Suncor Energy reports financial results for 2008 and operational goals for 2009



    
    All financial figures are unaudited and in Canadian dollars unless noted
    otherwise. Certain financial measures referred to in this document are
    not prescribed by Canadian generally accepted accounting principles
    (GAAP). For a description of these measures, see "Non-GAAP Financial
    Measures" on page 4. This document makes reference to barrels of oil
    equivalent (boe). A boe conversion ratio of six thousand cubic feet of
    natural gas: one barrel of crude oil is based on an energy equivalency
    conversion method primarily applicable at the burner tip and does not
    represent a value equivalency at the wellhead. Accordingly, boe measures
    may be misleading, particularly if used in isolation. Suncor's outlook
    includes a production range of +5%/-10% based on our current
    expectations, estimates, projections and assumptions for the 2009 fiscal
    year. Uncertainties in the estimating process and the impact of future
    events can and will cause actual results to differ, in some cases
    materially, from our estimates.
    

    CALGARY, Jan. 20 /CNW/ - Suncor Energy Inc. today reported 2008 net
earnings of $2.137 billion ($2.29 per common share), compared to $2.983
billion ($3.23 per common share) in 2007. Excluding unrealized foreign
exchange impacts on the company's U.S. dollar denominated long-term debt, the
impact of income tax rate reductions on opening future income tax liabilities,
and project start-up costs, 2008 earnings were $3.013 billion ($3.23 per
common share), compared to $2.390 billion ($2.59 per common share) in 2007.
Cash flow from operations in 2008 was $4.463 billion, compared to $4.009
billion in 2007.
    The increases in earnings and cash flow from operations are due primarily
to higher annual average price realizations for oil sands and natural gas
products. This was partially offset by unscheduled maintenance - which led to
higher operating expenses, lower production and increased product purchases -
and decreased earnings from our downstream operations due to declining
commodity prices in the second half of the year which reduced the value of
inventories.
    "We've had a challenging 2008 with unscheduled maintenance at our oil
sands operations," said Rick George, president and chief executive officer.
"We've put considerable effort into maximizing the reliability of our assets
with the target of achieving higher, more stable production rates in 2009 and
beyond."

    
    2008 Overview

    -   Suncor's total upstream production averaged 264,700 barrels of oil
        equivalent (boe) per day in 2008, compared to 271,400 boe per day in
        2007. Oil sands production contributed 228,000 barrels per day (bpd)
        in 2008 compared to 235,600 bpd in 2007. Oil sands production volumes
        and sales mix were impacted during the year by planned and unplanned
        maintenance activities in the company's upgrading and extraction
        facilities. In Suncor's natural gas business, production was
        220 million cubic feet equivalent (mmcfe) per day compared to an
        average of 215 mmcfe per day in 2007.

    -   Oil sands cash operating costs in 2008 averaged $38.50 per barrel,
        compared to $27.80 per barrel during 2007. The increase in cash
        operating costs per barrel was due to higher operating expenses
        including increased unplanned maintenance, as well as increased
        third-party bitumen purchases and higher natural gas input costs.

    -   Commissioning of Suncor's $2.3 billion expansion to one of two oil
        sands upgraders was completed in the third quarter of 2008. With the
        completion of this expansion, Suncor has upgrading design capacity in
        place of 350,000 bpd. Actual production in 2009 is expected to be
        less than design capacity at 300,000 bpd (+5%/-10%) primarily due to
        expected constraints in bitumen supply and planned maintenance in the
        third quarter.

    -   Suncor's Board of Directors approved a $20.6 billion investment that
        is expected to boost crude oil production capacity at the company's
        oil sands operation by 200,000 bpd. At the end of 2008, spending on
        this project totaled approximately $7.0 billion. Company-wide capital
        spending in 2008 totaled $7.6 billion. Net debt at year-end 2008 was
        $7.2 billion, compared to $3.2 billion at the end of 2007. For
        further details on Suncor's capital spending plans, see Operational
        and Financial Outlook on page 3.

