[Management Discussion and Analysis](index=1&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an overview and analysis of the company's financial condition and operating results [Company Overview](index=2&type=section&id=Company%20Overview) Sunshine Oil Sands Ltd. is an Athabasca oil sands developer with 640 million barrels of best estimate contingent resources, facing ongoing financing and profitability challenges - The company is an interest holder and developer of oil sands resources in the Athabasca region, with approximately **640 million barrels** of best estimate contingent resources[3](index=3&type=chunk) - The West Ells Phase I commercial project (5,000 barrels/day) is in production and ramping up, with plans for a Phase II expansion to add an additional 5,000 barrels/day[3](index=3&type=chunk) - As of December 31, 2024, the company had invested approximately **CAD 1.29 billion** in oil sands leases, drilling, engineering, procurement, and construction assets[4](index=4&type=chunk) - The company's ability to continue as a going concern faces significant doubt, dependent on West Ells' continued operation and development, favorable oil sands heavy oil sales prices, achieving profitability, and securing additional financing[4](index=4&type=chunk) [Recent Operating Performance](index=2&type=section&id=Recent%20Operating%20Performance) West Ells project resumed full operations in April 2023, with Q4 2024 production and sales significantly impacted by equipment maintenance - The West Ells project resumed full operations on April 11, 2023, after a suspension in March 2020 due to crude oil market volatility, equipment maintenance, and the pandemic[5](index=5&type=chunk) West Ells Oil Sands Bitumen Production and Diluted Bitumen Sales (barrels/day) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Average Oil Sands Bitumen Production | 301.9 | 1,604 | 726.9 | 946 | | Average Diluted Bitumen Sales | 428 | 1,550 | 1,018.8 | 968 | - Production and sales decreased in Q4 and full-year 2024, primarily due to equipment maintenance at West Ells in Q4 2024[15](index=15&type=chunk)[16](index=16&type=chunk) - The Thickwood and Legend projects are planned for initial production of **10,000 barrels/day** each, with the Muskwa area expected to resume development under new Renergy ownership in 2024 at no cost to Sunshine Oil Sands[6](index=6&type=chunk)[7](index=7&type=chunk) [Quarterly Performance Summary](index=3&type=section&id=Quarterly%20Performance%20Summary) This section summarizes key financial data for the past eight quarters, including oil sales, operating costs, net loss, and capital expenditures Key Financial Data for the Past Eight Quarters (CAD thousand, except per share amounts and barrels/day) | Metric | Q4 2024 | Q3 2024 | Q2 2024 | Q1 2024 | Q4 2023 | Q3 2023 | Q2 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Oil Sands Bitumen Sales (barrels/day) | 311 | 479 | 884 | 1,227 | 1,550 | 9 | 1,294 | 1,025 | | Oil Sales | 3,074 | 5,211 | 10,674 | 11,437 | 11,932 | 49 | 11,064 | 7,192 | | Royalties | 86 | 340 | 408 | 245 | 373 | (2) | 298 | 13 | | Diluent | 1,113 | 2,422 | 4,668 | 4,942 | 5,040 | 31 | 3,528 | 3,863 | | Transportation | 477 | 778 | 1,576 | 2,441 | 3,436 | 106 | 3,468 | 2,521 | | Operating Costs | 3,062 | 2,683 | 3,269 | 4,290 | 4,528 | 3,581 | 4,472 | 4,487 | | Finance Costs | 4,308 | 2,630 | 2,920 | 2,740 | 2,684 | 2,668 | 2,237 | 2,536 | | Net Loss/(Profit) | 41,845 | 579 | 11,048 | 22,217 | (2,111) | 15,758 | (5,671) | 11,650 | | Net Loss/(Income) Attributable to Equity Holders | 41,769 | 505 | 10,974 | 22,144 | (2,184) | 15,686 | (5,745) | 11,573 | | Per Share - Basic and Diluted | 0.17 | (0.00) | 0.05 | 0.09 | (0.01) | 0.06 | (0.02) | 0.05 | | Capital Expenditures | 962 | 275 | 672 | 171 | 378 | 1,864 | 593 | (54) | | Total Assets | 739,023 | 741,301 | 742,120 | 745,963 | 745,932 | 739,708 | 744,484 | 747,557 | | Working Capital Deficit | 92,666 | 514,041 | 83,772 | 84,242 | 79,458 | 94,082 | 87,079 | 517,464 | | Shareholders' Equity | 16,848 | 57,203 | 57,782 | 68,830 | 91,047 | 88,272 | 104,030 | 98,359 | - **Net loss** for Q4 2024 significantly increased to **CAD 41,845 thousand**, compared to a net profit of CAD 2,111 thousand in Q4 2023[8](index=8&type=chunk) - Oil sands bitumen sales volume for Q4 2024 significantly decreased year-over-year, from **1,550 barrels/day** to **311 barrels/day**[8](index=8&type=chunk) [Operating Results](index=3&type=section&id=Operating%20Results) This section analyzes the company's operating financial metrics for Q4 and full-year 2024 compared to 2023, covering revenue, costs, and impairment [Oil Sands Bitumen Revenue](index=3&type=section&id=Oil%20Sands%20Bitumen%20Revenue) Q4 2024 bitumen revenue decreased due to lower production, while per-barrel realized prices increased for both Q4 and the full year Oil Sands Bitumen Revenue (CAD thousand, except CAD/barrel) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Diluted Bitumen Revenue | 3,074 | 11,932 | 30,396 | 30,237 | | Diluent Blended | (1,113) | (5,040) | (13,145) | (12,462) | | Realized Oil Sands Bitumen Revenue | 1,961 | 6,892 | 17,251 | 17,775 | | Realized Price per Barrel (CAD/barrel) | 49.80 | 40.54 | 46.27 | 42.24 | - Realized oil sands bitumen revenue for Q4 2024 decreased by **CAD 4.9 million** to **CAD 2 million** year-over-year, primarily due to reduced production from equipment maintenance[11](index=11&type=chunk) - The realized price per barrel of oil sands bitumen increased by **CAD 9.26/barrel** to **CAD 49.80/barrel** in Q4 2024 year-over-year, and by **CAD 4.03/barrel** to **CAD 46.27/barrel** for the full year[11](index=11&type=chunk)[12](index=12&type=chunk) [Operating Netback](index=4&type=section&id=Operating%20Netback) Q4 2024 operating cash flow net loss widened due to reduced sales, but full-year net loss narrowed from improved prices and lower costs Operating Netback (CAD thousand, except CAD/barrel) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Realized Oil Sands Bitumen Revenue | 1,961 | 6,892 | 17,251 | 17,775 | | Transportation | (477) | (3,436) | (5,272) | (9,531) | | Royalties | (86) | (373) | (1,079) | (682) | | Net Oil Sands Bitumen Revenue | 1,398 | 3,083 | 10,900 | 7,562 | | Operating Costs | (3,062) | (4,528) | (13,304) | (17,068) | | Operating Cash Flow | (1,664) | (1,445) | (2,404) | (9,506) | | Operating Netback (CAD/barrel) | (42.26) | (8.50) | (6.44) | (22.59) | - The operating cash flow net loss for Q4 2024 widened to **CAD 1.7 million**, and the operating netback loss per barrel increased by **CAD 33.76/barrel** to **CAD 42.26/barrel**, mainly due to higher operating costs per barrel from reduced sales volume[14](index=14&type=chunk) - The full-year operating cash flow net loss narrowed to **CAD 2.4 million**, and the operating netback loss per barrel decreased by **CAD 16.15/barrel** to **CAD 6.44/barrel**, primarily benefiting from higher sales prices and lower transportation/operating costs[14](index=14&type=chunk) [Oil Sands Bitumen Production](index=5&type=section&id=Oil%20Sands%20Bitumen%20Production) West Ells bitumen production significantly decreased in Q4 and full-year 2024 due to equipment maintenance Oil Sands Bitumen Production (barrels/day) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Oil Sands Bitumen Production | 302 | 1,604 | 727 | 946 | - Q4 2024 production decreased by **1,302 barrels/day** year-over-year, and full-year production decreased by **219 barrels/day**, primarily due to equipment maintenance at West Ells in Q4 2024[15](index=15&type=chunk) [Oil Sands Bitumen Sales](index=5&type=section&id=Oil%20Sands%20Bitumen%20Sales) West Ells bitumen sales significantly decreased in Q4 and full-year 2024, primarily due to reduced production Oil Sands Bitumen Sales (barrels/day) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Oil Sands Bitumen Sales | 311 | 1,550 | 723 | 968 | - Q4 2024 sales volume decreased by **1,239 barrels/day** year-over-year, and full-year sales decreased by **245 barrels/day**, mainly due to reduced oil sands bitumen production at West Ells in Q4 2024[16](index=16&type=chunk) [Oil Sales, Net of Royalties](index=5&type=section&id=Oil%20Sales%2C%20Net%20of%20Royalties) Q4 2024 oil sales net of royalties decreased due to lower sales volume, but per-barrel prices increased for both periods Oil Sales, Net of Royalties (CAD thousand, except CAD/barrel) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Oil Sales | 3,074 | 11,932 | 30,396 | 30,237 | | Royalties | (86) | (373) | (1,079) | (682) | | Oil Sales, Net of Royalties | 2,988 | 11,559 | 29,317 | 29,555 | | CAD/barrel | 75.91 | 68.00 | 78.63 | 70.24 | - Oil sales net of royalties for Q4 2024 decreased to **CAD 3 million** year-over-year, primarily due to lower sales volume resulting from reduced oil sands bitumen production[17](index=17&type=chunk) - The per-barrel oil sales net of royalties increased by **CAD 7.91/barrel** to **CAD 75.91/barrel** in Q4 2024, and by **CAD 8.39/barrel** to **CAD 78.63/barrel** for the full year, driven by higher diluted bitumen sales prices[17](index=17&type=chunk) - Royalty rates are linked to WTI oil prices, increasing with prices above **CAD 55/barrel** up to a maximum of **9%**; Q4 2024 royalties decreased by **CAD 0.3 million** due to lower sales volume, while full-year royalties increased by **CAD 0.4 million** due to higher sales volume and rates[18](index=18&type=chunk)[19](index=19&type=chunk) [Diluent Costs](index=6&type=section&id=Diluent%20Costs) Q4 2024 diluent costs decreased due to lower production, while full-year costs increased from higher on-site blending for new pipeline requirements Diluent Costs (CAD thousand, except CAD/barrel and blending ratio) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Diluent (on-site) | 1,113 | 3,276 | 12,551 | 7,658 | | Diluent (off-site) | - | 1,764 | 594 | 4,804 | | Total | 1,113 | 5,040 | 13,145 | 12,462 | | CAD/barrel | 28.27 | 29.65 | 35.25 | 29.62 | | Blending Ratio (on-site) | 27.4% | 16.1% | 29.0% | 16.0% | | Blending Ratio (off-site) | 0% | 22.2% | 8.2% | 23.0% | - Total diluent costs for Q4 2024 decreased by **CAD 3.9 million** year-over-year, primarily due to reduced on-site diluent blending volumes from lower production[21](index=21&type=chunk) - Total diluent costs for the full year 2024 increased by **CAD 0.7 million**, mainly due to increased on-site diluent usage to meet specific pipeline requirements for a new terminal, leading to a significant rise in the on-site blending ratio[21](index=21&type=chunk) [Transportation](index=6&type=section&id=Transportation) Transportation costs significantly decreased in Q4 and full-year 2024 due to lower sales volume and reduced trucking rates from a closer delivery terminal Transportation Costs (CAD thousand, except CAD/barrel) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Transportation | 477 | 3,436 | 5,272 | 9,531 | | CAD/barrel | 12.11 | 20.21 | 14.14 | 22.65 | - Transportation costs decreased by **CAD 2.9 million** in Q4 2024 year-over-year and by **CAD 4.2 million** for the full year, primarily due to lower sales volume and reduced trucking rates from delivering diluted bitumen to a closer new terminal since February 2024[22](index=22&type=chunk) - Transportation costs per barrel decreased by **CAD 8.10/barrel** to **CAD 12.11/barrel** in Q4 2024, and by **CAD 8.51/barrel** to **CAD 14.14/barrel** for the full year[22](index=22&type=chunk) [Operating Costs](index=7&type=section&id=Operating%20Costs) Operating costs decreased in Q4 and full-year 2024 due to lower natural gas prices and reduced non-energy expenses Operating Costs (CAD thousand, except CAD/barrel) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Energy Operating Costs | 596 | 1,404 | 3,301 | 5,059 | | Non-Energy Operating Costs | 2,466 | 3,124 | 10,003 | 12,009 | | Total Operating Costs | 3,062 | 4,528 | 13,304 | 17,068 | - Operating costs decreased by **CAD 1.5 million** to **CAD 3.1 million** in Q4 2024 year-over-year, and by **CAD 3.8 million** to **CAD 13.3 million** for the full year[24](index=24&type=chunk) - The cost reduction was mainly due to lower energy costs from decreased natural gas prices at West Ells, and reduced non-energy costs (chemicals, processing, trucking, etc.)