Page 137 - Suncor AR English

contingencies, the company believes that any liabilities that might arise pertaining to such matters would not have a

material effect on its consolidated financial position.

Costs attributable to these commitments and contingencies are expected to be incurred over an extended period of time
and to be funded from the company’s cash flow from operating activities. Although the ultimate impact of these matters

on net earnings cannot be determined at this time, the impact may be material.

Operational risk
The company also has exposure to some operational risks, which is reduced by maintaining a comprehensive insurance

program at limits and deductible amounts that management believes to be acceptable.

The company carries property damage and business interruption insurance with varying coverage limits and deductible
amounts based on the asset. As of December 31, 2013, Suncor’s insurance program includes coverage of up to

US$1.2 billion for oil sands risks, up to US$1.3 billion for offshore risks and up to US$594 million for refining risks. These
limits are all net of deductible amounts or waiting periods and subject to certain price and volume limits. The company

also has primary property insurance for US$300 million that covers all of Suncor’s assets. As part of its normal course of
operations, Suncor also carries risk mitigation instruments in the aggregate amount of $300 million on certain foreign

operations.

Suncor believes its liability, property and business interruption insurance is appropriate to its business, although such
insurance will not provide coverage in all circumstances or fully protect against prolonged outages. In the future, the

insurance program may change due to market conditions or other business considerations.

(c) Guarantees
At December 31, 2013, the company has various indemnification agreements with third parties as described below and

provides loan guarantees to certain retail licensees, wholesale marketers, and the company’s subsidiaries.

The company has agreed to indemnify holders of all notes and debentures and the company’s credit facility lenders
(see note 21) for added costs relating to withholding taxes. Similar indemnity terms apply to certain facility and

equipment leases.

There is no limit to the maximum amount payable under the indemnification agreements described above. The company
is unable to determine the maximum potential amount payable as government regulations and legislation are subject to

change without notice. Under these agreements, the company has the option to redeem or terminate these contracts if
additional costs are incurred.

The company also has guaranteed its working-interest share of certain joint venture undertakings related to transportation
services agreements entered into with third parties. The guaranteed amount is limited to the company’s share in the joint

venture. As at December 31, 2013, the probability is remote that these guarantee commitments will impact the company.

33. VOYAGEUR UPGRADER PROJECT

Management applies judgment in determining whether an acquisition meets the definition of a business combination or
an asset purchase. When a transaction meets the definition of a business combination, the acquired identifiable assets

and assumed liabilities, including contingent liabilities, are measured and recognized at their fair value on the date of the
acquisition, including tax assets and liabilities. Associated transaction costs are expensed when occurred.

Effective March 27, 2013, the company acquired Total E&P Canada Ltd.’s (Total E&P) interest in Voyageur Upgrader

Limited Partnership (VULP) for $515 million and gained full control over the partnership assets. The transaction was
accounted for as a business combination.

As VULP was in the development stage and therefore had no revenues and the majority of costs were capitalized, no

significant net earnings were generated.

The allocation of the purchase price was based on current best estimates by the company. The completion of the
purchase price allocation may result in further adjustment to the carrying value of the recorded assets and liabilities

acquired.

SUNCOR ENERGY INC. ANNUAL REPORT 2013 133