    -   At the company's annual and special meeting in April 2008, Suncor
        shareholders approved a split of the company's common shares on a
        two-for-one basis, and the shares began trading at the split-adjusted
        price in May on both the Toronto and New York stock exchanges.
    

    Fourth Quarter 2008

    Suncor recorded a net loss in the fourth quarter 2008 of $215 million
($0.24 per common share), compared to net earnings of $1.042 billion ($1.13
per common share) for the fourth quarter of 2007. Excluding unrealized foreign
exchange impacts on the company's U.S. dollar denominated long-term debt, the
impact of income tax rate reductions on opening future income tax liabilities,
and project start-up costs, earnings for the fourth quarter of 2008 were $434
million ($0.46 per common share), compared to $677 million ($0.73 per common
share) in the fourth quarter of 2007. Cash flow from operations for the fourth
quarter of 2008 was $551 million, compared to $1.200 billion in the fourth
quarter of 2007.
    The decrease in earnings was primarily due to significant decreases in
benchmark commodity prices over the course of the fourth quarter of 2008. This
negatively impacted both our sales revenues and the value of our inventories.
In addition, we had higher operating expenses in our oil sands business. These
impacts were partially offset by mark-to-market gains on our crude oil hedges.
The decrease in cash flow from operations was due primarily to the same
factors that impacted earnings during the quarter excluding the impact of the
crude oil hedging gains.
    Suncor's combined oil sands and natural gas production for the fourth
quarter of 2008 was 279,400 boe per day, compared to 290,700 boe per day in
the same period of 2007. Oil sands production in the fourth quarter of 2008
averaged 243,800 bpd, compared to fourth quarter 2007 production of 252,500
bpd. Production volumes were reduced in the fourth quarter of 2008 due to
planned and unplanned maintenance. Natural gas production averaged 213 mmcfe
per day in the fourth quarter of 2008, compared to the 229 mmcfe per day
recorded in the fourth quarter of 2007. The decrease in production was
primarily due to third-party processing outages during the fourth quarter of
2008.
    Fourth quarter 2008 oil sands cash operating costs were $41.30 per
barrel, compared to $27.90 per barrel in the same period of 2007. Cash
operating costs per barrel were higher in the fourth quarter primarily due to
higher total operating costs, including expenses and production impacts
related to a fire at the oil sands facility in late November.
    In the company's downstream business, planned maintenance at the Sarnia
refinery, which involved a partial shutdown of the facility's operating units,
was completed in October. This shutdown was completed safely, on schedule and
on budget.

    Operational and Financial Outlook

    In January, Suncor's Board of Directors approved a revised 2009 capital
spending plan of $3 billion, with approximately one third of the budget
targeted to growth projects and the remainder for spending on base business
operations. The previous plan, approved in October 2008, had targeted spending
of $6 billion.
    With the revised plan, construction on the Voyageur upgrader and Firebag
Stage 3 will be wound down and the projects placed in a "safe mode" pending
resumption of expansion work. At this time, construction restart and
completion targets for these projects, and start up and completion targets for
all other expansion projects, have not been determined. Capital growth plans
will be reviewed on a quarterly basis in light of market conditions and
updates provided as details are known.
    "With market conditions limiting our growth capital spending in 2009, we
will be tightly focused on getting full value from our existing assets," said
George. "Safe, reliable, cost-effective and environmentally responsible
performance will be the keys to weathering the current downturn and ensuring
we are well positioned for a market recovery. We have some of the most
experienced employees and contractors in the industry and, going forward, I
expect everyone to be lined up behind these priorities."
    Suncor's outlook provides management's targets for 2009 in certain key
areas of the company's business. Users of this forward-looking information are
cautioned that actual results may vary from the targets disclosed.

