Page 78 - Suncor AR English

ADVISORIES

Bridge Analyses of Operating Earnings

Throughout this MD&A, the company presents charts that illustrate the change in operating earnings from the
comparative period through key variance factors. These factors are analyzed in the Operating Earnings narratives following

the bridge analyses in a particular section of the MD&A. These bridge analyses are presented because management uses
this presentation to analyze performance.

• The factor for Volumes and Mix is calculated based on production volumes and mix for the Oil Sands and Exploration

and Production segments and throughput volumes and mix for the Refining and Marketing segment.

• The factor for Price, Margin and Other Revenue includes upstream price realizations before royalties, refining and
marketing margins, other operating revenues, and the net impacts of sales and purchases of third-party crude,

including product purchased for use as diluent in the company’s Oil Sands operations and subsequently sold as part of
diluted bitumen.

• The factor for Royalties includes royalties in Libya that represent the difference between gross revenues, which is

based on the company’s working-interest share of production, and the net revenue attributable to Suncor under the
terms of the respective contracts.

• The factor for Inventory reflects the opportunity cost of building production volumes in inventory or the additional

margin earned by drawing down inventory produced in previous periods. The calculation of the Inventory factor in a
bridge analysis permits the company to present the factor for Volumes and Mix based on production volumes, rather

than based on sales volumes.

• The factor for Operating and Transportation Expense includes project start-up costs, operating, selling and general
expense (adjusted for impacts of changes in inventory), and transportation expense.

• The factor for Financing Expense and Other Income includes financing expenses, other income, operational foreign

exchange gains and losses, changes in gains and losses on disposal of assets that are not operating earnings
adjustments, changes in statutory income tax rates, and other income tax adjustments.

Return on Capital Employed (ROCE)

ROCE is a non-GAAP financial measure that management uses to analyze operating performance and the efficiency of
Suncor’s capital allocation process. Average capital employed is calculated as a thirteen-month average of the capital
employed balance at the beginning of the twelve-month period and the month-end capital employed balances

throughout the remainder of the twelve-month period. Figures for capital employed at the beginning and end of the
twelve-month period are presented to show the changes in the components of the calculation over the twelve-month

period.

74 SUNCOR ENERGY INC. ANNUAL REPORT 2013