Exhibit 99.1​

Management’s Discussion and Analysis

May 9, 2022

Suncor Energy Inc. (Suncor or the company) is an integrated energy company headquartered in Calgary, Alberta, Canada. Suncor’s operations include oil sands development, production and upgrading; offshore oil and gas; petroleum refining in Canada and the U.S.; and the company’s Petro-Canada retail and wholesale distribution networks (including Canada’s Electric Highway™, a coast-to-coast network of fast-charging electric vehicle stations). Suncor is developing petroleum resources while advancing the transition to a low-emissions future through investment in power, renewable fuels and hydrogen. Suncor also conducts energy trading activities focused principally on the marketing and trading of crude oil, natural gas, byproducts, refined products and power. Suncor has been recognized for its performance and transparent reporting on the Dow Jones Sustainability index, FTSE4Good and CDP. Suncor is also listed on the UN Global Compact 100 stock index. Suncor’s common shares (symbol: SU) are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange (NYSE).

For a description of Suncor’s segments, refer to Suncor’s Management’s Discussion and Analysis (MD&A) for the year ended December 31, 2021, dated February 23, 2022 (the 2021 annual MD&A).

This MD&A, for the three months ended March 31, 2022, should be read in conjunction with Suncor’s unaudited interim Consolidated Financial Statements for the three months ended March 31, 2022, Suncor’s audited Consolidated Financial Statements for the year ended December 31, 2021, and the 2021 annual MD&A.

Additional information about Suncor filed with Canadian securities regulatory authorities and the United States Securities and Exchange Commission (SEC), including quarterly and annual reports and Suncor’s Annual Information Form dated February 23, 2022 (the 2021 AIF), which is also filed with the SEC under cover of Form 40-F, is available online at www.sedar.com, www.sec.gov and our website www.suncor.com. Information contained in or otherwise accessible through our website does not form part of this MD&A, and is not incorporated into this document by reference.

Suncor Energy Inc. has numerous direct and indirect subsidiaries, partnerships and joint arrangements (collectively, affiliates), which own and operate assets and conduct activities in different jurisdictions. The terms “we”, “our”, “Suncor”, or “the company” are used herein for simplicity of communication and only mean there is an affiliation with Suncor Energy Inc., without necessarily identifying the specific nature of the affiliation. The use of such terms in any statement herein does not mean they apply to Suncor Energy Inc. or any particular affiliate, and does not waive the corporate separateness of any affiliate. For further clarity, Suncor Energy Inc. does not directly operate or own assets in the U.S.

Table of Contents

2022 First Quarter   Suncor Energy Inc.   9

Management’s Discussion and Analysis

1. Advisories

Basis of Presentation

Unless otherwise noted, all financial information has been prepared in accordance with Canadian generally accepted accounting principles (GAAP), specifically International Accounting Standard (IAS) 34 Interim Financial Reporting as issued by the International Accounting Standards Board (IASB), which is within the framework of International Financial Reporting Standards (IFRS) as issued by the IASB.

All financial information is reported in Canadian dollars, unless otherwise noted. Production volumes are presented on a working-interest basis, before royalties, except for production volumes from the company’s Libya operations, which is on an economic basis.

References to Oil Sands operations exclude Suncor’s interests in Fort Hills and Syncrude.

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

Non-GAAP and Other Financial Measures

Certain financial measures in this MD&A – namely adjusted operating earnings (loss), adjusted funds from (used in) operations, measures contained in return on capital employed (ROCE) and ROCE excluding impairments, price realizations, Oil Sands operations cash operating costs, Fort Hills cash operating costs, Syncrude cash operating costs, refining and marketing gross margin, refining operating expense, free funds flow, net debt, total debt, last-in, first-out (LIFO) inventory valuation methodology and related per share or per barrel amounts or metrics that contain such measures – are not prescribed by GAAP. Adjusted operating earnings (loss) is defined in the Non-GAAP and Other Financial Measures Advisory section of this MD&A and reconciled to the most directly comparable GAAP measures in the Consolidated Financial Information and Segment Results and Analysis sections of this MD&A. Oil Sands operations cash operating costs, Fort Hills cash operating costs, Syncrude cash operating costs and LIFO inventory valuation methodology are defined in the Non-GAAP and Other Financial Measures Advisory section of this MD&A and reconciled to the most directly comparable GAAP measures in the Segment Results and Analysis section of this MD&A. Adjusted funds from (used in) operations, ROCE, ROCE excluding impairments, price realizations, free funds flow, net debt, total debt, refining and marketing gross margin, and refining operating expense are defined and reconciled, where applicable, to the most directly comparable GAAP measures in the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

Beginning in the fourth quarter of 2021, the company changed the label of operating earnings (loss) and funds from (used in) operations to adjusted operating earnings (loss) and adjusted funds from (used in) operations, respectively, to better distinguish these non-GAAP financial measures from their respective comparable GAAP measures and better reflect the purpose of such measures. The composition of these measures remained unchanged and therefore no prior periods were restated.