    
                                            2009 Full Year Outlook
    -------------------------------------------------------------------------
    Oil Sands
    Production(1) (bpd)                     300 000 (+5%/-10%)
    Sales
      Diesel                                11%
      Sweet                                 39%
      Sour                                  48%
      Bitumen                               2%
    Realization on crude sales basket       WTI @ Cushing less
                                             Cdn$4.50 to Cdn$5.50 per barrel
    Cash operating costs(2)                 $33 to $38 per barrel
    -------------------------------------------------------------------------
    Natural Gas
      Production(3) (mmcf equivalent
       per day)                             210 (+5%/-5%)
      Natural gas                           92%
      Liquids                               8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes volumes transferred to Suncor for processing for which the
        company receives a processing fee. Volumes received under this
        arrangement are not included as purchases for financial statement
        presentation.

    (2) Cash operating cost estimates are based on the following assumptions:
        (i) production volumes and sales mix as described in the table above;
        and (ii) a natural gas price of $7.10 per gigajoule at AECO. This
        goal also includes costs incurred for third-party bitumen processing.
        Cash operating costs per barrel are not prescribed by Canadian
        generally accepted accounting principles (GAAP). This non-GAAP
        financial measure does not have any standardized meaning and
        therefore is unlikely to be comparable to similar measures presented
        by other companies. Suncor includes this non-GAAP financial measure
        because investors may use this information to analyze operating
        performance. This information should not be considered in isolation
        or as a substitute for measures of performance prepared in accordance
        with GAAP. See "Non-GAAP Financial Measures".

    (3) Production target includes natural gas liquids (NGL) and crude oil
        converted into mmcf equivalent at a ratio of one barrel of NGL/crude
        oil: six thousand cubic feet of natural gas. This conversion ratio is
        based on an energy equivalency conversion method primarily applicable
        at the burner tip and does not represent a value equivalency at the
        wellhead. This mmcf equivalent may be misleading, particularly if
        used in isolation.


    The 2009 outlook is based on Suncor's current expectations, estimates,
projections and assumptions for the 2009 fiscal year and is subject to change.
Assumptions are based on management's experience and perception of historical
trends, current conditions, anticipated future developments and other factors
believed to be relevant. Assumptions of the 2009 outlook include implementing
reliability and operational efficiency initiatives which we expect to minimize
unplanned maintenance in 2009.
    Factors that could potentially impact Suncor's operations and financial
performance in 2009 include:

    -   Bitumen supply. Ore grade quality, unplanned mine equipment and
        extraction plant maintenance, tailings storage and in-situ reservoir
        performance could impact 2009 production targets. Production could
        also be impacted by the availability of third-party bitumen.

    -   Performance of recently commissioned upgrading facilities. Production
        rates while new equipment is being lined out are difficult to predict
        and can be impacted by unplanned maintenance.

    -   Unplanned maintenance. Production estimates could be impacted if
        unplanned work is required at any of its mining, production,
        upgrading, refining or pipeline assets.

    -   Crude oil hedges. Suncor has hedging agreements for 55,000 bpd in
        2009 and 2010 at a floor price of US$60 per barrel.

    -   Market Instability. Suncor's ability to borrow in the capital debt
        markets at acceptable rates may be affected by market instability.

    The preceding paragraphs and table contain forward-looking information
that is subject to a number of risks and uncertainties, many of which are
beyond the company's control. For additional information on risks,
uncertainties and other factors that could cause actual results to differ,
please refer to the legal notice on page 7.

    Net Earnings Components

    This table sets forth some of the factors impacting Suncor's net earnings.

                                    Three months ended           Years ended
    ($ millions, after-tax)                December 31           December 31
    (unaudited)                        2008       2007       2008       2007
    -------------------------------------------------------------------------
    Earnings before the
     following items:                   434        677      3 013      2 390
      Impact of income tax rate
       changes on opening future
       income tax liabilities(1)          -        360          -        427
      Unrealized foreign exchange
       gain (loss) on U.S. dollar
       denominated long-term debt      (645)        16       (852)       215
      Project start-up costs             (4)       (11)       (24)       (49)
    -------------------------------------------------------------------------
    Net earnings (loss) as reported    (215)     1 042      2 137      2 983
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Reflects Q4 2007 federal rate reduction of 3.5% and Q2 2007 federal
        rate reduction of 0.5%.
    

