting Standards (IFRS). Prior to 2011, the company prepared its Consolidated Financial Statements in accordance with Canadian generally accepted accounting principles in effect prior to January 1, 2011. Comparative figures presented in this press release pertaining to Suncor's 2010 results have been restated to be in accordance with IFRS. The impacts of the transition to IFRS on the company's previously reported financial statements for the three and twelve months ended December 31, 2010 are presented in the notes to the unaudited interim Consolidated Financial Statements contained in Suncor's fourth quarter 2011 report to shareholders dated January 31, 2012 (the Q4 Report). Production volumes are presented on a working-interest basis, before royalties, unless otherwise noted.

Certain financial measures in this news release - namely operating earnings, cash flow from operations, cash operating costs for Oil Sands and return on capital employed (ROCE) - are not prescribed by GAAP. Operating earnings is defined and reconciled to GAAP net earnings in the Non-GAAP Financial Measures Advisory section of the Q4 Report. Oil Sands cash operating costs is defined and reconciled in the Segmented Results and Analysis - Oil Sands section of the Q4 Report. Cash flow from operations and ROCE are reconciled in the Non-GAAP Financial Measures Advisory section of the Q4 Report. See generally the Non-GAAP Financial Measures Advisory section of the Q4 Report for further information on these Non-GAAP financial measures. These non-GAAP financial measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. These non-GAAP financial measures are included because management uses the information to analyze operating performance, leverage and liquidity. Therefore, these non-GAAP financial measures should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Suncor Energy Inc. recorded fourth quarter 2011 net earnings of $1.427 billion ($0.91 per common share), compared to net earnings of $1.286 billion ($0.82 per common share) for the fourth quarter of 2010. Operating earnings, which adjusts net earnings for significant items that are not indicative of operating performance, increased to $1.427 billion ($0.91 per common share) in the fourth quarter of 2011 from $808 million ($0.52 per common share) in the fourth quarter of 2010.

The increase in operating earnings was due primarily to higher average upstream price realizations. As a result, return on capital employed (ROCE) for the twelve months ended December 31, 2011 reached 13.8%, the highest level since the merger with Petro-Canada.

Cash flow from operations was $2.650 billion ($1.69 per common share) in the fourth quarter of 2011, compared to $2.132 billion ($1.36 per common share) in the fourth quarter of 2010. The increase in cash flow from operations was primarily due to the same factors that impacted operating earnings.

Production volumes from Suncor's Oil Sands business (excluding the company's proportionate production share from the Syncrude joint venture) averaged 326,500 barrels per day (bbls/d) in the fourth quarter of 2011, a slight increase compared with fourth quarter 2010 production of 325,900 bbls/d. Production in the fourth quarter of 2011 consisted of a greater percentage of sweet synthetic crude due to strong upgrading reliability.

Suncor's total upstream production during the fourth quarter of 2011 averaged 576,500 barrels of oil equivalent per day (boe/d), compared to 625,600 boe/d during the fourth quarter of 2010. The decrease in production volumes reflected the divestiture of non-core assets throughout 2010 and 2011, lower output from Libya during the restart of production following the lifting of sanctions and operational outages at Syncrude.

"Our ongoing focus on operational excellence in 2011 led to impressive gains in reliability company-wide and record levels of oil sands production," said Rick George, chief executive officer. "Following our largest ever turnaround at our second upgrader, we had our two highest quarters on record for oil sands production, capped by a single month record of 345,000 barrels per day in December."

Bitumen production from the company's in situ operations averaged 101,400 bbls/d in the fourth quarter of 2011, compared to 85,800 bbls/d in the fourth quarter of 2010, and increased mainly due to the ramp up of production from the first well pad for the Firebag Stage 3 expansion and recently completed infill wells on existing Firebag well pads. Bitumen production from Suncor's in situ operations exited the year at 111,000 bbls/d. At the company's mining operations, the mining of ore from the North Steepbank Extension started in late December.

Cash operating costs for Oil Sands (excluding Syncrude) were $39.60 per barrel in the fourth quarter of 2011, compared to $36.70 per barrel during the fourth quarter of 2010. The increase was primarily a reflection of higher total in situ cash operating costs as new assets ramp up production from the Firebag Stage 3 expansion.

Suncor's proportionate share of production from the Syncrude joint venture contributed an average of 30,300 bbls/d of production during the fourth quarter of 2011, compared to 37,900 bbls/d in the same quarter of 2010. Syncrude operated at lower rates for much of the quarter due to maintenance on a hydrogen plant and operating issues with a coker unit.

The Exploration and Production business contributed 219,700 boe/d of production in the fourth quarter of 2011, compared to 261,800 boe/d in the same period of 2010. The production decrease primarily reflected the divestiture of non-core assets over the past year, which had contributed incremental production of approximately 26,000 boe/d in the fourth quarter of 2010, and lower output from Libya during the restart of production following the lifting of sanctions.

In Suncor's downstream Refining and Marketing business, total refined product sales averaged 81,600 cubic metres per day (m3/d) during the fourth quarter of 2011, compared to 89,200 m3/d in the fourth quarter of 2010. The decrease in sales volumes primarily reflected lower throughput at the Edmonton refinery associated with a third-party hydrogen supply outage and lower demand for heating oil in Eastern Canada due to warmer weather.

Suncor recorded net earnings of $4.304 billion ($2.74 per common share) for the year ended December 31, 2011, compared to $3.829 billion ($2.45 per common share) for the year ended December 31, 2010. Operating earnings increased to $5.674 billion ($3.61 per common share) in 2011 from $2.634 billion ($1.69 per common share) in 2010. Cash flow from operations increased to $9.746 billion ($6.20 per common share) in 2011 from $6.656 billion ($4.25 per common share) in 2010.

"Suncor's integrated business model demonstrated its full value in 2011, maximizing the margins realized on our barrels of oil amid significant economic instability and volatility in commodity markets around the world," said Steve Williams, president and chief operating officer. "Through it all, Suncor's annual operating earnings more than doubled compared to 2010, and our annual cash flow from operations was also the highest ever, which bodes very well for the company's financial performance going forward."

Suncor
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