Risk Factors and Forward-Looking Information

The company’s business, reserves, financial condition and results of operations may be affected by a number of factors, including, but not limited to, the factors described within the Forward-Looking Information section of this MD&A. This MD&A contains forward-looking information based on Suncor’s current expectations, estimates, projections and assumptions. This information is subject to a number of risks and uncertainties, including those discussed in this MD&A, the 2021 annual MD&A and Suncor’s other disclosure documents filed with Canadian securities regulatory authorities and the SEC, many of which are beyond the company’s control. Users of this information are cautioned that actual results may differ materially. Refer to the Forward-Looking Information section of this MD&A for information on the material risk factors and assumptions underlying our forward-looking information contained in this MD&A.

Measurement Conversions

Certain crude oil and natural gas liquids volumes have been converted to mcfe on the basis of one bbl to six mcf. Also, certain natural gas volumes have been converted to boe or mboe on the same basis. Any figure presented in mcfe, boe or mboe may be misleading, particularly if used in isolation. A conversion ratio of one bbl of crude oil or natural gas liquids to six mcf of natural gas is based on an energy-equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, conversion on a 6:1 basis may be misleading as an indication of value.

Common Abbreviations

For a list of abbreviations that may be used in this MD&A, refer to the Common Abbreviations section of this MD&A.

10   2022 First Quarter   Suncor Energy Inc.

2. First Quarter Highlights

•

First quarter financial results

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•

Suncor’s adjusted operating earnings(1)(2) increased to $2.755 billion ($1.92 per common share) in the first quarter of 2022, compared to $746 million ($0.49 per common share) in the prior year quarter, primarily due to significantly higher crude oil and refined product realizations reflecting the improved business environment in the current quarter. The increase in adjusted operating earnings was partially offset by an increase in royalties and income taxes associated with the improved business environment and increased operating expenses primarily related to a significant increase in commodity costs and share-based compensation expense in the current quarter compared to the prior year quarter.

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•

Suncor’s net earnings were $2.949 billion ($2.06 per common share) in the first quarter of 2022, compared to $821 million ($0.54 per common share) in the prior year quarter. In addition to the factors impacting adjusted operating earnings discussed above, net earnings for the first quarter of 2022 included a $146 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $75 million unrealized gain on risk management activities recorded in other income (loss), and a $27 million income tax expense related to the items noted. Net earnings in the prior year quarter included a $196 million unrealized foreign exchange gain on the revaluation of U.S. dollar denominated debt recorded in financing expenses, a $27 million unrealized gain on risk management activities recorded in other income (loss), a restructuring charge of  $168 million related to workforce reduction plans recorded in operating, selling and general expenses in the Corporate and Eliminations segment, and a $20 million income tax recovery related to the items noted.

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•

Adjusted funds from operations(1)(2) were $4.094 billion ($2.86 per common share) in the first quarter of 2022, compared to $2.110 billion ($1.39 per common share) in the prior year quarter. Adjusted funds from operations were influenced by the same factors impacting adjusted operating earnings noted above. Adjusted funds from operations in the prior year quarter were also impacted by the $168 million before-tax restructuring charge related to workforce reduction plans recorded in the first quarter of 2021. Cash flow provided by operating activities, which includes changes in non-cash working capital, was $3.072 billion ($2.14 per common share) for the first quarter of 2022, compared to $2.345 billion ($1.54 per common share) in the prior year quarter. In addition to the factors noted above, cash flow provided by operating activities was further impacted by a use of cash associated with the company’s working capital balances in the first quarter of 2022, compared to a source of cash in the prior year quarter. The use of cash in the first quarter of 2022 was primarily due to an increase in accounts receivable and inventory balances related to the increase in commodity prices through the quarter and the payment of the company’s 2021 income tax expense, partially offset by an increase in accounts payable and accrued liabilities and an increase in taxes payable related to the company’s 2022 income tax expense.

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•

Record Oil Sands cash flows. In the first quarter of 2022, Oil Sands delivered its highest quarterly adjusted funds from operations(3) on record of  $3.414 billion, compared to $1.527 billion in the prior year quarter, supported by strong production from the company’s In Situ assets, including Firebag, which produced its 750 millionth barrel of oil during the quarter, and the ramp-up of production at Fort Hills, allowing the company to capture strong upstream pricing. Combined Oil Sands upgrader utilization was 96% compared to 97% in the prior year quarter.

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•

Industry-leading Refining & Marketing (R&M) utilizations. R&M generated $1.597 billion in adjusted funds from operations(3) in the first quarter of 2022, compared to $1.172 billion in the prior year quarter. The first quarter of 2022 included a first-in, first-out (FIFO) inventory valuation gain, including the impact of commodity risk management activities, of  $729 million before-tax, compared to $432 million before-tax in the prior year quarter. On a LIFO(4) basis Suncor’s refining and marketing gross margin(1) improved nearly 20% compared to the prior year quarter. Refinery utilization in the first quarter of 2022 was 94%, compared to refinery utilization of 92% in the prior year quarter, as the company’s Canadian refineries continued to outperform the national refining industry average.(5)

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(1)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of the MD&A and the Adjusted Operating Earnings Reconciliation below for a reconciliation of net earnings to adjusted operating earnings.

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(2)

Beginning in the fourth quarter of 2021, the company revised the label of operating earnings (loss) and funds from (used in) operations to adjusted operating earnings (loss) and adjusted funds from (used in) operations, respectively, to better distinguish these non-GAAP financial measures from their respective comparable GAAP measures and better reflect the purpose of such measures. The composition of these measures remained unchanged and therefore no prior periods were restated.