    Non-GAAP Financial Measures

    Certain financial measures referred to in this news release, namely
return on capital employed (ROCE) and cash flow from operations, are not
prescribed by GAAP. These non-GAAP measures do not have any standardized
meaning and therefore are unlikely to be comparable to similar measures
presented by other companies. Suncor includes these non-GAAP financial
measures because investors may use this information to analyze operating
performance, leverage and liquidity. The additional information should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP.
    Cash flow from operations is expressed before changes in non-cash working
capital. A reconciliation of net earnings to cash flow from operations is
provided in the schedules of segmented data, which are an integral part of the
company's fourth quarter financial statements.
    A reconciliation of cash flow from operations on a per common share basis
is presented in the following table:

    
    Reconciliation of cash flow from operations on a per share basis
    (unaudited)
                                    Three months ended           Years ended
                                           December 31           December 31
                                       2008       2007       2008       2007
    -------------------------------------------------------------------------
    Cash flow from operations
     ($ millions)                       551      1 200      4 463      4 009
    Weighted average number of
     common shares outstanding -
     basic (millions of shares)         935        925        932        922
    Cash flow from operations -
     basic ($ per share)               0.59       1.30       4.79       4.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The following tables outline the reconciliation of oil sands cash and
total operating costs to expenses included in the schedules of segmented data
in Suncor's fourth quarter financial statements.

    Oil Sands Operating Costs - Total Operations

                                        Three months ended December 31
                                          2008                  2007
    (unaudited)                   $ millions  $/barrel  $ millions  $/barrel
    -------------------------------------------------------------------------
    Operating, selling and
     general expenses                   968                   615
      Less: natural gas costs,
       inventory changes,
       stock-based compensation
       and other                       (183)                  (59)
      Less: non-monetary
       transactions                     (30)                  (21)
    Accretion of asset retirement
     obligations                         14                    10
    Taxes other than income taxes        23                    16
    -------------------------------------------------------------------------
    Cash costs                          792      35.35        561      24.10
    Natural gas                          91       4.05         84       3.60
    Imported bitumen (net of other
     reported product purchases)         43       1.90          5       0.20
    -------------------------------------------------------------------------
    Cash operating costs                926      41.30        650      27.90
    Project start-up costs                6       0.30         13       0.55
    -------------------------------------------------------------------------
    Total cash operating costs          932      41.60        663      28.45
    Depreciation, depletion
     and amortization                   168       7.50        129       5.60
    -------------------------------------------------------------------------
    Total operating costs             1 100      49.10        792      34.05
    -------------------------------------------------------------------------
    Production (thousands of
     barrels per day)                 243.8                 252.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                           Years ended December 31
                                          2008                  2007
    (unaudited)                   $ millions  $/barrel  $ millions  $/barrel
    -------------------------------------------------------------------------
    Operating, selling and
     general expenses                 3 124                 2 384
      Less: natural gas costs,
       inventory changes,
       stock-based compensation
       and other                       (524)                 (302)
      Less: non-monetary
       transactions                    (111)                 (102)
    Accretion of asset retirement
     obligations                         55                    41
    Taxes other than income taxes        80                    55
    -------------------------------------------------------------------------
    Cash costs                        2 624      31.45      2 076      24.15
    Natural gas                         438       5.25        307       3.55
    Imported bitumen (net of other
     reported product purchases)        150       1.80          8       0.10
    -------------------------------------------------------------------------
    Cash operating costs              3 212      38.50      2 391      27.80
    Project start-up costs               35       0.40         60       0.95
    -------------------------------------------------------------------------
    Total cash operating costs        3 247      38.90      2 451      28.75
    Depreciation, depletion
     and amortization                   580       6.95        462       5.40
    -------------------------------------------------------------------------
    Total operating costs             3 827      45.85      2 913      34.15
    -------------------------------------------------------------------------
    Production (thousands of
     barrels per day)                 228.0                 235.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Oil Sands Operating Costs - In-Situ Bitumen Production Only