[24](index=24&type=chunk) - As most operating costs are fixed, operating costs per barrel are expected to decrease with increasing West Ells production[24](index=24&type=chunk) [General and Administrative Expenses](index=7&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses decreased in Q4 and full-year 2024, mainly due to lower salaries and rent, partially offset by higher municipal fees General and Administrative Expenses (CAD thousand) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Salaries, Consulting Fees & Benefits | 1,346 | 1,489 | 5,493 | 6,124 | | Rent | 3 | 14 | 24 | 54 | | Legal & Audit | 387 | 328 | 519 | 832 | | Other | 1,066 | 1,052 | 6,255 | 5,543 | | Total | 2,802 | 2,883 | 12,291 | 12,553 | - General and administrative expenses decreased by **CAD 0.7 million** in Q4 2024 year-over-year, and by **CAD 0.3 million** for the full year, primarily due to lower salaries and rent expenses, partially offset by higher municipal fees[25](index=25&type=chunk) [Finance Costs](index=8&type=section&id=Finance%20Costs) Finance costs increased in Q4 and full-year 2024 due to higher interest expenses on related party and shareholder loans, and accretion costs Finance Costs (CAD thousand) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Senior Note Interest Expense | 308 | 299 | 1,192 | 1,174 | | Other Loan Interest Expense | 717 | 110 | 932 | 491 | | Related Party and Shareholder Loan Interest Expense | 2,723 | 1,744 | 8,375 | 6,678 | | Other Interest Expense - Leases and Other | 137 | 147 | 346 | 322 | | Accretion | 423 | 384 | 1,753 | 1,460 | | Total | 4,308 | 2,684 | 12,598 | 10,125 | - Finance costs increased by **CAD 1.6 million** in Q4 2024 year-over-year, and by **CAD 2.5 million** for the full year, primarily due to higher interest expenses on related party and shareholder loans, increased interest expenses on other loans, and higher accretion costs[26](index=26&type=chunk) [Share-Based Compensation](index=8&type=section&id=Share-Based%20Compensation) Share-based compensation was zero for both the three and twelve months ended December 31, 2024 and 2023 - Share-based compensation was **CAD 0** for both the three and twelve months ended December 31, 2024 and 2023[27](index=27&type=chunk) [Depletion, Depreciation, and Impairment](index=8&type=section&id=Depletion%2C%20Depreciation%2C%20and%20Impairment) This section covers the assessment of depletion, depreciation, and impairment, noting reduced expenses due to lower production and no impairment losses in 2024 [Depletion and Depreciation](index=8&type=section&id=Depletion%20and%20Depreciation) Depletion and depreciation expenses decreased in Q4 and full-year 2024 due to lower production and a reduced depletion rate Depletion and Depreciation (CAD thousand) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Depletion | 672 | 3,311 | 5,946 | 7,737 | | Depreciation | 143 | 211 | 740 | 873 | | Total Depletion and Depreciation | 815 | 3,522 | 6,686 | 8,610 | - Depletion and depreciation expenses decreased by **CAD 2.7 million** in Q4 2024 year-over-year, and by **CAD 1.9 million** for the full year, primarily due to lower production and a reduced depletion rate[29](index=29&type=chunk) [Impairment (Reversal)](index=9&type=section&id=Impairment%20(Reversal)) The company assesses assets for impairment, determining recoverable amounts based on FVLCD and VIU, with no impairment losses recognized in 2024 - The company assesses its E&E and PP&E assets for indicators of impairment or reversal of impairment at each reporting date, with recoverable amounts determined as the higher of fair value less costs to dispose (FVLCD) and value in use (VIU)[30](index=30&type=chunk) - For the full year 2024, the company did not recognize any impairment losses[32](index=32&type=chunk)[33](index=33&type=chunk) - In 2024, the discount rates for future cash flows of the Exploration and Evaluation assets CGU and West Ells CGU were **11.07%** and **10.86%**, respectively, a decrease from **14.91%** and **14.95%** in 2023[32](index=32&type=chunk) [Income Tax](index=10&type=section&id=Income%20Tax) The company did not recognize deferred income tax assets related to unrecognized tax losses for the periods ended December 31, 2024 and 2023 - For the periods ended December 31, 2024 and 2023, the company did not recognize any deferred income tax assets primarily related to unrecognized tax losses[34](index=34&type=chunk) - As of December 31, 2023, the company had approximately **CAD 1.42 billion** in available aggregate tax deductions, with unrecognized tax losses expiring between 2029 and 2043[34](index=34&type=chunk) [Liquidity and Capital Resources](index=10&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2024, the company had a working capital deficit of CAD 92.67 million and faces various legal claims and a high debt-to-asset ratio Liquidity Position (CAD thousand) | Metric | December 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Working Capital Deficit | 92,666 | 79,458 | | Shareholders' Equity | 16,848 | 91,047 | - The company has entered into multiple interest waiver agreements with forbearance holders, waiving accrued interest of **USD 31.5 million** annually for 2024 and 2025, and signed an Amended and Restated Forbearance Agreement extending the debt repayment period to August 31, 2027[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[51](index=51&type=chunk)[53](index=53&type=chunk) - As of December 31, 2024, the company had incurred unsecured royalty debt totaling **USD 56.6 million** (approximately **CAD 81.4 million**)[40](index=40&type=chunk) - The company faces **CAD 16.5 million** in municipal property taxes and **CAD 19.7 million** in overdue penalties, for which it has sought judicial review; additionally, it faces a New York State court judgment for **USD 19.694 million** (approximately **CAD 26.048 million**)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) - As of December 31, 2024, the company's debt-to-asset ratio was **98%**, compared to **88%** in 2023, indicating an increased debt level[43](index=43&type=chunk) - The company is primarily exposed to foreign exchange risks in Hong Kong Dollars, US Dollars, and Renminbi, but currently has no foreign currency hedging policy[43](index=43&type=chunk)[45](index=45&type=chunk) [Royalty Agreement](index=13&type=section&id=Royalty%20Agreement) The company signed a royalty agreement with BEH in 2021 for CAD 20 million, revised in June 2024 to accelerate a CAD 5 million payment and adjust royalty rates - The company entered into a royalty agreement with Burgess Energy Holdings (BEH) in 2021, granting an undivided interest in oil sands for a total consideration of **CAD 20 million**[46](index=46&type=chunk) - The agreement was revised in June 2024, accelerating a **CAD 5 million** payment to the company and adjusting the royalty rate from **8.75%** to a maximum of **25.00%** (previously **15.00%**) when WCS prices exceed **USD 80/barrel**[47](index=47&type=chunk) [Commitments and Contingencies](index=13&type=section&id=Commitments%20and%20Contingencies) Management's estimates of contractual obligation due dates may differ from actual dates, and various claims and lawsuits could materially impact net income - Management has estimated the contractual due dates for the company's obligations, but these estimates may differ significantly from actual due dates[48](index=48&type=chunk) - The company is involved in various claims and lawsuits, the outcomes of which cannot be predicted with certainty and could have a material adverse effect on net income or loss[41](index=41&type=chunk) [Related Party Transactions](index=13&type=section&id=Related%20Party%20Transactions) In 2024, a director-affiliated consulting firm received CAD 0.5 million for services, and the company has unsecured related party and shareholder loans totaling CAD 77.195 million - For the full year 2024, a consulting firm associated with a company director received **CAD 0.5 million** for management and consulting services[49](index=49&type=chunk) - As of December 31, 2024, Mr. Sun Guoping, the company's Executive Chairman, beneficially owned approximately **51.42%** of the company's issued common shares[49](index=49&type=chunk) Related Party Loans (CAD thousand) | Loan Type | December 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Related Party Loans | 56,205 | 51,933 | | Shareholder Loans | 20,990 | 19,021 | - Both related party and shareholder loans are unsecured and carry an annual interest rate of **10%**[49](index=49&type=chunk) [Off-Balance Sheet Arrangements](index=13&type=section&id=Off-Balance%20Sheet%20Arrangements) As of December 31, 2024, the group had no other off-balance sheet arrangements - As of December 31, 2024, the group had no other off-balance sheet arrangements[50](index=50&type=chunk) [Subsequent Events](index=13&type=section&id=Subsequent%20Events) On January 7, 2025, the company signed an Amended and Restated Forbearance Agreement, extending the debt forbearance period and waiving interest - On January 7, 2025, the company signed an Amended and Restated Forbearance Agreement with forbearance holders, extending the debt forbearance period to August 31, 2027[51](index=51&type=chunk) - Concurrently, accrued interest of **USD 31.529 million** for the period from January 1, 2025, to December 31, 2025, was waived[53](index=53&type=chunk) - The Board of Directors believes this action is in the best overall interest of the company and its shareholders, providing more time to repay or refinance debt and reducing financing costs[36](index=36&type=chunk) [Critical Accounting Judgments and Estimates](index=14&type=section&id=Critical%20Accounting%20Judgments%20and%20Estimates) Significant accounting estimates materially impact financial position and operations, requiring management judgment, assumptions, and estimates - The company's significant accounting estimates have a material impact on its financial position and operations, requiring management to make judgments, assumptions, and estimates based on past experience and reasonable factors[54](index=54&type=chunk) - For a detailed discussion, please refer to Note 4 of the consolidated annual financial statements for the year ended December 31, 2024[55](index=55&type=chunk) [Risk Factors](index=14&type=section&id=Risk%20Factors) Resource exploration, development, and extraction activities involve high risks, with significant factors remaining largely unchanged from the 2023 annual report - Resource exploration, development, and extraction activities involve a high degree of risk[56](index=56&type=chunk) - The significant risks and uncertainties affecting the company remain largely unchanged from those disclosed in the 2023 annual report[56](index=56&type=chunk) [Disclosure Controls and Procedures](index=14&type=section&id=Disclosure%20Controls%20and%20Procedures) As of December 31, 2024, the CEO and CFO concluded that the company's disclosure controls and procedures were effective - As of December 31, 2024, the company's Chief Executive Officer and Chief Financial Officer evaluated and concluded that the company's disclosure controls and procedures were effective[57](index=57&type=chunk) [Internal Control Over Financial Reporting](index=14&type=section&id=Internal%20Control%20Over%20Financial%20Reporting) As of December 31, 2024, the CEO and CFO concluded that the company's internal control over financial reporting (ICFR) was