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(3)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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(4)

The estimated impact of the LIFO method is a non-GAAP financial measure. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(5)

Source: Canada Energy Regulator – https://www.cer-rec.gc.ca/en/data-analysis/energy-commodities/crude-oil-petroleum-products/statistics/​
weekly-crude-run-summary-data/index.html.

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2022 First Quarter   Suncor Energy Inc.   11

Management’s Discussion and Analysis

•

Returning value to shareholders. In the first quarter of 2022, the company returned over $1.4 billion of value to its shareholders through $827 million in share repurchases and payment of  $601 million of dividends. As at May 6, 2022, since the start of the year, the company has repurchased $1.3 billion of Suncor’s common shares, representing approximately 33 million common shares at an average share price of $39.70 per share, or the equivalent of 2.3% of its common shares as at December 31, 2021.

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•

Accelerating net debt reduction. In the first quarter of 2022, the company reduced net debt(1) by $728 million, primarily due to an early redemption of its outstanding US$182 million 4.50% notes and increased cash and cash equivalents, after making a significant income tax payment of approximately $1.0 billion during the quarter related to the company’s 2021 income tax expense.

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•

Optimization of the company’s asset portfolio. During the first quarter of 2022, in alignment with Suncor’s strategy to maximize value through its core business, the company announced that it is taking steps to optimize its asset portfolio through the planned divestment of its Exploration & Production (E&P) assets in Norway. Subsequent to the quarter, based on interest received in the company’s E&P assets in the U.K., the company is exploring the sale of its entire U.K. portfolio, and has also announced plans to divest its wind and solar assets to focus on areas of energy expansion that are more complementary to its base business, with an emphasis on hydrogen and renewable fuels.

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•

Record dividend and share repurchase program. Subsequent to the quarter, Suncor’s Board of Directors (the Board) approved a quarterly dividend of  $0.47 per share, which represents an increase of 12% over the prior quarter dividend and the highest quarterly dividend per share in the company’s history. Also, the Board and the TSX approved an increase to the company’s normal course issuer bid program (NCIB), to increase the maximum number of common shares the company may repurchase to up to approximately 10% of Suncor’s public float as at January 31, 2022.

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(1)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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3. Consolidated Financial Information

Financial Highlights

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(1)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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(2)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(3)

Excludes capitalized interest of  $37 million in the first quarter of 2022 and $31 million in the first quarter of 2021.

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(4)

Excludes capital expenditures related to assets held for sale of  $19 million in the first quarter of 2022.

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2022 First Quarter   Suncor Energy Inc.   13

Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)(2)

(1)

For an explanation of this bridge analysis, see the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

All reconciling items are presented on a before-tax basis and adjusted for income taxes in the Income Tax bridge factor.

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(3)

The bridge factor for Inventory Valuation is comprised of changes in the FIFO inventory valuation and realized commodity risk management activities reported in the R&M segment, and changes in the intersegment elimination of profit reported in the Corporate and Eliminations segment.

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Suncor’s adjusted operating earnings increased to $2.755 billion ($1.92 per common share) in the first quarter of 2022, compared to $746 million ($0.49 per common share) in the prior year quarter, primarily due to significantly higher crude oil and refined product realizations reflecting the improved business environment in the current quarter. The increase in adjusted operating earnings was partially offset by an increase in royalties and income taxes associated with the improved business environment and increased operating expenses primarily related to a significant increase in commodity costs and share-based compensation expense in the current quarter compared to the prior year quarter.

(1)

In the first quarter of 2022, share-based compensation expense of  $206 million includes $70 million recorded in the Oil Sands segment, $6 million recorded in the E&P segment, $32 million recorded in the R&M segment and $98 million recorded in the Corporate and Eliminations segment. The first quarter of 2021 share-based compensation expense of  $111 million includes $31 million recorded in the Oil Sands segment, $3 million recorded in the E&P segment, $19 million recorded in the R&M segment and $58 million recorded in the Corporate and Eliminations segment. Other primarily includes non-recurring costs associated with investments in the company’s digital transformation, Syncrude long-term incentive program expense in the first quarter of 2021, and a non-recurring $168 million restructuring charge related to workforce reduction plans recorded in the first quarter of 2021.

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The company’s total operating, selling and general expenses were $3.088 billion in the first quarter of 2022, compared to $2.900 billion in the prior year quarter. The increase was primarily due to a significant increase in commodity costs, primarily driven by increased natural gas prices, and increased share-based compensation expenses in the first quarter of 2022 compared to the first quarter of 2021. The increase was also due to costs associated with increased production at Fort Hills and increased maintenance costs in the current period relative to the prior year quarter, partially offset by increased costs in the prior year quarter relating to a restructuring charge associated with the company’s workforce reduction plans. The company’s exposure to higher natural gas costs is partially mitigated by revenue from power sales that is recorded in operating revenues.

2022 First Quarter   Suncor Energy Inc.   15

spreads are based on quoted near-month contracts for WTI and spot prices for gasoline and diesel and do not necessarily reflect the margins at a specific refinery. Suncor’s realized refining and marketing gross margins are influenced by actual crude oil feedstock costs, refinery configuration, product mix and realized market prices unique to Suncor’s refining and marketing business. In addition, the U.S. regulatory renewable blending obligations influence the benchmark cracks, which may increase their volatility, while the cost of regulatory compliance is not deducted in calculating the benchmark cracks.

