Suncor Energy Inc. (SU) Earnings

Management highlights

### Safety and Cultural Priorities - Suncor's base plant mining team won the John T. Ryan Award for industry-leading safety performance for the second consecutive year, with safety named the company's top overall priority. - The company has built a deep, team-focused, results-oriented high-performance culture centered on continuous improvement, rapid response to unplanned events, and delivering consistent performance across commodity price cycles. ### Turnaround Performance Improvements - The company originally committed to reduce annual turnaround capital costs by $250 million within three years after 2024 Investor Day, and achieved this target in two years. It then raised the target to $350 million annual reduction, and expects to hit that in 2026 (a year ahead of schedule), before raising the goal again to $400 million annual reduction. - The Q2 2026 Firebag turnaround (covering 2/3 of the field's 250,000 bpd capacity) was completed in 44 days at a cost of $118 million, a 24% reduction in duration and 21% reduction in cost compared to a similar 2022 turnaround. This cut the Q2 production impact to 60,000 bpd, 25,000 bpd better than planned, and will extend the next turnaround cycle to 5 years from the historical 4 years. Innovations like new cleaning processes using mineral oil cut two full days off vessel cleaning. - Other Q2 turnarounds also outperformed: the Base Plant U2 Coker was completed in 46 days (vs 60 days in 2021) at 10% lower cost, and the Commerce City Refinery turnaround was completed in 50 days (vs 74 days in 2021). ### Operational Resilience and Weather Learning - After record Q2 precipitation (highest in 30 years, 50% above the 10-year average) hit Fort McMurray and reduced mining output, the company has implemented new mitigation measures including 48/72-hour weather outlooks, pre-stockpiling ore in high-risk areas, pre-securing critical equipment and materials, and real-time drone monitoring of mine conditions. Production returned to normal by the end of Q2, with preliminary July production of ~870,000 bpd (the second highest July output on record). ### Downstream and Global Market Expansion - The company has expanded global product sales access over multiple years, growing from sales in ~20 countries to ~45 countries, and added long-term time charters for vessels to enable exports from both the East and West coasts of North America. Exports hit 56 cargoes in H1 2026, nearly matching the full-year 2025 total of 58 cargoes. West Coast export capacity has grown from 3-4 cargoes per month to 5-6 cargoes per month, and the Montreal refinery developed a zero-cost structural capability to export up to 25,000 bpd of jet fuel (up from 0 a year prior, with a planned original target of 5,000 bpd). This expansion is a permanent, structural change to the business, not a transitory response to market volatility. ### Capital Allocation and Shareholder Returns - With a strong balance sheet, the company is focused on returning excess cash to shareholders. In Q2 2026, it returned $1.8 billion to shareholders: $1.1 billion in share buybacks and $706 million in dividends. Monthly buybacks were increased to $500 million per month (from the prior $350 million per month set in April 2026, and the $275 million per month level at the start of 2026), marking the second buyback increase in 2026.

Guidance

- Full-year upstream production guidance was maintained despite Q2 weather impacts, with management confirming it expects to meet full-year guidance and has a track record of delivering at the upper end of guidance ranges in recent years. A strong rebound in upstream production is expected in the second half of 2026, as major maintenance is completed and Q2 weather impacts are fully behind the company. - The company maintains its existing 100,000 bpd organic growth target through 2028, with optionality to accelerate growth if market conditions and shareholder preferences support that step; no acceleration has been approved to date, but preparatory work (seismic surveys, delineation drilling) is ongoing to preserve optionality. - Management expects current strong global refining cracks (driven by low Russian refinery output and export cuts, and strong demand for diesel and jet fuel) to remain resilient over the medium term, which positions Suncor's downstream business for strong ongoing performance.

Segment performance

1. Upstream: Q2 2026 production reached 761,000 barrels per day (bpd), impacted by 50,000-60,000 bpd of lost output from record precipitation in Fort McMurray. Upgrader utilization hit 93% for the quarter, and 94% year-to-date (a new record, 1% higher than H1 2025). 2. Downstream Refining: Q2 2026 refining throughput reached 471,000 bpd (the second highest Q2 on record, 28,000 bpd higher than 2025 Q2). Combined utilization for the company's two largest refineries (Montreal and Edmonton) hit 99%, with overall network utilization of 92% on re-rated capacity of 511,000 bpd. Year-to-date utilization is 95% (a new record, 4% higher than H1 2025). Downstream adjusted funds from operations (AFFO) hit a record $2.3 billion, $200 million above the prior all-time record set in Q2 2022. 3. Product Sales: Q2 product sales hit 655,000 bpd, the highest Q2 in company history, 54,000 bpd higher than the prior 2025 Q2 record. This marked the 8th consecutive quarter with sales over 600,000 bpd. Jet fuel sales hit a record 51,000 bpd, 90% higher than the prior record of 27,000 bpd in Q1 2026. 4. Corporate Total: Total adjusted funds from operations (AFFO) hit $5.3 billion, tying the all-time quarterly record set in Q2 2022, with AFFO per share of $4.52 (20% higher than the 2022 Q2 per share result despite WTI prices $15 per barrel lower than 2022 Q2). Net debt as of quarter-end was $4.5 billion, 75% lower than the start of the 2020s.

Risks & headwinds

- Unusual extreme weather events (like the record Q2 2026 rainfall in Fort McMurray) can materially impact upstream mining production and cause near-term output losses, and while mitigation measures have been improved, these weather risks cannot be fully eliminated. - Commodity price volatility remains an ongoing risk, though Suncor's improved balance sheet, low corporate breakeven, and integrated operating model have increased resilience to price swings. - Uncertainty remains around regulatory and market access developments in Western Canada, with plans for potential growth still contingent on final policy outcomes from the recent trilateral MOU with provincial and federal governments.

Analyst Q&A

• Q: With the new $500 million per month buyback level, is this sustainable through the commodity cycle, and are there alternative cash return levers the company could use?

  A: Management emphasized a commitment to predictable, rateable shareholder returns through commodity cycles. They maintained buybacks steady even during 2025's lower price period, and only increased it as business performance improved. The company uses a leverage guardrail (1x net debt to cash flow at $50/bbl WTI) rather than a fixed net debt target, allowing returns to track performance. Investors can model the $500 million per month buyback for the foreseeable future, supported by the company's strong balance sheet and high-quality asset base.

• Q: How does increased potential Western Canada egress change the company's plans for in-situ growth at Lewis and Firebag?

  A: The company's existing 100,000 bpd growth plan does not require new pipelines or regulatory reform to be delivered. Management confirmed the company retains significant optionality to accelerate growth if market conditions and shareholder preferences support that step. Preparatory work is ongoing to preserve this option, but no acceleration has been approved at this time.

• Q: Is the recent strong growth in global product sales transitory, or a structural improvement to the business?

  A: Global market expansion has been a multi-year buildout of logistics and sales capabilities, not a response to recent volatility. The company now exports from both coasts, growing West Coast capacity from 3-4 to 5-6 cargoes per month, and developed a new 25,000 bpd jet export capability at Montreal from zero a year prior. Management confirmed this is permanent structural change that will deliver ongoing value long-term.

• Q: How should investors think about the split between share buybacks and dividend growth for future cash returns?

  A: Management noted shareholder preferences are mixed, with most favoring buybacks but some preferring dividends. The company will continue to monitor both return methods to optimize for broad shareholder satisfaction, and does not follow hard fixed rules for allocation between the two, instead taking a holistic approach that adapts to market conditions.