effective, with no significant changes identified - As of December 31, 2024, the company's Chief Executive Officer and Chief Financial Officer evaluated and concluded that the company's internal control over financial reporting (ICFR) was effective[58](index=58&type=chunk) - No changes that materially affected ICFR were identified during the quarter[59](index=59&type=chunk) [Guidance Section](index=15&type=section&id=Guidance%20Section) This section provides guidance on non-GAAP measures and forward-looking information [Non-GAAP Measures](index=15&type=section&id=Non-GAAP%20Measures) This MD&A includes non-GAAP measures like "operating netback" and "funds from operations," which are common in the industry but may not be comparable - This Management Discussion and Analysis includes non-GAAP measures such as "operating netback" and "funds from operations"[61](index=61&type=chunk) - These measures are commonly used in the oil and natural gas industry, but their non-standard definitions may lead to incomparability with similar measures provided by other issuers[61](index=61&type=chunk) [Cash Flow Used in Operating Activities](index=15&type=section&id=Cash%20Flow%20Used%20in%20Operating%20Activities) Cash flow used in operating activities is a non-GAAP measure for analyzing performance and liquidity, excluding non-cash working capital changes and decommissioning expenditures Cash Flow Used in Operating Activities (CAD thousand) | Metric | Q4 2024 | Q4 2023 | Full-Year 2024 | Full-Year 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (935) | (2,385) | (2,968) | (7,588) | | Net Change in Non-Cash Working Capital Items | (3,954) | (1,874) | (10,697) | (12,198) | | Cash Flow Used in Operating Activities | (4,889) | (4,259) | (13,665) | (19,786) | - Cash flow used in operating activities is a non-GAAP measure that excludes the net change in non-cash working capital items and decommissioning expenditures[62](index=62&type=chunk) [Forward-Looking Information](index=15&type=section&id=Forward-Looking%20Information) This MD&A contains forward-looking statements involving significant risks and uncertainties that could cause actual results to differ materially, with no obligation to update - Certain statements in this Management Discussion and Analysis are forward-looking statements which, by their nature, involve significant risks and uncertainties that could cause actual results to differ materially from those anticipated[63](index=63&type=chunk) - The company strongly advises investors not to place undue reliance on any such forward-looking statements, and the company has no obligation to update them[64](index=64&type=chunk) [HKEX Additional Information](index=16&type=section&id=HKEX%20Additional%20Information) This section provides additional disclosures required by the Hong Kong Stock Exchange, including corporate governance, directors' securities dealings, and outlook [Corporate Governance Code](index=16&type=section&id=Corporate%20Governance%20Code) For the three months ended December 31, 2024, the company complied with the Corporate Governance Code, except for seeking directors' legal action insurance - For the three months ended December 31, 2024, the company complied with the provisions of the Corporate Governance Code set out in Appendix C1 of the Hong Kong Listing Rules, except for seeking suitable insurance coverage for legal actions against the company's directors[66](index=66&type=chunk) [Standard Securities Dealing Code for Listed Company Directors](index=16&type=section&id=Standard%20Securities%20Dealing%20Code%20for%20Listed%20Company%20Directors) All directors confirmed compliance with the Standard Code for Securities Transactions by Directors of Listed Issuers during the review financial year - Following specific inquiries to all directors, the directors confirmed their compliance with the Standard Code set out in Appendix C3 of the Hong Kong Listing Rules during the review financial year[67](index=67&type=chunk) [Share Option Movements](index=16&type=section&id=Share%20Option%20Movements) As of December 31, 2024, 200,000 share options held by directors expired, with no new options granted during the year Director Share Option Movements (shares) | Name | December 31, 2023 | Granted | Exercised | Forfeited | Lapsed | December 31, 2024 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | He Yi | 100,000 | - | - | - | 100,000 | - | | Xing Guangzhong | 100,000 | - | - | - | 100,000 | - | | Subtotal Directors | 200,000 | - | - | - | 200,000 | - | - No new share options were granted in 2024, and the weighted average fair value of options granted in prior years was **CAD 0** (CAD 0.6 in 2023)[70](index=70&type=chunk)[71](index=71&type=chunk) [Purchase, Sale and Redemption of Sunshine Oil Sands' Listed Securities](index=17&type=section&id=Purchase%2C%20Sale%20and%20Redemption%20of%20Sunshine%20Oil%20Sands%27%20Listed%20Securities) On December 18, 2024, the company issued 48,695,736 Class "A" common shares to settle trade payables, with no other listed securities activities - On December 18, 2024, the company issued **48,695,736 Class "A" common shares** at a price of **HKD 0.38 per share** to settle trade payables[72](index=72&type=chunk) - As of December 31, 2024, there were no other purchases, sales, or redemptions of Sunshine Oil Sands' listed securities[73](index=73&type=chunk) [Share Issuance](index=17&type=section&id=Share%20Issuance) As of December 31, 2024, the company had 292,174,417 Class "A" common shares in issue - As of December 31, 2024, the company had **292,174,417 Class "A" common shares** in issue[74](index=74&type=chunk) [Employees](index=17&type=section&id=Employees) As of December 31, 2024, the company had 230 full-time employees, with total personnel expenses of CAD 5.5 million for the year - As of December 31, 2024, the company had a total of **230 full-time employees**[75](index=75&type=chunk) - Total personnel expenses for the twelve months ended December 31, 2024, amounted to **CAD 5.5 million**[75](index=75&type=chunk) [Dividends](index=17&type=section&id=Dividends) The company did not declare or pay any dividends for the twelve months ended December 31, 2024 - The company did not declare or pay any dividends for the twelve months ended December 31, 2024[76](index=76&type=chunk) [Review of Annual Results](index=18&type=section&id=Review%20of%20Annual%20Results) The company's consolidated financial statements for the periods ended December 31, 2024, were reviewed by the audit committee, audited by external auditors, and approved by the board - The company's consolidated financial statements for the three and twelve months ended December 31, 2024, were reviewed by the company's Audit Committee, audited by the company's external auditors, and approved by the Board of Directors[77](index=77&type=chunk) [Publication of Information](index=18&type=section&id=Publication%20of%20Information) This annual results announcement is published on the HKEX and company websites in both English and Chinese, with the English version prevailing - This annual results announcement will be published on the Hong Kong Stock Exchange website (www.hkexnews.hk) and the company's website (www.sunshineoilsands.com)[78](index=78&type=chunk) - This announcement is available in both English and Chinese versions, with the English version prevailing in case of any discrepancy[78](index=78&type=chunk) [Outlook](index=18&type=section&id=Outlook) The company focuses on cost control and business expansion, including a proposed acquisition of an environmental energy business and restarting activities in Muska and Godin - The company continues to focus on cost control and seeks opportunities to prudently expand and diversify its business[79](index=79&type=chunk) - The company has signed a Memorandum of Understanding with Nobao Energy Holdings (China) Co., Ltd. to acquire its environmental energy business subsidiary, which is expected to significantly improve financial performance (revenue and cash flow) and enhance the cost-effectiveness of its mining operations[79](index=79&type=chunk) - The company will continue to restart activities in the Muskwa and Godin areas with its joint venture partners[80](index=80&type=chunk)

Financial Performance - For the third quarter of 2024, the company reported a net loss attributable to equity holders of CAD 505,000, compared to a net profit of CAD 15.7 million in the third quarter of 2023[8]. - The total assets as of September 30, 2024, were CAD 741.3 million, showing a slight decrease from CAD 742.1 million in the previous quarter[8]. - Sunshine Oilsands reported a significant increase in diluted bitumen revenue to CAD 27.32 million for the nine months ended September 30, 2024, compared to CAD 18.31 million for the same period in 2023[9]. - As of September 30, 2024, the company reported a net loss attributable to shareholders of CAD 33.6 million and a working capital deficit of CAD 514 million[41]. - The company's debt-to-asset ratio increased to 92% as of September 30, 2024, compared to 88% as of December 31, 2023[41]. Production and Sales - The average production of diluted bitumen for the three and nine months ended September 30, 2024, was 521.8 barrels per day and 869.7 barrels per day, respectively[5]. - The average sales volume of diluted bitumen for the same periods was 689.0 barrels per day and 1,217.1 barrels per day[5]. - The average oil sands heavy oil production for Q3 2024 was 522 barrels/day, a significant increase from 2 barrels/day in Q3 2023, representing an increase of 520 barrels/day[13]. - The average oil sands heavy oil sales for Q3 2024 was 479 barrels/day, up from 9 barrels/day in Q3 2023, an increase of 470 barrels/day[15]. Revenue and Pricing - The average price per barrel for diluted bitumen was CAD 45.85 for the nine months ended September 30, 2024, compared to CAD 43.39 for the same period in 2023[9]. - For the three months ended September 30, 2024, the company's realized oil sands heavy oil revenue increased by 2.77 million CAD to 2.79 million CAD, compared to 0.20 million CAD in the same period of 2023[10]. - The average realized price per barrel of oil sands heavy oil rose from 18.41 CAD/barrel to 44.00 CAD/barrel, an increase of 25.59 CAD/barrel, primarily due to insufficient delivery costs incurred in Q3 2023[10]. Costs and Expenses - The operating cash flow for the three months ended September 30, 2024, was a net loss of 1.00 million CAD, an improvement from a net loss of 3.67 million CAD in the same period of 2023[11]. - The royalty expenses increased by 300,000 CAD and 700,000 CAD for the three and nine months ended September 30, 2024, respectively, mainly due to increased oil sales and higher applicable royalty rates[17]. - Total diluent costs for the three and nine months ended September 30, 2024, were CAD 2.4 million and CAD 12 million, respectively, compared to CAD 0.03 million and CAD 7.4 million for the same periods in 2023, reflecting an increase of CAD 2.4 million and CAD 4.6 million due to higher production volumes[20]. - The cost per barrel for transportation decreased significantly to CAD 12.27 and CAD 14.38 for the three and nine months ended September 30, 2024, compared to CAD 108.45 and CAD 24.30 in 2023[21]. Financing and Debt - The company has incurred unsecured debt totaling $57.4 million (approximately CAD 77.5 million) as of September 30, 2024[38]. - The company entered into an interest waiver agreement with deferral holders, waiving accrued interest from January 1, 2023, to December 31, 2023, amounting to USD 31.5 million[35]. - The financing costs for the three months and nine months ended September 30, 2024, were CAD 2.63 million and CAD 8.29 million, respectively, compared to CAD 2.67 million and CAD 7.44 million for the same periods in 2023[26]. Legal and Regulatory Matters - The company is negotiating a settlement plan with the RMWB regarding a property tax claim of CAD 16.1 million and overdue penalties of CAD 19 million[38]. - The company faces various legal claims and uncertainties that could significantly impact its net income or loss during the determination period[39]. - The company has a judgment requiring it to pay $15.481 million (approximately CAD 20.967 million) to non-tolerant holders, which was later increased to $19.694 million (approximately CAD 26.048 million)[40]. Strategic Initiatives - Sunshine Oilsands plans to enter the second phase of the West Ells project, which aims to increase production by an additional 5,000 barrels per day once financing is secured[3]. - The company signed a memorandum of understanding on June 3, 2024, to acquire a clean energy subsidiary from Noble Energy Holdings (China) Co., Ltd., which is expected to significantly improve revenue and cash flow post-acquisition[74]. - The company is actively conducting due diligence and valuation for a potential acquisition of a wholly-owned subsidiary from Noble Energy Holdings (China) Limited[50]. Internal Controls and Governance - The company’s internal controls over financial reporting were assessed as effective as of September 30, 2024[56]. - The company’s disclosure controls and procedures were deemed effective as of September 30, 2024[55].