Suncor has developed an indicative 5-2-2-1 index based on publicly available pricing data to more accurately reflect Suncor’s realized refining and marketing gross margin. This internal index is a single value calculated based on a notional five barrels of crude oil of varying grades refined to produce two barrels each of gasoline and distillate and one barrel of secondary product to approximate Suncor’s unique set of refinery configurations; overall crude slate and product mix; and the benefit of its location, quality and grade differentials, and marketing margins. The internal index is calculated by taking the product value of refined products less the crude value of refinery feedstock excluding the impact of FIFO inventory accounting methodology. The product value incorporates the New York Harbor 2-1-1 crack, Chicago 2-1-1 crack, WTI benchmarks and seasonal factors. The seasonal factor applies an incremental US$6.50/bbl in the first and fourth quarters and US$5.00/bbl in the second and third quarters and reflects the location, quality and grade differentials for refined products sold in the company’s core markets during the winter and summer months, respectively. The crude value incorporates the SYN, WCS and WTI benchmarks.

Crack spreads are based on current crude feedstock prices, whereas actual earnings are accounted for on a FIFO basis in accordance with IFRS where a delay exists between the time that feedstock is purchased and when it is processed and when products are sold to a third party. A FIFO loss normally reflects a declining price environment for crude oil and finished products, whereas FIFO gains reflect an increasing price environment for crude oil and finished products. The company’s realized refining and marketing gross margins are also presented on a LIFO basis, which is consistent with how industry benchmarks and the Suncor 5-2-2-1 index are calculated and with how management evaluates performance.

In the first quarter of 2022, the New York Harbor 2-1-1 and Chicago 2-1-1 benchmark crack spreads increased compared to the prior year quarter due to decreased crude supply, increased demand for transportation fuels and to compensate for increased costs associated with renewable blending regulatory obligations. The Suncor 5-2-2-1 index was US$32.25/bbl in the first quarter of 2022 compared to US$24.50/bbl in the first quarter of 2021, primarily related to the increase in benchmark crack spreads.

The cost of natural gas used in Suncor’s Oil Sands and Refining operations is primarily referenced to Alberta spot prices at AECO. The average AECO benchmark increased to $4.50/GJ in the first quarter of 2022, from $2.95/GJ in the prior year quarter.

Excess electricity produced at Suncor’s Oil Sands assets is sold to the Alberta Electric System Operator, with the proceeds netted against the applicable cash operating cost per barrel metric. The Alberta power pool price decreased to an average of $90.00/MWh in the first quarter of 2022 compared to $95.45/MWh in the prior year quarter.

The majority of Suncor’s revenues from the sale of oil and natural gas commodities are based on prices that are determined by or referenced to U.S. dollar benchmark prices, while the majority of Suncor’s expenditures are realized in Canadian dollars. In the first quarter of 2022, the Canadian dollar remained unchanged in relation to the U.S. dollar as the average exchange rate for both the first quarters of 2022 and 2021 was US$0.79 per one Canadian dollar.

Suncor also has assets and liabilities, including approximately 60% of the company’s debt, that are denominated in U.S. dollars and translated to Suncor’s reporting currency (Canadian dollars) at each balance sheet date. A decrease in the value of the Canadian dollar, relative to the U.S. dollar, from the previous balance sheet date increases the amount of Canadian dollars required to settle U.S. dollar denominated obligations, while an increase in the value of the Canadian dollar, relative to the U.S. dollar, decreases the amount of Canadian dollars required to settle U.S. dollar denominated obligations.

2022 First Quarter   Suncor Energy Inc.   17

Production Volumes(1)

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(1)

Bitumen production from Oil Sands Base is upgraded, while bitumen production from In Situ operations is either upgraded or sold directly to customers, including Suncor’s own refineries, with SCO and diesel yields of approximately 79% of bitumen feedstock input. Fort Hills finished bitumen is sold directly to customers, including Suncor’s own refineries. Essentially all of the bitumen produced at Syncrude is upgraded to sweet SCO and a small amount of diesel, at an approximate yield of 85%.

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(2)

Combined upgrader utilization rates are calculated using total upgraded production, inclusive of internally consumed diesel and internal transfers.

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(3)

Both Oil Sands operations and Syncrude produce diesel, which is internally consumed in mining operations, and Fort Hills and Syncrude use internally produced diesel from Oil Sands Base within their mining operations. In the first quarter of 2022, Oil Sands operations production volumes included 10,000 bbls/d of internallyconsumed diesel, of which 6,900 bbls/d was consumed at Oil Sands Base, 2,000 bbls/d was consumed at Fort Hills and 1,100 bbls/d was consumed at Syncrude. Syncrude production volumes included 2,000 bbls/d of internally consumed diesel.

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(4)

Internal feedstock transfers between Oil Sands operations and Syncrude through the interconnecting pipelines are included in gross SCO and bitumen production volumes. In the first quarter of 2022, Oil Sands operations included 3,700 bbls/d of SCO that were transferred to Suncor’s share of Syncrude through the interconnecting pipelines. Syncrude production included 100bbls/d of SCO and 3,200 bbls/d of bitumen that were transferred to Oil Sands Base through the interconnecting pipelines.

