The increase in earnings was primarily due to higher price realizations on the company’s oil sands sales, as benchmark crude oil prices continued to rise. This was partially offset by increased oil sands operating expenses and increased oil sands royalties, as well as reduced margins in the refining and marketing business.

Suncor’s total upstream production averaged 286,200 barrels of oil equivalent (boe) per day during the first quarter of 2008, compared to 283,100 boe per day in the first quarter of 2007. Oil sands production during the first quarter averaged 248,000 barrels per day (bpd), comparable to first quarter 2007 production of 248,200 bpd. Natural gas production increased to 229 million cubic feet equivalent (mmcfe) per day in the first quarter of 2008 from 209 mmcfe per day in the first quarter of 2007.

Oil sands cash operating costs averaged $31.55 per barrel in the first quarter of 2008, compared to $26.30 per barrel during the first quarter of 2007. The increase in cash operating costs per barrel was primarily due to an increase in third party bitumen purchases and higher maintenance costs, employee expenses, contract mining and energy input costs.

Operations and growth update

“Driving operational excellence is the priority,” said Rick George, president and chief executive officer. “Ensuring a steady supply of bitumen is key to boosting production rates at our expanded oil sands facilities. A strategic focus on maintenance across the company is also expected to help us deliver on our plans to have all systems running safely and reliably.”

Scheduled maintenance at both Suncor’s Sarnia refinery and oil sands operations is expected to contribute to improved long term operational performance.

Planned work at the Sarnia refinery includes equipment improvements that are expected to allow the refinery to achieve full benefit from modifications made in 2007 to increase sour synthetic crude capacity. All work is scheduled for completion in early May.

At the oil sands operations, an approximate 30-day maintenance shutdown to Upgrader 1 is expected to begin in mid-May. During the planned maintenance, Upgrader 2 is expected to produce approximately 200,000 bpd.

Progress also continues on work to reduce emissions at the company’s Firebag in-situ operation. Air emissions exceeding regulatory limits at the facility resulted late last year in regulators capping production at 42,000 bpd of bitumen until emissions are stable at compliant levels. Construction is underway on a $340 million sulphur plant to help manage sulphur emissions and Suncor will continue to work closely with regulators on meeting requirements to increase production.

The addition of a third coker set to Upgrader 2 is on budget and on schedule for completion in June with production expected to increase during the balance of 2008.

“With the planned maintenance and expansion work at oil sands scheduled for completion in the coming months, we’re targeting increased production through the second half of the year as we ramp up toward new capacity of 350,000 barrels per day,” says George.

Plans to further increase production capacity from 350,000 bpd to 550,000 bpd in 2012 were confirmed in January when the company’s Board of Directors approved the $20.6 billion Voyageur expansion. Approximately $3.3 billion has already been invested in the project, which includes constructing a third upgrader and increasing bitumen supply through further expansion of in-situ operations.

As Suncor invests for future growth, prudent debt management remains a priority. Net debt levels increased to $3.9 billion at the end of the first quarter from $3.2 billion at December 31, 2007.