Page 132 - Suncor AR English
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The following table shows the timing of cash outflows related to trade and other payables and debt.
December 31, 2013
Trade and Gross derivative
($ millions) other payables liabilities(1) Debt(2)
Within one year 6 911 353
1 959
.......................................................................................................................................................................................................................................................
1 to 3 years 64 11 1 402 .......................................................................................................................................................................................................................................................
3 to 5 years — — 4 064 .......................................................................................................................................................................................................................................................
Over 5 years — — 15 746
6 975 364 23 171
(1) Gross derivative liabilities of $364 million are offset by gross derivative assets of $185 million, resulting in a net amount of $179 million.
(2) Debt includes short-term debt, long-term debt, finance leases and interest payments on fixed-term debt and commercial paper.
3) Credit Risk
Credit risk is the risk that a customer or counterparty will fail to perform an obligation or fail to pay amounts due causing
a financial loss. The company’s credit policy is designed to ensure there is a standard credit practice throughout the
company to measure and monitor credit risk. The policy outlines delegation of authority, the due diligence process
required to approve a new customer or counterparty and the maximum amount of credit exposure per single entity.
Before transactions begin with a new customer or counterparty, its creditworthiness is assessed, a credit rating is assigned
and a maximum credit limit is allocated. The assessment process is outlined in the credit policy and considers both
quantitative and qualitative factors. The company constantly monitors the exposure to any single customer or
counterparty along with the financial position of the customer or counterparty. If it is deemed that a customer or
counterparty has become materially weaker, the company will work to reduce the credit exposure and lower the credit
limit allocated. Regular reports are generated to monitor credit risk and the Credit Committee meets quarterly to ensure
compliance with the credit policy and review the exposures.
A substantial portion of the company’s accounts receivable are with customers in the oil and gas industry and are subject
to normal industry credit risk. At December 31, 2013, substantially all of the company’s trade receivables were current.
The company may be exposed to certain losses in the event that counterparties to derivative financial instruments are
unable to meet the terms of the contracts. The company’s exposure is limited to those counterparties holding derivative
contracts with positive fair values at the reporting date. At December 31, 2013, the company’s exposure was $225 million
(December 31, 2012 – $53 million).
28. CAPITAL STRUCTURE FINANCIAL POLICIES
The company’s primary capital management strategy is to maintain a conservative balance sheet, which supports a solid
investment-grade credit rating profile. This objective affords the company the financial flexibility and access to the capital
it requires to execute on its growth objectives.
The company’s capital is primarily monitored by reviewing the ratios of net debt to cash flow from operations(1) and total
debt to total debt plus shareholders’ equity.
Net debt to cash flow from operations is calculated as short-term debt plus total long-term debt less cash and cash
equivalents divided by cash flow from operations for the year then ended.
Total debt to total debt plus shareholders’ equity is calculated as short-term debt plus total long-term debt divided by
short-term debt plus total long-term debt plus shareholders’ equity. This financial covenant under the company’s various
banking and debt agreements shall not be greater than 65%.
The company’s financial covenants are reviewed regularly and controls are in place to maintain compliance with these
covenants. The company complied with financial covenants for the years ended December 31, 2013 and 2012.
128 SUNCOR ENERGY INC. ANNUAL REPORT 2013