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Total Oil Sands production was 685,700 bbls/d in the first quarter of 2022, compared to 690,600 bbls/d in the prior year quarter, with the first quarter of 2022 reflecting lower production early in the quarter due to the previously disclosed weather-related mining challenges experienced in the region. The company’s net SCO production in the first quarter of 2022 was 515,300 bbls/d, compared to 519,900 bbls/d in the first quarter of 2021, reflecting a combined upgrader utilization rate of 96% compared to 97% in the prior year quarter.

The company’s non-upgraded bitumen production was 170,400 bbls/d in the first quarter of 2022, comparable to 170,700 bbls/d in the prior year quarter, primarily due to increased production at Fort Hills, which was largely offset by decreased saleable bitumen production from the company’s In Situ assets. Production from Fort Hills in the first quarter of 2022 increased to 87,500 bbls/d, compared to 51,200 bbls/d in the prior year quarter, as production ramped up in the quarter. Overall production from the company’s In Situ assets was comparable to the prior year quarter, reflecting strong production in both periods, with the decrease in saleable bitumen production in the current period due to increased Firebag volumes being diverted to upgrading to maximize higher-value SCO production.

SCO and diesel sales volumes were 517,700 bbls/d in the first quarter of 2022, compared to 515,200 bbls/d in the prior year quarter, reflecting a draw of inventory in the first quarter of 2022 compared to a build of inventory in the prior year quarter.

Non-upgraded bitumen sales volumes decreased to 153,700 bbls/d in the first quarter of 2022, compared to 180,200 bbls/d in the prior year quarter, due to a build of inventory in the first quarter of 2022, as increased production from Fort Hills was transported to customers extending down to the U.S. Gulf Coast, compared to a draw of inventory in the prior year quarter.

2022 First Quarter   Suncor Energy Inc.   19

Cash Operating Costs

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(1)

Non-GAAP financial measures. Related per barrel amounts contain non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

Significant non-production costs include, but are not limited to, share-based compensation adjustments, research costs, project startup costs and adjustments to reflect the cost of internal transfers in the receiving asset at the cost of production. In addition, non-production costs include safe-mode costs associated with the deferral of capital projects and additional costs incurred in response to the COVID-19 pandemic. Non-production costs at Fort Hills and Syncrude also include, but are not limited to, excess power revenue from cogeneration units and an adjustment to reflect internally produced diesel from Oil Sands operations at the cost of production.

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(3)

Oil Sands operations excess power capacity and other includes, but is not limited to, the operational revenue impacts of excess power from cogeneration units and the natural gas expense recorded as part of a non-monetary arrangement involving a third-party processor.

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Oil Sands operations cash operating costs per barrel(1) were $28.70 in the first quarter of 2022, compared to $23.30 in the prior year quarter, due to higher operating, selling and general expenses, as detailed above, and decreased production. Oil Sands operations non-production costs, which are excluded from cash operating costs, were lower in the current quarter compared to the prior year quarter primarily due to a decrease in research and development costs, partially offset by higher share-based compensation expense in the current quarter compared to the prior year quarter. Oil Sands operations inventory changes in the first quarter of 2022 reflected changes to inventory valuation that are excluded from cash cost per barrel, which is calculated on a production basis.

Fort Hills cash operating costs per barrel(1) decreased to $29.00 in the first quarter of 2022, compared to $37.05 in the prior year quarter, reflecting increased production, partially offset by higher operating, selling and general expenses, as detailed above. In the first quarter of 2022, non-production costs were higher compared to the prior year quarter mainly due to the increased price for internally sourced diesel, which is adjusted to reflect internally produced diesel from Oil Sands operations at the cost of production.

(1)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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2022 First Quarter   Suncor Energy Inc.   21

Management’s Discussion and Analysis

Syncrude cash operating costs per barrel(1) were $34.70 in the first quarter of 2022, compared to $32.25 in the prior year quarter, due to higher operating, selling and general expenses, as detailed above, and decreased production. In the first quarter of 2022, non-production costs were higher compared to the prior year quarter primarily due to the increased price for internally sourced diesel, which is adjusted to reflect internally produced diesel from Oil Sands operations at the cost of production.

(1)

Production from the company’s Libya operations has been presented in the E&P section of this MD&A on an economic basis. Revenue and royalties from the company’s Libya operations are presented under the working-interest basis, which is required for presentation purposes in the company’s financial statements. In the first quarter of 2022, revenue includes a gross-up amount of  $138 million, with an offsetting amount of  $60 million in royalties in the E&P segment and $78 million in income tax expense reported at the consolidated level. In the first quarter of 2021, there were no Libya sales included in production, revenue or royalties.

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(2)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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(3)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)(2)

(1)

For an explanation of this bridge analysis, see the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated adjusted operating earnings (loss). Comparative periods have been restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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(1)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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22   2022 First Quarter   Suncor Energy Inc.

Adjusted operating earnings for the E&P segment in the first quarter of 2022 increased to $645 million compared to $258 million in the prior year quarter, with the increase primarily due to significantly higher realized crude prices, partially offset by higher royalties associated with higher crude price realizations.

Production volumes for E&P Canada were 51,200 bbls/d in the first quarter of 2022, compared to 58,000 bbls/d in the prior year quarter, primarily due to natural declines.