Financial Performance - For the nine months ended September 30, 2024, oil sales (net of royalties) increased from CAD 18 million to CAD 26.3 million, primarily due to increased sales volume and higher diluted oil sands heavy oil prices[1]. - The net operating loss for the three months ended September 30, 2024, was CAD 0.5 million, compared to a net operating income of CAD 0.9 million in the same period last year[2]. - Operating cash flow for the three months ended September 30, 2024, was a net outflow of CAD 1.0 million, an improvement from a net outflow of CAD 3.67 million in the same period last year[2]. - The net loss attributable to shareholders for the three months ended September 30, 2024, was approximately CAD 0.5 million, compared to a net loss of CAD 15.7 million in the same period last year[2]. - For the nine months ended September 30, 2024, the company reported a net loss of approximately $33,844,000 compared to a net loss of $21,737,000 for the same period in 2023, indicating a significant increase in losses[11]. - The company's financing costs for the nine months ended September 30, 2024, were $8,290,000, up from $7,441,000 in the previous year, reflecting increased financial pressure[11]. - The company reported a foreign exchange gain of CAD 6,827,000 for the three months ended September 30, 2024, compared to a loss of CAD 10,735,000 in the same period of 2023[9]. - The company reported unrealized foreign exchange losses of $(6,827) million for the nine months ended September 30, 2024, compared to $10,735 million for the same period in 2023[71]. Assets and Liabilities - Total assets as of September 30, 2024, were CAD 741.3 million, a slight decrease from CAD 745.9 million as of December 31, 2023[3]. - Total liabilities increased to CAD 684.1 million as of September 30, 2024, compared to CAD 654.9 million as of December 31, 2023[6]. - As of September 30, 2024, total equity was CAD 57,203,000, compared to a negative equity of CAD 999,000 as of December 31, 2022[10]. - The company's current liabilities net amounted to approximately $51,400,000, highlighting ongoing liquidity challenges[15]. - The total financial liabilities amounted to $629,239 million as of September 30, 2024, with $520,954 million due within one year[74]. - The company’s working capital deficit increased to $514,041 million as of September 30, 2024, from $79,458 million as of December 31, 2023[66]. Revenue and Sales - Oil sales, net of royalties, for the three months ended September 30, 2024, were CAD 4,871,000, a significant increase from CAD 51,000 in the same period of 2023[9]. - Oil sales revenue for the three months ended September 30, 2024, was $5,211,000, compared to $49,000 for the same period in 2023, while total revenue for the nine months ended September 30, 2024, was $27,322,000, up from $18,305,000 in 2023[54]. - Customer contract revenue for the three months ended September 30, 2024, was $4,871,000, compared to $51,000 in 2023, with total revenue for the nine months reaching $26,329,000, up from $17,996,000[54]. Expenses - Total expenses for the three months ended September 30, 2024, were CAD 12,230,000, up from CAD 6,110,000 in the same period of 2023[9]. - General and administrative expenses for the three months ended September 30, 2024, were $3,028,000, slightly down from $3,034,000 in 2023, while total expenses for the nine months were $9,489,000, compared to $9,670,000 in 2023[61]. - The company incurred financing costs of CAD 2,630,000 for the three months ended September 30, 2024, compared to CAD 2,668,000 in the same period of 2023[9]. Equity and Shareholder Information - Shareholders' equity decreased to CAD 57.2 million as of September 30, 2024, down from CAD 91.0 million as of December 31, 2023[3]. - The basic loss per share attributable to the company's owners was $(0.14) for the nine months ended September 30, 2024, compared to $(0.09) for the same period in 2023[63]. - The company has issued and fully paid common shares totaling 243,478,681 as of September 30, 2024, with no changes in share capital during the period[48]. Capital Expenditures and Investments - The company reported capital expenditures of $2,234 thousand for the year ending December 31, 2020, and $1,239 thousand for the year ending December 31, 2023, indicating ongoing investment in exploration and evaluation assets[25]. - The company’s exploration and evaluation assets increased slightly from CAD 237,971 thousand in 2023 to CAD 239,291 thousand in 2024, an increase of about 0.5%[95]. Debt and Financing - The company needs to refinance or restructure its current debt to meet its operational cash needs and maintain capital expenditures, indicating significant financial uncertainty[15]. - The company is actively discussing refinancing options with existing shareholders and creditors to secure additional funding for ongoing operations[17]. - The company entered into a debt transfer agreement, with the bondholder transferring bonds for a principal amount of approximately $188.66 million (equivalent to about CAD 240.2 million) as of December 31, 2021[40]. Legal and Regulatory Matters - The company is involved in ongoing litigation regarding a judgment requiring payment of approximately $19,694 million (equivalent to about $26,048 million CAD) to non-exempt holders[85]. - The group has accrued a total of $16.1 million in municipal property tax demands from RMWB for the period from 2016 to 2024, along with accrued late fees of $19 million[83]. Operational Challenges - The company continues to explore new strategies for market expansion and product development to improve financial performance moving forward[10]. - The company faces significant risks regarding its ability to continue operations due to uncertainties in capital and operational expenditures, with a focus on the 2023 budget and future spending estimates[17]. - The company is currently engaged in the assessment and development of oil properties, which involves high risks and uncertainties regarding profitability[15].

Financial Performance - Oil sales (net of royalties) increased from CAD 17.9 million to CAD 21.5 million for the six months ended June 30, 2024, primarily due to higher diluted oil sands heavy oil sales prices[1]. - Net operating income (excluding one-time foreign exchange losses) for the three months ended June 30, 2024, was CAD 1.13 million, down from CAD 1.66 million in the same period last year[2]. - The company reported a net loss attributable to shareholders of CAD 11 million for the second quarter of 2024, compared to a net profit of approximately CAD 5.7 million in the same period last year[2]. - Operating cash flow for the three months ended June 30, 2024, was a net inflow of CAD 0.8 million, compared to a net outflow of CAD 0.7 million in the same period last year[2]. - The company reported a net loss of approximately CAD 33.1 million for the six months ending June 30, 2024[31]. - The company’s total liabilities as of June 30, 2024, amounted to CAD 684,338,000, compared to CAD 654,885,000 as of December 31, 2023[60]. - The company’s total equity decreased to CAD 57.78 million as of June 30, 2024, from CAD 91.05 million as of December 31, 2023[29]. Production and Sales - Average diluted oil sands heavy oil sales volume increased from 1,380.1 barrels per day to 1,484.1 barrels per day for the six months ended June 30, 2024[1]. - In Q2 2024, the company reported oil sands heavy oil sales of 884 barrels per day, a decrease of 31.8% from 1,294 barrels per day in Q2 2023[13]. - The realized oil sands heavy oil revenue for Q2 2024 was CAD 6,006,000, down from CAD 7,536,000 in Q2 2023, reflecting a decrease of 20.3%[9]. - The average diluted loss per share for the three months ended June 30, 2024, was $0.05, compared to a profit of $0.02 in the same period of 2023[62]. Costs and Expenses - Total operating costs for the three and six months ended June 30, 2024, were CAD 3,269,000 and CAD 7,559,000, compared to CAD 4,472,000 and CAD 8,959,000 in 2023, indicating a decrease of 26.9% and 15.6% respectively[20]. - General and administrative expenses for the three months ended June 30, 2024, were CAD 1.857 million, down from CAD 2.098 million in the same period of 2023, mainly due to reduced salaries and legal fees[21]. - Financing costs increased to CAD 2.9 million for the three months ended June 30, 2024, from CAD 2.2 million in the same period of 2023, primarily due to interest expenses on loans from related parties and shareholders[22]. - The company incurred total expenses of $16,274 thousand for the three months ended June 30, 2024, compared to $18,612 thousand in the same period of 2023, indicating a reduction in operational costs[62]. Assets and Liabilities - As of June 30, 2024, the company had invested approximately CAD 1.29 billion in oil sands lease, drilling operations, project engineering, procurement, and construction[4]. - The company’s total liabilities as of June 30, 2024, amounted to CAD 684,338,000, compared to CAD 654,885,000 as of December 31, 2023[60]. - The company’s operating capital deficit was CAD 83.77 million as of June 30, 2024, compared to CAD 79.46 million as of December 31, 2023[29]. - The company has unsecured loans from related parties totaling approximately CAD 53.375 million, with an interest rate of 10%[35]. Tax and Legal Matters - As of June 30, 2024, the company has total available tax deductions of approximately CAD 1.43 billion, with unrecognized tax losses expiring between 2029 and 2044[27]. - The company has received a municipal property tax notice from RMWB for CAD 15.8 million, along with overdue penalties of CAD 13.6 million[30]. - The company is appealing a court judgment requiring it to pay approximately USD 19,694,000 (approximately CAD 26,048,000) to non-exempt holders[116]. Future Outlook and Strategy - The company continues to evaluate its exploration and evaluation assets for impairment indicators, ensuring asset recoverability is based on fair value and value in use assessments[25]. - The company plans to focus on cost control and will restart activities in the Muskwa and Godin areas with joint ventures[59]. - The company needs to refinance or restructure its current debt and secure additional financing to meet its short-term operational cash needs and maintain capital expenditures[68]. - The company’s ability to continue as a going concern is dependent on its ability to successfully refinance or restructure existing debt and secure additional financing[67].