                                        Three months ended December 31
                                          2008                  2007
    (unaudited)                   $ millions  $/barrel  $ millions  $/barrel
    -------------------------------------------------------------------------
    Operating, selling and
     general expenses                    91                    69
      Less: natural gas costs
       and inventory changes            (35)                  (34)
    Taxes other than income taxes         4                     2
    -------------------------------------------------------------------------
    Cash costs                           60      16.55         37       9.95
    Natural gas                          35       9.65         34       9.15
    -------------------------------------------------------------------------
    Cash operating costs                 95      26.20         71      19.10
    In-situ (Firebag) start-up costs      -          -          -          -
    -------------------------------------------------------------------------
    Total cash operating costs           95      26.20         71      19.10
    Depreciation, depletion
     and amortization                    24       6.55         25       6.80
    -------------------------------------------------------------------------
    Total operating costs               119      32.75         96      25.90
    -------------------------------------------------------------------------
    Production (thousands of
     barrels per day)                  39.7                  40.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                           Years ended December 31
                                          2008                  2007
    (unaudited)                   $ millions  $/barrel  $ millions  $/barrel
    -------------------------------------------------------------------------
    Operating, selling and
     general expenses                   334                   273
      Less: natural gas costs
       and inventory changes           (168)                 (134)
    Taxes other than income taxes        12                     7
    -------------------------------------------------------------------------
    Cash costs                          178      13.00        146      10.85
    Natural gas                         168      12.30        134       9.90
    -------------------------------------------------------------------------
    Cash operating costs                346      25.30        280      20.75
    In-situ (Firebag) start-up costs      9       0.65          -          -
    -------------------------------------------------------------------------
    Total cash operating costs          355      25.95        280      20.75
    Depreciation, depletion
     and amortization                    87       6.35         83       6.20
    -------------------------------------------------------------------------
    Total operating costs               442      32.30        363      26.95
    -------------------------------------------------------------------------
    Production (thousands of
     barrels per day)                  37.4                  36.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    ROCE is calculated as net earnings (2008 - $2,940 million; 2007 - $2,804
million) adjusted for after-tax financing expense (2008 - $803 million; 2007 -
income of $179 million) for the twelve month period ended; divided by average
capital employed (2008 - $13,957 million; 2007 - $9,584 million). Average
capital employed is the sum of shareholders' equity and short-term debt plus
long-term debt less cash and cash equivalents, at the beginning and end of the
year, divided by two, less average annual capitalized costs related to major
projects in progress (as applicable). For more detail on how ROCE is
calculated, see page 46 of Suncor's 2007 Annual Report to Shareholders.

