Morningstar DBRS Confirms Suncor Energy Inc.'s Issuer Rating and Debentures and Medium-Term Notes Credit Rating at A (low) and Commercial Paper Credit Rating at R-1 (low), Stable Trends

DBRS, Inc. (Morningstar DBRS) confirmed Suncor Energy Inc.' s (Suncor or the Company) Issuer Rating and Debentures and Medium-Term Notes credit rating at A (low) as well as Suncor's Commercial Paper credit rating at R-1 (low). All trends are Stable.

KEY CREDIT RATING CONSIDERATIONS
The credit rating confirmations and Stable trends reflect Morningstar DBRS' view that no material changes to Suncor's credit fundamentals are expected in the near term. The credit ratings are based on Suncor's (1) superior size as one of Canada's largest integrated energy companies, (2) large, long-life, low-decline oil sands developments, (3) integrated upstream and downstream refining and retail operations enabling it to capture margin across the entire value chain, (4) diversified refined product mix, and (5) significant financial and capital spending flexibility. Factors that temper the credit ratings include Suncor's (1) dependency on a high concentration of heavy crude oil-producing assets in Western Canada, (2) exposure to lower-margin, nonupgraded bitumen production, and (3) escalating compliance and cost pressures related to expanding environmental regulations.

CREDIT RATING DRIVERS
Morningstar DBRS may consider a credit ratings upgrade if, in combination with a strengthening of Suncor's business risk profile (i.e., operating efficiency), the Company were to reduce gross debt and improve its lease-adjusted cash flow-to-debt ratio to consistently higher than 100%. Conversely, Morningstar DBRS may consider a negative credit rating action if oil and gas prices and/or Suncor's operating performance were to materially weaken so that the lease-adjusted cash flow-to-debt ratio stays below 50% for an extended period.

EARNINGS OUTLOOK
Looking ahead, Suncor expects total upstream production of 825,000 barrels of oil per day (b/d) in 2025 (midpoint of its guidance range), nearly unchanged from the 827,600 b/d reported in 2024. The upstream guidance for 2025 includes a major maintenance turnaround within the Company's Oil Sands Operations segment. However, the Company achieved total upstream production of 853,200 b/d in Q1 2025, largely driven by outperformance at the Firebag in situ and Fort Hills mining oil sands operations and, secondly, by strong production at the Terra Nova and Hebron offshore projects in Atlantic Canada. The strong start in Q1 2025 plus productivity improvements across most of its projects should position Suncor to achieve its full-year 2025 upstream production target. Morningstar DBRS forecasts Suncor's operating revenues, net of royalties, to sequentially decline by 12% to 13% to between $44.0 billion and $45.0 billion in 2025 mostly because of a lower crude oil price assumption. Despite this, Morningstar DBRS expects ongoing efficiency gains to support the EBITDA margin at about 30% in 2025, a modest decline from 2024. Morningstar DBRS' base-case commodity price assumptions can be found in the commentary, "Crude Spike From Israel-Iran War Likely Short-Lived as Supply Adjusts" (June 17, 2025) at https://dbrs.morningstar.com/research/456419.

FINANCIAL OUTLOOK
Suncor's 2025 total capital expenditure (capex) guidance is $6.1 billion to $6.3 billion. Based on its base-case commodity price assumptions, Morningstar DBRS forecasts Suncor to generate a free cash flow (FCF) (i.e., cash flow after capex and dividends) surplus in 2025. At March 31, 2025, total debt (ex-lease liabilities) was $10.3 billion and net debt (i.e., total debt less cash and cash equivalents) was about $7.6 billion. Morningstar DBRS forecasts net debt to be below $8 billion through the forecast period (2025-27). Although Morningstar DBRS expects Suncor to allocate nearly all its FCF surplus to share repurchases, the Company is forecast to maintain a lease-adjusted cash flow-to-debt ratio of around 80% through 2027. Suncor's liquidity is strong with $2.8 billion of cash and cash equivalents and available committed credit facilities totaling about $5.5 billion as at March 31, 2025.

CREDIT RATING RATIONALE
Comprehensive Business Risk Assessment (CBRA): A
The CBRA reflects Suncor's large size (production of 853,200 b/d in Q1 2025), large, long-life, low-decline oil sands developments with low sustaining capital requirements, and integrated upstream and downstream operations enabling the Company to capture margin across the entire value chain and providing it with a superior ability to withstand market volatility. Factors that temper the CBRA include Suncor's high concentration of assets in one geographic region, exposure to lower-margin, nonupgraded bitumen production, and environmental-related regulation, compliance, and cost pressures. The business risk score also factors in a positive 0.5-notch adjustment for Suncor's strong retail market position.

Comprehensive Financial Risk Assessment (CFRA): AL/BBBH
Suncor's CFRA reflects strong forecast EBIT and operating cash flow, supporting EBIT interest coverage of at least 7 times (x), and a lease-adjusted cash flow-to-debt ratio of around 80% through 2027. The financial risk score also factors in a negative one-notch adjustment for carbon and greenhouse gas (GHG) costs. Morningstar DBRS believes the Company's financial risk profile supports the credit ratings.

Intrinsic Assessment (IA): AL
The IA of AL is at the midpoint of the Intrinsic Assessment Range and is based on the CBRA and CFRA, also taking into consideration current credit rating trend and peer comparisons, among other factors.

Additional Considerations: None
Suncor's credit ratings include no further negative or positive adjustments because of additional considerations.

Further details on the Issuer's Intrinsic Assessment can be found at https://dbrs.morningstar.com/research/459140.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

Environmental (E) Factors
Morningstar DBRS considered carbon and GHG costs as a relevant environmental factor for Suncor. This factor is relevant because ever-increasing environmental regulations in Canada targeting the reduction of GHG emissions will likely limit the growth potential and add costs for all Canadian oil and gas companies and for Suncor, which has exposure to more carbon-intensive oil sands developments. Suncor's balance sheet strength and ongoing emission reduction initiatives provide it with the financial flexibility to navigate the energy transition path.

There were no Social or Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196

Notes:
All figures are in Canadian dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology:

Global Methodology for Rating Companies in the Oil & Gas, Oilfield Services, and Pipeline and Midstream Energy Industries (May 6, 2025), https://dbrs.morningstar.com/research/453396.

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025, https://dbrs.morningstar.com/research/447186) which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:

-- Morningstar DBRS Global Corporate Criteria (February 3, 2025)
https://dbrs.morningstar.com/research/447186

-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

DBRS, Inc.
22 West Washington Street
Chicago, IL 60602 USA
Tel. +1 312 332-3429