Resource Estimates and Production - Sunshine Oilsands has an estimated recoverable resource of approximately 1.53 billion barrels as of December 31, 2023, with a best estimate of 910 million barrels in the Athabasca region[3]. - The average production of diluted bitumen for the three and six months ended June 30, 2024, was 905.2 barrels per day and 1,045.5 barrels per day, respectively[4]. - For the second quarter of 2024, the company reported bitumen sales of 10,674 barrels per day, a decrease from 11,064 barrels per day in the second quarter of 2023[8]. - The company plans to enter the second phase of the West Ells project, which aims to increase production by an additional 5,000 barrels per day once financing is secured[3]. - Oil sands heavy oil production averaged 905 barrels per day for the three months ended June 30, 2024, down from 1,267 barrels per day in the same period of 2023[14]. - Oil sands heavy oil sales averaged 884 barrels per day for the three months ended June 30, 2024, compared to 1,294 barrels per day in the same period of 2023[15]. - The West Ells project has fully resumed production, and the company will continue to monitor developments in the crude oil market[60]. Financial Performance - The net loss attributable to equity holders for the second quarter of 2024 was CAD 10.97 million, compared to a net loss of CAD 5.75 million in the second quarter of 2023[8]. - For the three months ended June 30, 2024, the company reported oil sands heavy oil revenue of CAD 6.00 million, a decrease of CAD 1.50 million from CAD 7.54 million in the same period of 2023[10]. - The company reported a net income of CAD 0.30 million for the six months ended June 30, 2024, compared to a net loss of CAD 4.40 million in the same period of 2023[12]. - As of June 30, 2024, the company reported a net loss attributable to shareholders of CAD 33.1 million and a working capital deficiency of CAD 83.8 million[34]. - The working capital deficit as of June 30, 2024, was CAD 83.772 million, compared to CAD 79.458 million as of December 31, 2023, reflecting an increase in the deficit[31]. - Shareholders' equity decreased to CAD 57.782 million as of June 30, 2024, down from CAD 91.047 million as of December 31, 2023[31]. Costs and Expenses - The average realized price for diluted bitumen was CAD 50.67 per barrel for the three months ended June 30, 2024, compared to CAD 54.30 per barrel for the same period in 2023[9]. - The company reported operating costs of CAD 3.27 million for the second quarter of 2024, down from CAD 4.47 million in the second quarter of 2023[8]. - The total operating costs, including energy and non-energy costs, for the six months ended June 30, 2024, were CAD 7.6 million, down from CAD 9.0 million in 2023, indicating improved cost efficiency[22]. - The total cost of diluent for the three and six months ended June 30, 2024, was CAD 4.7 million and CAD 9.6 million, respectively, compared to CAD 3.5 million and CAD 7.4 million for the same periods in 2023, reflecting an increase of CAD 1.2 million and CAD 2.2 million[20]. - The average transportation cost per barrel for the three and six months ended June 30, 2024, was CAD 13.29 and CAD 14.87, respectively, down from CAD 24.99 and CAD 23.97 in 2023, reflecting a reduction in transportation distance[21]. - The operating cash flow for the three months ended June 30, 2024, was CAD 0.80 million, compared to a net loss of CAD 0.70 million in the same period of 2023[11]. Debt and Financing - The company has incurred unsecured debt totaling USD 56 million (approximately CAD 76.6 million) as of June 30, 2024[32]. - The company's debt-to-asset ratio increased to 92% as of June 30, 2024, compared to 88% as of December 31, 2023[34]. - The company entered into an interest waiver agreement, resulting in a waiver of accrued interest amounting to USD 31.5 million for the period from January 1, 2024, to December 31, 2024[31]. - The company has unsecured loans from related parties totaling approximately CAD 53,375,000, with an interest rate of 10%, which can be deferred for 2 to 3 years[37]. - The total amount of loans from shareholders is approximately CAD 21,190,000, due within one to three years[37]. Tax and Legal Matters - As of June 30, 2024, the company had total available tax deductions of approximately CAD 1.43 billion, with unrecognized tax losses expiring between 2029 and 2043[30]. - The company received a payment notice from RMWB regarding municipal property taxes amounting to CAD 15.8 million, along with overdue penalties of CAD 13.6 million[32]. - The company is actively negotiating a settlement plan with RMWB to address the overdue penalties and believes the property tax notice is not compliant with relevant laws[32]. - The company has a pending court judgment requiring it to pay USD 19.694 million (approximately CAD 26.048 million) to non-compliant bondholders[33]. Operational and Strategic Developments - The company is focusing on cost control and will restart activities in the Muskwa and Godin areas with joint ventures[60]. - The company confirmed no further indications of impairment losses for exploration and evaluation (E&E) or property, plant, and equipment (PP&E) assets as of June 30, 2024[29]. - The company has entered into a deferral and amendment agreement covering the period from September 1, 2023, to August 31, 2025, with an annual interest rate of 10% on all outstanding amounts[32]. - The company continues to face significant risks and uncertainties in its resource exploration, development, and refining business[41]. Shareholder Information - The company reported a total of 243,478,681 shares of Class "A" common stock issued as of June 30, 2024[57]. - The company’s executive chairman, Mr. Sun Guoping, beneficially owns, controls, or directs 150,232,591 common shares, representing about 61.70% of the company’s issued common shares[37]. - The company did not declare or pay any dividends for the six-month period ended June 30, 2024, consistent with the previous year[58].

Executive Summary [Financial Data Summary](index=1&type=section&id=Financial%20Summary) Oil sales increased, but Q2 net income turned to loss due to exchange losses and royalties, highlighting going concern issues Financial Data Summary (CAD thousands) | Metric | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Oil Sales (Net of Royalties) | 21,458 | 17,945 | | Average Sales Volume of Diluted Bitumen (barrels/day) | 1,484.1 | 1,380.1 | Financial Data Summary (CAD thousands) | Metric | Three Months Ended June 30, 2024 (CAD thousands) | Three Months Ended June 30, 2023 (CAD thousands) | | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Net Operating Income (Excluding One-Time Exchange Loss) | 1,130 | 1,660 | | Operating Cash Flow | 753 | (702) | | Net Profit (Loss) Attributable to Equity Holders of the Company | (10,974) | 5,745 | - Oil sales (net of royalties) increased from **CAD 17.9 million** in H1 2023 to **CAD 21.5 million** in H1 2024, primarily due to higher sales prices for diluted bitumen[1](index=1&type=chunk) - Net loss attributable to equity holders of the company for Q2 2024 was **CAD 11.0 million**, compared to a net profit of **CAD 5.7 million** in the prior-year period, marking a shift from profit to loss[1](index=1&type=chunk) Condensed Consolidated Interim Financial Statements [Condensed Consolidated Statement of Financial Position](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) Total assets decreased, liabilities increased, and shareholders' equity significantly reduced, indicating financial pressure Condensed Consolidated Statement of Financial Position (CAD thousands) | Metric | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :--------------- | :--------------------- | :---------------------- | | Total Assets | 742,120 | 745,932 | | Current Assets | 7,862 | 5,951 | | Non-Current Assets | 734,258 | 739,981 | | Total Liabilities | 684,338 | 654,885 | | Current Liabilities | 91,634 | 85,409 | | Non-Current Liabilities | 592,704 | 569,476 | | Total Equity Attributable to Equity Holders of the Company | 57,782 | 91,047 | - Shareholders' equity decreased from **CAD 91,047 thousand** as of December 31, 2023, to **CAD 57,782 thousand** as of June 30, 2024, a **36.5% decrease**[4](index=4&type=chunk)[5](index=5&type=chunk) [Condensed Consolidated Statement of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statement%20of%20Comprehensive%20Income) Net loss significantly widened due to foreign exchange loss and higher finance costs, despite increased oil sales revenue Condensed Consolidated Statement of Comprehensive Income (CAD thousands) | Metric | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Oil Sales (Net of Royalties) | 21,458 | 17,945 | | Other Income | 916 | 2,684 | | Foreign Exchange (Gain)/Loss | (17,729) | 12,000 | | Net Income/(Loss) | (33,265) | (5,979) | | Net Income/(Loss) Attributable to Equity Holders of the Group for the Year | (33,118) | (5,828) | | Basic and Diluted Earnings/(Loss) Per Share | (0.14) | (0.02) | - Foreign exchange shifted from a **CAD 12.0 million gain** in H1 2023 to a **CAD 17.7 million loss** in H1 2024, significantly impacting net profit[6](index=6&type=chunk) - Finance costs increased from **CAD 4.773 million** in H1 2023 to **CAD 5.660 million** in H1 2024[6](index=6&type=chunk) [Condensed Consolidated Statement of Changes in Equity](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) Total equity attributable to equity holders significantly decreased due to the period's net loss, impacting the capital base Condensed Consolidated Statement of Changes in Equity (CAD thousands) | Metric | Balance as of December 31, 2023 (CAD thousands) | Balance as of June 30, 2024 (CAD thousands) | | :------------------- | :-------------------------- | :------------------------- | | Share Capital | 1,315,265 | 1,315,265 | | Accumulated Deficit | (1,294,508) | (1,327,626) | | Equity Attributable to Equity Holders of the Company | 92,265 | 59,147 | | Total Equity | 91,047 | 57,782 | - Equity attributable to equity holders of the company decreased from **CAD 92,265 thousand** as of December 31, 2023, to **CAD 59,147 thousand** as of June 30, 2024, primarily due to a **CAD 33,118 thousand** net loss during the period[7](index=7&type=chunk) [Condensed Consolidated Statement of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Operating cash flow was negative, investing cash flow turned positive, and financing cash flow was positive, increasing cash balance Condensed Consolidated Statement of Cash Flows (CAD thousands) | Metric | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :----------------------- | :--------------------------------- | :--------------------------------- | | Net Cash Provided by (Used in) Operating Activities | (1,127) | (1,990) | | Net Cash Provided by (Used in) Investing Activities | 340 | (536) | | Net Cash Generated from Financing Activities | 1,192 | 2,312 | | Cash at End of Period | 914 | 234 | - Net cash used in operating activities improved from a **CAD 1,990 thousand** outflow in H1 2023 to a **CAD 1,127 thousand** outflow in H1 2024, though still negative[9](index=9&type=chunk) - Net cash from investing activities shifted from a **CAD 536 thousand** outflow in H1 2023 to a **CAD 340 thousand** inflow in H1 2024, mainly due to proceeds from asset disposals[9](index=9&type=chunk) Notes to the Condensed Consolidated Interim Financial Statements [1. Company Information](index=9&type=section&id=1.