    Legal Notice - Forward-Looking Information

    This news release contains certain forward-looking statements that are
based on Suncor's current expectations, estimates, projections and assumptions
that were made by the company in light of its experience and its perception of
historical trends.
    All statements that address expectations or projections about the future,
including statements about Suncor's strategy for growth, expected and future
expenditures, commodity prices, costs, schedules, production volumes,
operating and financial results and expected impact of future commitments, are
forward-looking statements. Some of the forward-looking statements may be
identified by words like "expects," "anticipates," "estimates," "plans,"
"scheduled," "intends," "believes," "projects," "invests," "could," "focus,"
"goal," "proposed," "target," "objective," "potential," "forecast," "predict,"
"enable," "outlook," and similar expressions. These statements are not
guarantees of future performance and involve a number of risks and
uncertainties, some that are similar to other oil and gas companies and some
that are unique to Suncor. Suncor's actual results may differ materially from
those expressed or implied by its forward-looking statements and readers are
cautioned not to place undue reliance on them.
    Suncor's outlook includes a production range of +5%/-10% based on our
current expectations, estimates, projections and assumptions for the 2009
fiscal year. Uncertainties in the estimating process and the impact of future
events can and will cause actual results to differ, in some cases materially,
from our estimates.
    The risks, uncertainties and other factors that could influence actual
results include but are not limited to, market instability affecting Suncor's
ability to borrow in the capital debt markets at acceptable rates,
availability of third-party bitumen, success of hedging strategies, changes in
the general economic, market and business conditions; fluctuations in supply
and demand for Suncor's products; volatility of and assumptions regarding
commodity prices, interest rates and currency exchange rates; Suncor's ability
to respond to changing markets and to receive timely regulatory approvals; the
successful and timely implementation of capital projects including growth
projects (for example, the Voyageur project, including our Firebag in-situ
development) and regulatory projects (for example, the emissions reduction
modifications at our Firebag in-situ development); the accuracy of cost
estimates, some of which are provided at the conceptual or other preliminary
stage of projects and prior to commencement or conception of the detailed
engineering needed to reduce the margin of error and increase the level of
accuracy; the integrity and reliability of Suncor's capital assets; the
cumulative impact of other resource development; the cost of compliance with
current and future environmental laws; the accuracy of Suncor's reserve,
resource and future production estimates and its success at exploration and
development drilling and related activities; the maintenance of satisfactory
relationships with unions, employee associations and joint venture partners;
competitive actions of other companies, including increased competition from
other oil and gas companies or from companies that provide alternative sources
of energy; labour and material shortages; uncertainties resulting from
potential delays or changes in plans with respect to projects or capital
expenditures; actions by governmental authorities including the imposition of
taxes or changes to fees and royalties, changes in environmental and other
regulations (for example, the Government of Alberta's implementation of
recommendations to enhance how the performance of the royalty regime is
measured and reported, the Government of Canada's proposed Clean Air
regulatory framework and the development of greenhouse gas regulation by other
provincial and state governments); the future potential for lawsuits against
greenhouse gas emitters, based on links drawn between greenhouse gas emissions
and climate change; unexpected issues associated with management and
reclamation of our tailings ponds; the ability and willingness of parties with
whom we have material relationships to perform their obligations to us; and
the occurrence of unexpected events such as fires, blowouts, freeze-ups,
equipment failures and other similar events affecting Suncor or other parties
whose operations or assets directly or indirectly affect Suncor. The foregoing
important factors are not exhaustive.
    Many of these risk factors are discussed in further detail throughout
Suncor's third quarter Management's Discussion and Analysis and in the
company's Annual Information Form/Form 40-F on file with Canadian securities
commissions at www.sedar.com and the United States Securities and Exchange
Commission (SEC) at www.sec.gov. Readers are also referred to the risk factors
described in other documents that Suncor files from time to time with
securities regulatory authorities. Copies of these documents are available
without charge from the company.

    Suncor Energy Inc. is an integrated energy company headquartered in
Calgary, Alberta. Suncor's oil sands business, located near Fort McMurray,
Alberta, extracts and upgrades oil sands and markets refinery feedstock and
diesel fuel, while operations throughout western Canada produce natural gas.
Suncor operates a refining and marketing business in Ontario with retail
distribution under the Sunoco brand. U.S.A. downstream assets include pipeline
and refining operations in Colorado and Wyoming and retail sales in the Denver
area under the Phillips 66(R) brand. Suncor's common shares (symbol: SU) are
listed on the Toronto and New York stock exchanges.
    Suncor Energy (U.S.A.) Inc. is an authorized licensee of the Phillips
66(R) brand and marks in the state of Colorado. Sunoco in Canada is separate
and unrelated to Sunoco in the United States, which is owned by Sunoco, Inc.
of Philadelphia.

    A full copy of Suncor's fourth quarter report to shareholders, including
management's discussion and analysis and the financial statements and notes
(unaudited) can be obtained at www.suncor.com/financialreporting or by calling
1-800-558-9071 toll-free in North America.
    To listen to the conference call discussing Suncor's fourth quarter
results, visit www.suncor.com/webcasts.





For further information:

For further information: about Suncor Energy Inc. please visit our web
site at www.suncor.com; Investor inquiries: John Rogers, (403) 269-8670; Media
inquiries: Shawn Davis, (403) 920-8379

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