E&P International production was 29,200 boe/d in the first quarter of 2022, compared to 37,300 boe/d in the prior year quarter, primarily due to the absence of production from the Golden Eagle Area Development, as the sale of the company’s working interest in the asset was completed in the fourth quarter of 2021, partially offset by liftings in Libya in the first quarter of 2022 compared to no liftings in Libya in the prior year quarter. In the first quarter of 2022, the company commenced a sale process for its assets in Norway with an expected close later this year. These assets have been reclassified as assets held for sale in the first quarter of 2022.

E&P sales volumes were 79,500 boe/d in the first quarter of 2022, compared to 84,200 boe/d in the prior year quarter, consistent with the decrease in production and impacted by a larger build of inventory in the prior year quarter compared to the current year quarter.

(1)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

E&P International price realizations exclude Libya.

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Price realizations at E&P Canada and E&P International increased in the first quarter of 2022 from the prior year quarter, in line with the improved commodity price environment.

Royalties

E&P royalties in the first quarter of 2022 were higher than the prior year quarter primarily due to the increase in price realizations.

Expenses and Other Factors

Operating and transportation expenses decreased in the first quarter of 2022 compared to the prior year quarter, primarily due to a one-time transportation provision recorded in the prior year quarter, and the sale of the Golden Eagle Area Development resulting in lower transportation costs in the current period.

DD&A and exploration expense increased in the first quarter of 2022 compared to the prior year quarter, primarily due to the prior year quarter including a reversal of a previous asset impairment charge relating to the sale of the company’s working interest in the Golden Eagle Area Development, partially offset by lower production volumes in the current quarter compared to the prior year quarter.

Financing expense and other, which includes other income, decreased in the first quarter of 2022 compared to the prior year quarter, primarily due to the recognition of contingent consideration related to the company’s sale of the Golden Eagle Area Development.

2022 First Quarter   Suncor Energy Inc.   23

Management’s Discussion and Analysis

Refining and Marketing

Financial Highlights

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(1)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated net earnings (loss), adjusted operating earnings (loss) and adjusted funds from (used in) operations. Comparative periods have been restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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(2)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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Bridge Analysis of Adjusted Operating Earnings ($ millions)(1)(2)

(1)

For an explanation of this bridge analysis, see the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

Beginning in the first quarter of 2022, to align with how management evaluates segment performance, the company revised its segment presentation to reflect segment results before income tax expense and present tax at a consolidated level. This presentation change has no effect on consolidated adjusted operating earnings (loss). Comparative periods have been restated to reflect this change. See the Income Tax section of this MD&A for a discussion on income taxes.

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R&M adjusted operating earnings in the first quarter of 2022 increased to $1.395 billion from $943 million in the prior year quarter. The increase was primarily due to a larger FIFO inventory valuation gain in the first quarter of 2022 compared to the prior year quarter and an increase in refining and marketing margins as a result of significantly higher crack spread benchmarks in the first quarter of 2022 compared to the prior year quarter, partially offset by an increase in operating expenses. In the first quarter of 2022, adjusted operating earnings included a before-tax FIFO inventory valuation gain, including the impact of commodity risk management activities, of  $729 million on the increase in crude and refined product benchmarks, compared to a $432 million gain in the prior year quarter.

Volumes

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(1)

Refinery utilization is the amount of crude oil and natural gas plant liquids run through crude distillation units, expressed as a percentage of the capacity of these units.

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(2)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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Refinery crude throughput increased to 436,500 bbls/d and refinery utilization was 94% in the first quarter of 2022, compared to 428,400 bbls/d and 92% in the prior year quarter, reflecting improved refined product demand and a strategic build in product inventory in advance of upcoming turnaround activities, partially offset by maintenance that occurred late in the current period, including maintenance that was accelerated into the first quarter from the second quarter. Refined product sales in the first quarter of 2022 increased to 551,900 bbls/d, compared to 548,100 bbls/d in the prior year quarter. Domestic demand for diesel has improved compared to 2019 levels, however, gasoline demand continues to lag behind the comparable 2019 levels.

Refining and Marketing Gross Margins(1)​

Refining and marketing gross margins were influenced by the following:

•

On a LIFO(2) basis, Suncor’s refining and marketing gross margin increased to $35.95/bbl in the first quarter of 2022, from $30.30/bbl in the prior year quarter, due to improved benchmark crack spreads related to decreased refined product supply in the market and increased demand, in addition to the widening of heavy crude oil differentials. Suncor’s refining and marketing gross margin also reflects Suncor’s feedstock advantage, which enables the company to process heavier crude oil, marketing and logistics capabilities and strong sales channels within its integrated retail and wholesale networks.

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•

On a FIFO basis, Suncor’s refining and marketing gross margin increased to $53.20/bbl in the first quarter of 2022, from $40.75/bbl in the prior year quarter, due to the same factors noted above, in addition to FIFO inventory valuation impacts. In the first quarter of 2022, the FIFO method of inventory valuation, relative to an estimated LIFO(2) accounting method, including the impact of commodity risk management activities, resulted in a gain of  $729 million before-tax. In the prior year quarter, FIFO including the impact of commodity risk management activities resulted in a gain of $432 million before-tax, for a favourable quarter-over-quarter impact of  $297 million.