%20Company%20Information) Sunshine Oilsands Ltd. develops oil mineral properties in Alberta, producing bitumen, and has a Chinese joint venture - The company was incorporated on **February 22, 2007**, under Alberta laws, and its shares were listed on the HKEX on **March 1, 2012**[10](index=10&type=chunk) - The Group primarily engages in the evaluation and development of oil mineral properties, currently producing bitumen in the Athabasca oil sands region of Alberta, Canada[10](index=10&type=chunk) - The company has a 51% interest in a joint venture, Sunshine Oilsands Hebei, in China, which had no business activities as of June 30, 2024[10](index=10&type=chunk)[64](index=64&type=chunk) [2. Basis of Preparation](index=9&type=section&id=2.%20Basis%20of%20Preparation) Financial statements are on a going concern basis despite significant losses and net current liabilities, requiring debt restructuring and new financing - For the six months ended June 30, 2024, the Group incurred a net loss of approximately **CAD 33.1 million** and had net current liabilities of approximately **CAD 83.8 million**[11](index=11&type=chunk) - The company's ability to continue as a going concern depends on successfully refinancing or restructuring existing debt, securing additional financing, and achieving profitable operations[11](index=11&type=chunk)[12](index=12&type=chunk) - Management is actively discussing with existing shareholders and creditors to reduce expected cash outflows and secure additional financing for capital and operating expenditures[12](index=12&type=chunk) [2.1 Statement of Compliance](index=10&type=section&id=2.1%20Statement%20of%20Compliance) Interim financial statements comply with IFRS and HKEX Listing Rules, presented in CAD, and should be read with the 2023 annual report - The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) and the HKEX Listing Rules, presented in Canadian dollars[13](index=13&type=chunk) - Certain information and disclosures have been condensed or omitted, and it is recommended to read this report in conjunction with the 2023 annual consolidated financial statements[13](index=13&type=chunk) [3. Adoption of Revised IFRS](index=10&type=section&id=3.%20Adoption%20of%20Revised%20IFRS) New and revised IFRS standards were adopted with no significant expected impact, and future amendments are listed - The company's directors do not expect the application of new and revised IFRS to have a significant impact on the Group's performance and financial position[14](index=14&type=chunk)[15](index=15&type=chunk) - Issued but not yet effective IFRS amendments include revisions to IAS 21, IAS 16, IAS 1, IAS 7, IFRS 10, and IAS 28[15](index=15&type=chunk) [4. Trade and Other Receivables](index=10&type=section&id=4.%20Trade%20and%20Other%20Receivables) Total trade and other receivables slightly increased, with a 30-day credit period and minimal expected credit losses Trade and Other Receivables (CAD thousands) | Receivable Category | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :----------------- | :--------------------- | :---------------------- | | Trade Receivables | 3,494 | 3,501 | | Other Receivables – Current | 3,454 | 1,923 | | Other Receivables – Non-Current | 2,827 | 2,594 | | Other Loan Receivables – Non-Current | 10,665 | 12,049 | | **Total** | **20,440** | **20,067** | - The Group grants an average **30-day credit period** to trade customers, with oil and gas marketing companies typically paying by the 25th of the month following production[15](index=15&type=chunk) - As of June 30, 2024, the company's directors consider the expected credit losses on receivables to be minimal[16](index=16&type=chunk) [5. Exploration and Evaluation Assets](index=11&type=section&id=5.%20Exploration%20and%20Evaluation%20Assets) Exploration and evaluation assets slightly increased, with no impairment losses recognized, using the FVLCD method Exploration and Evaluation Assets (CAD thousands) | Metric | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :----------------------- | :--------------------- | :---------------------- | | Beginning Balance | 237,971 | 235,044 | | Capital Expenditure | 643 | 2,234 | | Disposal of Assets | (750) | - | | **Ending Balance** | **238,346** | **237,971** | - For the six months ended June 30, 2024, the Group did not recognize any impairment losses for exploration and evaluation cash-generating units[18](index=18&type=chunk) - Impairment tests use the FVLCD method, with cash flow data derived from reports by independent qualified reserve evaluators, GLJ Petroleum Consultants[16](index=16&type=chunk) [6. Property, Plant and Equipment](index=12&type=section&id=6.%20Property,%20Plant%20and%20Equipment) Property, plant and equipment carrying amount slightly decreased, with no impairment losses, using the FVLCD method Property, Plant and Equipment (CAD thousands) | Metric | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :----------------------- | :--------------------- | :---------------------- | | Total Cost | 895,567 | 896,096 | | Accumulated Depreciation, Depletion and Impairment | 418,850 | 414,712 | | **Carrying Amount** | **476,717** | **481,384** | - For the six months ended June 30, 2024, the Group did not recognize any impairment losses for the West Ells cash-generating unit[22](index=22&type=chunk) - Impairment tests use the FVLCD method, based on GLJ Petroleum Consultants' oil and gas reserve reports and oil price forecasts[20](index=20&type=chunk) [7. Right-of-Use Assets and Leases](index=13&type=section&id=7.%20Right-of-Use%20Assets%20and%20Leases) Right-of-use assets were CAD 5.7M, lease liabilities CAD 1.7M, and cash flows for leases CAD 0.36M Right-of-Use Assets and Leases (CAD thousands) | Metric | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :--------------- | :--------------------- | :---------------------- | | Total Right-of-Use Assets | 5,703 | 5,983 | | Lease Liabilities | 1,676 | - | - For the six months ended June 30, 2024, total cash flows for leases amounted to **CAD 359 thousand**[24](index=24&type=chunk) [8. Trade and Accrued Payables](index=13&type=section&id=8.%20Trade%20and%20Accrued%20Payables) Total trade and accrued payables increased, with significant interest payable and high overdue trade payables Trade and Accrued Payables (CAD thousands) | Liability Category | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :--------------- | :--------------------- | :---------------------- | | Trade Payables | 19,815 | 18,973 | | Interest Payable | 201,558 | 190,886 | | Other Payables | 23,325 | 21,830 | | Accrued Liabilities | 24,373 | 22,317 | | **Total** | **269,071** | **254,006** | Aging of Trade Payables (CAD thousands) | Aging of Trade Payables | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :--------------- | :--------------------- | :---------------------- | | 0 - 30 Days | 910 | 972 | | 31 – 60 Days | 80 | 480 | | 61 – 90 Days | 172 | 86 | | > 90 Days | 18,653 | 17,435 | - Trade payables over **90 days** reached **CAD 18,653 thousand** as of June 30, 2024, representing the vast majority of total trade payables, indicating pressure on long-term payment obligations[26](index=26&type=chunk) [9. Debt](index=14&type=section&id=9.%20Debt) Debt includes other loans and senior notes with renewed extension and interest waiver agreements, but repayment challenges persist Debt (CAD thousands) | Debt Category | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :--------------- | :--------------------- | :---------------------- | | Total Other Loans | 16,155 | 15,454 | | Senior Notes (Current) | 10,950 | 10,581 | | Senior Notes (Non-Current) | 260,930 | 252,142 | - The company entered into a 2024 interest waiver agreement with the Extension Holders, waiving **USD 31.5 million** of interest accrued on the Senior Notes for the period from January 1 to December 31, 2024[29](index=29&type=chunk) - The Senior Notes extension agreement has been extended to **August 31, 2025**, with an annual interest rate of **10%** during the period[32](index=32&type=chunk) [10. Provisions](index=15&type=section&id=10.%20Provisions) Asset retirement obligation provision increased to CAD 51.0M, based on estimated costs discounted using risk-free rates and inflation Provisions (CAD thousands) | Metric | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :------------------- | :--------------------- | :---------------------- | | Beginning Balance of Decommissioning Liabilities | 49,829 | 44,144 | | Impact of Discount Rate Change | 290 | 4,225 | | Unwinding of Discount | 872 | 1,460 | | **Ending Balance (Non-Current)** | **50,991** | **49,829** | - The total estimated undiscounted cash flows for asset retirement obligations are **CAD 81.4 million**, expected to continue until **2040**[30](index=30&type=chunk) - Retirement costs are discounted using risk-free rates ranging from **2.69% to 2.95%**, and an annual inflation rate of **2.0%** is included[30](index=30&type=chunk) [11. Income Tax](index=16&type=section&id=11.%20Income%20Tax) No deferred tax benefits were recognized, resulting in zero net deferred income tax assets, with non-capital losses offset by liabilities Deferred Tax Assets (Liabilities) (CAD thousands) | Deferred Tax Assets (Liabilities) Category | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :----------------------- | :--------------------- | :---------------------- | | Exploration and Evaluation Assets and Property, Plant and Equipment | (75,651) | (69,567) | | Decommissioning Liabilities | 11,728 | 11,461 | | Non-Capital Losses | 241,090 | 243,242 | | Unrecognized Deferred Tax Benefits | (177,319) | (185,173) | | **Total** | **-** | **-** | - The company has a significant amount of unrecognized deferred tax benefits, indicating that its accumulated losses have not yet fully offset future taxable profits[33](index=33&type=chunk) [12. Share Capital](index=16&type=section&id=12.