Page 75 - AIF - English

Failure to obtain or maintain regulatory approvals, or failure interest rates and currency values and may result in

to obtain them on a timely basis or on satisfactory terms, financial or opportunity loss due to delivery commitments,
could result in delays, abandonment or restructuring of royalty rates and counterparty risks associated with

projects and increased costs, all of which could have a the contracts.
material adverse effect on Suncor’s business, financial
While the company limits its exposure to any one
condition, results of operations and cash flow.
counterparty to a level that management deems to be

reasonable, losses due to counterparties failing to fulfil
Energy Trading and Risk Management Activities and their contractual obligations may have a material adverse
the Exposure to Counterparties
effect on Suncor’s business, financial condition, results of

The nature of Suncor’s energy trading and risk operations and cash flow.
management activities, which may make use of derivative
financial instruments to hedge its commodity price and
Royalties
other market risks, creates exposure to significant financial Royalties can be impacted by changes in crude oil and
risks, which include, but are not limited to, the following:
natural gas pricing, production volumes, foreign exchange
• Movements in prices or values could result in a rates, and capital and operating costs by changes to

financial loss to the company;
existing legislation or PSCs, and by results of regulatory
audits of prior year filings and other unexpected events.
• A lack of counterparties, due to market conditions or
other circumstances, could leave us unable to liquidate The final determination of these events may have a
material impact on royalties payable to provincial and local
or offset a position, or unable to do so at or near the
previous market price;
governments and on the company’s royalties expense.

• We may not receive funds or instruments from our
Technology Risk
counterparty at the expected time;
There are risks associated with growth and other capital
• The counterparty could fail to perform an obligation
projects that rely largely or partly on new technologies and
owed to us;
the incorporation of such technologies into new or existing

• Loss as a result of human error or deficiency in our operations, particularly as the results of the application of
systems or controls; and
new technologies may differ from simulated or test

• Loss as a result of contracts being unenforceable or environments. The success of projects incorporating new
technologies cannot be assured. Advantages accrue to
transactions being inadequately documented.
In the normal course of business, the company enters into companies that can develop and adopt emerging
technologies in advance of competitors. The inability to
contractual relationships with counterparties in the energy
industry and other industries, including counterparties for develop and monitor new technologies may impact the
company’s ability to develop its new or existing operations
interest rate, foreign exchange and commodity hedging in a competitive or profitable manner.
arrangements. If such counterparties do not fulfil their
Current SAGD technologies for in situ recovery of heavy oil
contractual obligations, the company may suffer losses,
may have to proceed on a sole risk basis, may have to and bitumen are energy intensive, requiring significant
consumption of natural gas and other fuels in the
forego opportunities or may have to relinquish leases
or blocks.
production of the steam used in the recovery process. The
amount of steam required in the production process can
Suncor has adopted a Trading Risk Management Policy
also vary and impact costs. The performance of the
(the Trading Policy), which requires all trading activities to reservoir can also impact the timing and levels of
occur in the group responsible for trading, so that trading
production using this technology.
risks can be properly monitored, controlled and reported.
The Board has set the trading commodities, trading term
Exchange Rate Fluctuations
limits, value-at-risk limits and stop-loss limits under the Our Consolidated Financial Statements are presented in
Trading Policy. Any changes to the foregoing require Board
Canadian dollars. The majority of Suncor’s revenues from
approval. The Board reviews and monitors Suncor’s the sale of oil and natural gas are based on prices that are
compliance with the Trading Policy through the Audit
determined by, or referenced to, U.S. dollar benchmark
Committee, which receives a quarterly report that prices, while the majority of Suncor’s expenditures are
summarizes Suncor’s trading activities and provides an
realized in Canadian dollars. The company also holds
assessment of Suncor’s financial exposure to risk from these substantial amounts of U.S. dollar debt. Suncor’s results,
activities.
therefore, can be affected significantly by the exchange
The terms of derivative financial instruments may also limit rates between the Canadian dollar and the U.S. dollar. The
the benefit of favourable changes in commodity prices,
company also undertakes operations administered through

SUNCOR ENERGY INC. ANNUAL INFORMATION FORM 2014 73