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(1)

Contains non-GAAP financial measures. See the non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

The estimated impact of the LIFO method is a non-GAAP financial measure. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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2022 First Quarter   Suncor Energy Inc.   25

Management’s Discussion and Analysis

Expenses and Other Factors

Operating expenses and DD&A in the first quarter of 2022 increased compared to the prior year quarter, primarily due to increased refinery maintenance expenses, an increase in share-based compensation expense and higher commodity input costs.

Refining operating expense per barrel(1) was $6.25 in the first quarter of 2022, compared to $5.75 in the prior year quarter, due to increased operating expenses partially offset by increased throughput.

Eliminations reflect the deferral or realization of profit or loss on crude oil sales from Oil Sands to Suncor’s refineries. Consolidated profits and losses are only realized when the refined products produced from internal purchases of crude feedstock have been sold to third parties. During the first quarter of 2022, the company deferred $281 million of intersegment profit, compared to $122 million in the prior year quarter, which was driven by the increase in Oil Sands price realizations over the previous quarter, as lower margin crude refinery feedstock sourced internally from Oil Sands was sold and replaced by higher margin crude inventory.

Corporate and Eliminations adjusted funds used in operations were $665 million for the first quarter of 2022, compared to $670 million in the first quarter of 2021, and were influenced by the same factors impacting adjusted operating loss described above, excluding the impact of share-based compensation expense and the unrealized gain on investment recorded in the first quarter of 2022. Adjusted funds used in operations in the prior year quarter were impacted by the restructuring charge related to workforce reduction plans recorded in the first quarter of 2021, which was partially offset by a smaller share-based compensation cash payout in the prior year quarter compared to the current year quarter.

Subsequent to the first quarter of 2022, the company announced plans to divest its wind and solar assets. The company has commenced the sale process and expects a sale to close within the next twelve months.

(1)

Contains non-GAAP financial measures. See the non-GAAP and Other Financial Measures Advisory section of this MD&A.

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5. Income Tax

Provision for income taxes in the first quarter of 2022 increased compared to the first quarter of 2021, primarily due to increased earnings in the first quarter of 2022 compared to the prior year quarter. In the first quarter of 2022, the company’s effective tax rate was 23.4%, compared to 26.3% in the prior year quarter. The effective tax rate decreased in the first quarter of 2022 compared to the first quarter of 2021, primarily due to the settlement of prior year appeals in the first quarter of 2022 and other permanent items impacting total tax expense.

6. Capital Investment Update

Capital and Exploration Expenditures by Segment

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(1)

Excludes capital expenditures related to assets held for sale of  $19 million in the first quarter of 2022.

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Capital and Exploration Expenditures by Type, Excluding Capitalized Interest

(1)

Asset sustainment and maintenance capital expenditures include capital investments that deliver on existing value by ensuring compliance or maintaining relations with regulators and other stakeholders, maintaining current processing capacity and delivering existing developed reserves.

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(2)

Economic investment capital expenditures include capital investments that result in an increase in value through adding reserves or improving processing capacity, utilization, cost or margin, including associated infrastructure.

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(3)

Excludes capital expenditures related to assets held for sale of  $19 million in the first quarter of 2022.

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2022 First Quarter   Suncor Energy Inc.   27

Management’s Discussion and Analysis

During the first quarter of 2022, the company spent $974 million on capital expenditures, excluding capitalized interest, compared to $772 million in the prior year quarter. The increase in capital expenditures is primarily due to increased economic investment capital expenditures at Oil Sands Base and Corporate and Eliminations.

Activity in the first quarter of 2022 is summarized by business unit below.

Oil Sands

Oil Sands Base capital expenditures were $307 million in the first quarter of 2022 and were primarily focused on asset sustainment and maintenance activities, as well as economic investment to progress low-carbon power cogeneration to replace the coke-fired boilers.

In Situ capital expenditures were $133 million in the first quarter of 2022 and were directed towards economic investment activities, including the continued investment in well pad projects, and asset sustainment and maintenance activities.

Capital expenditures at Fort Hills were $68 million in the first quarter of 2022, and were directed towards asset sustainment and maintenance activities in mine and tailings development.

Syncrude capital expenditures were $133 million in the first quarter of 2022, the majority of which were for asset sustainment and maintenance expenditures relating to the company’s planned maintenance program, including planned maintenance that commenced in the first quarter and additional hydrotreating maintenance that was accelerated from later in the year to stagger coker and hydrotreating maintenance, which is expected to optimize full-year production at Syncrude. Economic investment during the quarter was directed towards progressing the Mildred Lake West Extension mining project.

Exploration and Production

Capital and exploration expenditures at E&P were $77 million in the first quarter of 2022 and were related to economic investment projects, including the Terra Nova Asset Life Extension Project, partially offset by support from the Government of Newfoundland and Labrador, and development drilling at Hebron.

Refining and Marketing

R&M capital expenditures were $132 million in the first quarter of 2022 and were primarily related to asset sustainment and maintenance activities relating to the company’s planned maintenance program.

Corporate and Eliminations

Corporate and Eliminations capital expenditures were $124 million in the first quarter of 2022 and were primarily directed towards the Forty Mile Wind Power Project and the company’s digital transformation.

7. Financial Condition and Liquidity

Indicators

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(1)

Non-GAAP financial measures or contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A.