%20Share%20Capital) Issued share capital remained unchanged, with various authorized share classes, and a placement is underway to settle trade payables Share Capital (CAD thousands) | Metric | Number of Shares as of June 30, 2024 | Amount as of June 30, 2024 (CAD thousands) | Number of Shares as of December 31, 2023 | Amount as of December 31, 2023 (CAD thousands) | | :--------------- | :--------------------- | :-------------------------- | :---------------------- | :-------------------------- | | Beginning Balance | 243,478,681 | 1,315,265 | 243,478,681 | 1,315,265 | | **Ending Balance** | **243,478,681** | **1,315,265** | **243,478,681** | **1,315,265** | - The company's authorized share capital includes an unlimited number of Class A and B voting common shares, Class C, D, E, and F non-voting common shares, and Class G and H non-voting preferred shares[34](index=34&type=chunk) - The company is undertaking a placement to issue **48,695,736 Class A common shares** at **HKD 0.38 per share** to settle trade payables[36](index=36&type=chunk) [13. Share-based Compensation](index=17&type=section&id=13.%20Share-based%20Compensation) Unexercised share options totaled 200,000 with a CAD 0.60 exercise price and 0.19 years remaining, with no compensation expense Share-based Compensation | Metric | Number of Share Options as of June 30, 2024 | Weighted Average Exercise Price as of June 30, 2024 (CAD) | Number of Share Options as of December 31, 2023 | Weighted Average Exercise Price as of December 31, 2023 (CAD) | | :--------------- | :--------------------- | :---------------------------------- | :---------------------- | :---------------------------------- | | Beginning Balance | 200,000 | 0.60 | 6,500,000 | 1.96 | | Expired | - | - | (6,300,000) | 2.00 | | **Ending Balance** | **200,000** | **0.60** | **200,000** | **1.96** | - As of June 30, 2024, the weighted average remaining contractual life of unexercised share options was **0.19 years**, a significant reduction from **0.69 years** at December 31, 2023[38](index=38&type=chunk) - No share-based compensation expense was recognized by the company during the period[39](index=39&type=chunk) [14. Revenue](index=18&type=section&id=14.%20Revenue) Revenue from contracts with customers increased by 19.6% to CAD 21.5M, all from Canadian customers and recognized upon control transfer Revenue (CAD thousands) | Metric | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :--------------- | :--------------------------------- | :--------------------------------- | | Oil Sales | 22,111 | 18,256 | | Royalties | (653) | (311) | | **Revenue from Contracts with Customers** | **21,458** | **17,945** | - All revenue is derived from Canadian customers and recognized when control of goods is transferred, typically collected in the month following delivery[40](index=40&type=chunk) - Royalty rates for West Ells are calculated based on price-sensitive royalty rates determined by the Government of Alberta, currently benchmarked against oil sands operations before break-even[41](index=41&type=chunk) [15. Segment Information](index=18&type=section&id=15.%20Segment%20Information) The Group operates in a single segment: mining, producing, and selling crude oil, with all revenue and most assets in Canada - The Group has only one reportable and operating segment: mining, producing, and selling crude oil products[42](index=42&type=chunk) - All of the Group's revenue is derived from Canadian customers, and the majority of non-current assets are also located in Canada[43](index=43&type=chunk) - Customer A contributed **73.3%** of the Group's total revenue for the six months ended June 30, 2024[44](index=44&type=chunk) [16. Other Income](index=19&type=section&id=16.%20Other%20Income) Total other income significantly decreased due to reduced other income, despite a gain on asset disposal Other Income (CAD thousands) | Income Category | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :------------------- | :--------------------------------- | :--------------------------------- | | Interest Income | 4 | 3 | | Other Income | 746 | 2,681 | | Gain (Loss) on Disposal of Assets | 166 | - | | **Ending Balance** | **916** | **2,684** | - Other income (excluding interest and gain on asset disposal) decreased from **CAD 2,681 thousand** in H1 2023 to **CAD 746 thousand** in H1 2024[45](index=45&type=chunk) [17. General and Administrative Expenses](index=19&type=section&id=17.%20General%20and%20Administrative%20Expenses) General and administrative expenses slightly decreased, with reductions in salaries, consulting, benefits, and legal/audit fees General and Administrative Expenses (CAD thousands) | Expense Category | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :----------------- | :--------------------------------- | :--------------------------------- | | Salaries, Consulting Fees and Benefits | 2,819 | 3,307 | | Rent | 16 | 16 | | Legal and Audit | 88 | 289 | | Other | 3,538 | 3,024 | | **Ending** | **6,461** | **6,636** | - Salaries, consulting fees, and benefits decreased from **CAD 3,307 thousand** in H1 2023 to **CAD 2,819 thousand** in H1 2024[46](index=46&type=chunk) - Legal and audit fees significantly decreased from **CAD 289 thousand** in H1 2023 to **CAD 88 thousand** in H1 2024[46](index=46&type=chunk) [18. Finance Costs](index=19&type=section&id=18.%20Finance%20Costs) Total finance costs increased, driven by higher other interest expenses and unwinding of discount on provisions Finance Costs (CAD thousands) | Finance Cost Category | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :----------------------- | :--------------------------------- | :--------------------------------- | | Interest Expense on Senior Secured Notes | 588 | 583 | | Interest Expense on Other Loans | 133 | 304 | | Other Interest Expense | 3,908 | 3,042 | | Other Interest Expense - Leases | 159 | 125 | | Unwinding of Discount on Provisions | 872 | 719 | | **Ending Balance** | **5,660** | **4,773** | - Other interest expense increased from **CAD 3,042 thousand** in H1 2023 to **CAD 3,908 thousand** in H1 2024[47](index=47&type=chunk) - Unwinding of discount on provisions increased from **CAD 719 thousand** in H1 2023 to **CAD 872 thousand** in H1 2024[47](index=47&type=chunk) [19. Earnings/(Loss) Per Share](index=19&type=section&id=19.%20Earnings%2F%28Loss%29%20Per%20Share) Basic and diluted loss per share significantly increased to CAD 0.14, reflecting substantial profitability deterioration Earnings/(Loss) Per Share | Metric | June 30, 2024 | June 30, 2023 | | :----------------------- | :------------ | :------------ | | Basic and Diluted – Class A Common Shares | 243,478,681 | 243,478,681 | | **Loss Per Share** | **(0.14)** | **(0.02)** | - Loss per share expanded from **CAD 0.02** in H1 2023 to **CAD 0.14** in H1 2024, reflecting a significant deterioration in the company's profitability[49](index=49&type=chunk) [20. Capital and Financial Risk Management](index=20&type=section&id=20.%20Capital%20and%20Financial%20Risk%20Management) Capital risk is managed via equity, JVs, and debt, while currency and liquidity risks are addressed, with a CAD 83.8M working capital deficit - The Group raises sufficient capital through equity issuance, joint ventures, and debt to maintain its capital base and financial flexibility[50](index=50&type=chunk) Capital and Financial Risk Management (CAD thousands) | Metric | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :--------------- | :--------------------- | :---------------------- | | Working Capital Deficit | 83,772 | 79,458 | | Shareholders' Equity | 57,782 | 91,047 | | **Total** | **141,554** | **170,505** | - The Group faces foreign exchange rate fluctuation risks, primarily related to USD, HKD, and RMB denominated expenditure commitments, deposits, payables, and long-term debt[53](index=53&type=chunk) [20.1 Capital Risk Management](index=20&type=section&id=20.1%20Capital%20Risk%20Management) Capital risk is managed via equity, JVs, and debt financing for flexibility, with a CAD 83.8M working capital deficit - The Group's strategy is to raise sufficient capital through equity issuance, joint ventures, and debt to maintain its capital base, aiming for financial flexibility and future business development[50](index=50&type=chunk) Working Capital Deficit (CAD thousands) | Metric | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :----------- | :--------------------- | :---------------------- | | Working Capital Deficit | 83,772 | 79,458 | [20.2 Financial Instruments Categories](index=20&type=section&id=20.2%20Financial%20Instruments%20Categories) Financial assets and liabilities are primarily measured at amortized cost, with carrying and fair values of CAD 20.0M and CAD 631.7M Financial Instruments Categories (CAD thousands) | Category | Carrying Amount as of June 30, 2024 (CAD thousands) | Fair Value as of June 30, 2024 (CAD thousands) | Carrying Amount as of December 31, 2023 (CAD thousands) | Fair Value as of December 31, 2023 (CAD thousands) | | :----------------------- | :---------------------------- | :---------------------------- | :----------------------------- | :----------------------------- | | Financial Assets Measured at Amortized Cost | 20,007 | 20,007 | 19,245 | 19,245 | | Financial Liabilities Measured at Amortized Cost | 631,671 | 631,671 | 603,137 | 603,137 | [20.3 Fair Value of Financial Instruments](index=20&type=section&id=20.3%20Fair%20Value%20of%20Financial%20Instruments) Carrying amounts of amortized cost financial instruments approximate fair values due to short-term maturity - The directors believe that the carrying amounts of financial assets and liabilities recognized at amortized cost approximate their fair values due to their short-term maturity[52](index=52&type=chunk) [20.4 Currency Risk](index=20&type=section&id=20.4%20Currency%20Risk) The Group faces USD, HKD, and RMB currency risks, impacting debt and payables, with a CAD 5.4M unrealized foreign exchange loss - The Group faces foreign exchange rate fluctuation risks, primarily related to USD, HKD, and RMB denominated expenditure commitments, deposits, payables, and long-term debt[53](index=53&type=chunk) Components of Foreign Exchange (Gain)/Loss (CAD thousands) | Components of Foreign Exchange (Gain)/Loss | Three Months Ended June 30, 2024 (CAD thousands) | Three Months Ended June 30, 2023 (CAD thousands) | | :------------------------ | :--------------------------------- | :--------------------------------- | | Unrealized Foreign Exchange Loss/(Gain) | 5,422 | (11,158) | | Realized Foreign Exchange Loss/(Gain) | (2) | - | | **Total Foreign Exchange Loss/(Gain)** | **5,420** | **(11,158)** | - A 1% upward or downward movement in the USD to CAD exchange rate would impact the carrying amount of debt by approximately **CAD 2.7 million**, HKD by **CAD 0.7 million**, and RMB by **CAD 0.1 million**[54](index=54&type=chunk) [20.5 Liquidity Risk](index=21&type=section&id=20.5%20Liquidity%20Risk) Liquidity risk is managed by ensuring sufficient funds to meet obligations, with CAD 91.1M financial liabilities maturing within one year - The Group manages liquidity risk by developing plans to ensure sufficient liquidity to meet financial obligations when due, through proceeds from equity or debt[55](index=55&type=chunk) Financial Liabilities Maturity Analysis (CAD thousands) | Financial Liability Category | Total (CAD thousands) | Within One Year (CAD thousands) | One to Two Years (CAD thousands) | | :--------------- | :------------ | :---------------- | :------------------ | | Trade and Accrued Payables | 269,071 | 76,298 | 192,773 | | Debt | 362,600 | 14,763 | 347,837 | | **Total** | **631,671** | **91,061** | **540,610** | [21. Related Party Transactions](index=21&type=section&id=21.