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(2)

ROCE would have been 12.4% for the twelve months ended March 31, 2022, excluding the impact of the impairment reversal of  $221 million ($168 million after-tax) in the third quarter of 2021. ROCE would have been (0.6%) for the twelve months ended March 31, 2021, excluding the impact of impairments of  $559 million ($423 million after-tax) in the fourth quarter of 2020.

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Capital Resources

Suncor’s capital resources consist primarily of cash flow provided by operating activities, cash and cash equivalents, and available lines of credit. Suncor’s management believes the company will have the capital resources to fund its planned 2022 capital spend program of  $4.7 billion and to meet current and future working capital requirements, through cash and cash equivalents balances, cash flow provided by operating activities, available committed credit facilities, issuing commercial paper and, if needed, accessing capital markets. The company’s cash flow provided by operating activities depends on a number of factors, including commodity prices, production and sales volumes, refining and marketing gross margins, operating expenses, taxes, royalties and foreign exchange rates.

The company has invested cash in short-term financial instruments that are presented as cash and cash equivalents. The objectives of the company’s short-term investment portfolio are to ensure the preservation of capital, maintain adequate liquidity to meet Suncor’s cash flow requirements and deliver competitive returns derived from the quality and diversification of investments within acceptable risk parameters. The maximum weighted average term to maturity of the short-term investment portfolio is not expected to exceed six months, and all investments will be with counterparties with investment grade debt ratings.

Available Sources of Liquidity

For the three months ended March 31, 2022, cash and cash equivalents increased to $2.599 billion from $2.205 billion at December 31, 2021, due to cash flow provided by operating activities exceeding the company’s capital and exploration expenditures, debt reduction, the payment of  $601 million in dividends, the repurchase of  $827 million of Suncor’s common shares under its NCIB, and the completion of a significant income tax payment related to the company’s 2021 income tax expense in the first quarter of 2022.

As at March 31, 2022, the weighted average days to maturity of the company’s short-term investment portfolio was approximately 18 days.

Available credit facilities for liquidity purposes at March 31, 2022 were $4.153 billion, comparable to $4.247 billion at December 31, 2021.

Financing Activities

Management of debt levels and liquidity continues to be a priority for Suncor given the company’s long-term plans and future expected volatility in the current business environment. Suncor believes a phased and flexible approach to existing and future projects should assist the company in maintaining its ability to manage project costs and debt levels.

Total Debt to Total Debt Plus Shareholders’ Equity

Suncor is subject to financial and operating covenants related to its bank debt and public market debt. Failure to meet the terms of one or more of these covenants may constitute an “event of default” as defined in the respective debt agreements, potentially resulting in accelerated repayment of one or more of the debt obligations. The company is in compliance with its financial covenant that requires total debt to not exceed 65% of its total debt plus shareholders’ equity. At March 31, 2022, total debt to total debt plus shareholders’ equity was 32.0% (December 31, 2021 – 33.4%). The company continues to be in compliance with all operating covenants under its debt agreements.

2022 First Quarter   Suncor Energy Inc.   29

The actual number of common shares that may be purchased and the timing of any such purchases will be determined by Suncor. Suncor believes that, depending on the trading price of its common shares and other relevant factors, purchasing its own shares represents an attractive investment opportunity and is in the best interests of the company and its shareholders. The company does not expect the decision to allocate cash to repurchase shares will affect its long-term strategy.

2022 First Quarter   Suncor Energy Inc.   31

Management’s Discussion and Analysis

8. Quarterly Financial Data

Trends in Suncor’s quarterly revenue, earnings and adjusted funds from operations are driven primarily by production volumes, which can be significantly impacted by major maintenance events, changes in commodity prices and crude differentials, refining crack spreads, foreign exchange rates and other significant events impacting operations, such as operational incidents and the impacts of the COVID-19 pandemic.

(2)

Non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A. Adjusted operating earnings (loss) for each quarter are defined in the Non-GAAP and Other Financial Measures Advisory section and reconciled to GAAP measures in the Consolidated Financial Information and Segment Results and Analysis sections of each Quarterly Report to Shareholders issued by Suncor (Quarterly Reports) in respect of the relevant quarter. Adjusted funds from operations for each quarter are defined and reconciled to GAAP measures in the Non-GAAP and Other Financial Measures Advisory section of each Quarterly Report in respect of the relevant quarter, with such information being incorporated by reference herein and available on SEDAR at www.sedar.com.

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(3)

Beginning in the first quarter of 2021, the company revised its calculation of adjusted operating earnings (loss), a non-GAAP financial measure, to exclude unrealized (gains) losses on derivative financial instruments that are recorded at fair value in other income (loss) to better align the earnings impact of the activity with the underlying items being risk-managed. Prior period comparatives have been restated to reflect this change.

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(4)

Contains non-GAAP financial measures. See the Non-GAAP and Other Financial Measures Advisory section of this MD&A. Non-GAAP measures included in ROCE and ROCE excluding impairments are defined and reconciled to GAAP measures in the Non-GAAP and Other Financial Measures Advisory section of each Quarterly Report in respect of the relevant quarter, with such information being incorporated by reference herein and available on SEDAR at www.sedar.com.

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(5)

Represented on a basic per share basis.

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32   2022 First Quarter   Suncor Energy Inc.