%20Related%20Party%20Transactions) The Group engaged in related party transactions, including management fees and loans, with the Executive Chairman holding 61.70% of common shares - For the six months ended June 30, 2024, a consulting firm related to a director of Sunshine Oilsands charged the Group **CAD 0.25 million** for management and consulting services[58](index=58&type=chunk) - Mr. Sun Guo Ping, the Executive Chairman of the company, beneficially owns or controls approximately **61.70%** of the company's issued common shares[58](index=58&type=chunk) [21.1 Trading Transactions](index=21&type=section&id=21.1%20Trading%20Transactions) The company paid CAD 0.25M for management and consulting services to a related firm; the Executive Chairman holds 61.70% of common shares - For the six months ended June 30, 2024, a consulting firm related to a director of Sunshine Oilsands charged the Group **CAD 0.25 million** for management and consulting services[58](index=58&type=chunk) - Mr. Sun Guo Ping, the Executive Chairman of the company, beneficially owns or controls approximately **61.70%** of the company's issued common shares[58](index=58&type=chunk) [21.2 Key Management Personnel and Directors' Remuneration](index=22&type=section&id=21.2%20Key%20Management%20Personnel%20and%20Directors'%20Remuneration) Key management and directors' remuneration totaled CAD 1.16M, consistent with prior year, primarily salaries and allowances Key Management Personnel and Directors' Remuneration (CAD thousands) | Remuneration Category | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :----------------- | :--------------------------------- | :--------------------------------- | | Directors' Fees | 182 | 180 | | Salaries and Allowances | 980 | 983 | | Share-based Compensation | - | - | | **Total** | **1,162** | **1,163** | [21.3 Related Company Loans](index=22&type=section&id=21.3%20Related%20Company%20Loans) Unsecured loans from related companies totaled CAD 53.4M, bearing 10% annual interest and extendable for 2-3 years Related Company Loans (CAD thousands) | Loan Category | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :------- | :--------------------- | :---------------------- | | Non-Current | 53,375 | 51,933 | | **Total** | **53,375** | **51,933** | - As of June 30, 2024, the Group's unsecured loans from related companies bear an annual interest rate of **10%**, with approximately **CAD 53,375 thousand** extendable for 2 to 3 years[60](index=60&type=chunk) [21.4 Shareholder Loans](index=22&type=section&id=21.4%20Shareholder%20Loans) Unsecured shareholder loans amounted to CAD 21.2M, with a 10% annual interest rate and extendable for 1-3 years - As of June 30, 2024, the Group's unsecured shareholder loans amounted to **CAD 21,190 thousand**, bearing an annual interest rate of **10%** and extendable for 1 to 3 years[61](index=61&type=chunk) [22. Commitments and Contingencies](index=22&type=section&id=22.%20Commitments%20and%20Contingencies) Annual obligations include CAD 2.5M for lease rentals, and the company faces significant litigation, including tax disputes and a court judgment - The Group has annual obligations to pay oil sands mineral lease rentals and surface lease rentals, with annual payments of approximately **CAD 2.5 million**[62](index=62&type=chunk) - The company received demand notices from RMWB for municipal property taxes from 2016 to 2024, totaling **CAD 15.8 million** in accrued taxes and **CAD 17.6 million** in accumulated overdue penalties[63](index=63&type=chunk) - The company received a New York court judgment to pay non-extending holders of senior notes approximately **USD 19.694 million** (approximately **CAD 26.048 million**) in principal and interest, which the company has appealed[63](index=63&type=chunk) [22.1 Commitments](index=22&type=section&id=22.1%20Commitments) Annual obligations include CAD 2.5M for oil sands mineral and surface lease rentals, with no other drilling or contractual commitments - The Group has annual obligations to pay oil sands mineral lease rentals and surface lease rentals, with annual payments of approximately **CAD 2.5 million**[62](index=62&type=chunk) [22.2 Litigation](index=22&type=section&id=22.2%20Litigation) The company faces a CAD 15.8M tax dispute and a CAD 26.048M New York court judgment, both appealed, with uncertain outcomes - The company received demand notices from RMWB for municipal property taxes from 2016 to 2024, totaling **CAD 15.8 million** in accrued taxes and **CAD 17.6 million** in accumulated overdue penalties[63](index=63&type=chunk) - The company received a New York court judgment to pay non-extending holders of senior notes approximately **USD 19.694 million** (approximately **CAD 26.048 million**) in principal and interest, which the company has appealed[63](index=63&type=chunk) - The company believes it has adequately provided for such claims, but the outcome of litigation is uncertain and could materially adversely affect the company's consolidated net income or loss[63](index=63&type=chunk) [23. Subsidiaries](index=23&type=section&id=23.%20Subsidiaries) The Group owns several subsidiaries, including a 51% interest in Sunshine Oilsands Hebei, with most having no operating activities - The Group owns wholly-owned subsidiaries including Sunshine Oilsands (Hong Kong) Ltd., Brighteous Investment Ltd., and Sunshine Oilsands (Shanghai) Ltd[64](index=64&type=chunk) - Sunshine Oilsands Hebei is a joint venture in which the company holds a **51% interest**[64](index=64&type=chunk) - As of June 30, 2024, all subsidiaries except Sunshine Oilsands Hebei had no operating activities[64](index=64&type=chunk) [24. Supplemental Cash Flow Disclosures](index=24&type=section&id=24.%20Supplemental%20Cash%20Flow%20Disclosures) Non-cash working capital changes provided CAD 4.1M to operating cash flow, primarily from increased trade and other payables Supplemental Cash Flow Disclosures (CAD thousands) | Cash Flow Category | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :------------------- | :--------------------------------- | :--------------------------------- | | Trade and Other Receivables | (224) | (2,419) | | Prepaid Expenses and Deposits | (1) | 1,058 | | Trade and Other Payables | 4,393 | 7,605 | | Foreign Exchange Changes | (19) | 115 | | **Total** | **4,149** | **6,359** | - Non-cash working capital changes contributing to operating cash flow decreased from **CAD 6,359 thousand** in H1 2023 to **CAD 4,149 thousand** in H1 2024[65](index=65&type=chunk) [25. Approval of Interim Consolidated Financial Statements](index=24&type=section&id=25.%20Approval%20of%20Interim%20Consolidated%20Financial%20Statements) The Board approved and authorized the issuance of the condensed interim consolidated financial statements on August 8/9, 2024 - The Board of Directors approved and authorized the issuance of the condensed interim consolidated financial statements on **August 8, 2024** (Calgary time) / **August 9, 2024** (Hong Kong time)[66](index=66&type=chunk) Appendix [A1. Sunshine Oilsands Ltd. Non-consolidated Statement of Financial Position](index=25&type=section&id=A1.%20Sunshine%20Oilsands%20Ltd.%20Non-consolidated%20Statement%20of%20Financial%20Position) Non-consolidated total assets were CAD 738.2M, liabilities CAD 673.6M, and equity CAD 64.6M, indicating high liabilities Sunshine Oilsands Ltd. Non-consolidated Statement of Financial Position (CAD thousands) | Metric | June 30, 2024 (CAD thousands) | December 31, 2023 (CAD thousands) | | :--------------- | :--------------------- | :---------------------- | | Total Assets | 738,246 | 740,887 | | Current Assets | 6,915 | 5,215 | | Non-Current Assets | 731,331 | 735,672 | | Total Liabilities | 673,623 | 645,029 | | Current Liabilities | 93,592 | 87,844 | | Non-Current Liabilities | 580,031 | 557,185 | | Total Equity | 64,623 | 95,858 | - Total equity in the non-consolidated statements decreased from **CAD 95,858 thousand** as of December 31, 2023, to **CAD 64,623 thousand** as of June 30, 2024, a decrease of approximately **32.6%**[68](index=68&type=chunk) [A2. Directors' Remuneration and Other Employee Costs](index=26&type=section&id=A2.%20Directors'%20Remuneration%20and%20Other%20Employee%20Costs) Directors' remuneration was CAD 1.16M, other employee costs CAD 2.14M, totaling CAD 3.31M Directors' Remuneration and Other Employee Costs (CAD thousands) | Cost Category | Six Months Ended June 30, 2024 (CAD thousands) | Six Months Ended June 30, 2023 (CAD thousands) | | :----------------- | :--------------------------------- | :--------------------------------- | | Directors' Remuneration | 1,163 | 1,312 | | Other Employee Costs | 2,144 | 1,420 | | **Total Employee Costs** | **3,307** | **2,732** | - Directors' remuneration decreased from **CAD 1,312 thousand** in H1 2023 to **CAD 1,163 thousand** in H1 2024[68](index=68&type=chunk) - Other employee costs increased from **CAD 1,420 thousand** in H1 2023 to **CAD 2,144 thousand** in H1 2024[68](index=68&type=chunk)

Financial Performance - The net loss attributable to equity holders for the first quarter of 2024 was CAD 22.14 million, compared to a net profit of CAD 11.57 million in the first quarter of 2023[10]. - The company recorded diluted oil sands heavy oil revenue of CAD 11.44 million for the first quarter of 2024, compared to CAD 7.19 million in the same period of 2023[13]. - The net revenue from oil sales, after deducting royalties, increased to CAD 11.2 million in Q1 2024 from CAD 7.2 million in Q1 2023, a rise of CAD 4 million[19]. - The average price per barrel of oil sold, net of royalties, increased from CAD 64.65 in Q1 2023 to CAD 73.85 in Q1 2024, an increase of CAD 9.20 per barrel[19]. - The company reported a cash flow from operating activities of CAD (4,551,000), an improvement from CAD (7,906,000) in the same period of 2023[60]. - The company has a cash balance of CAD 390,000 as of March 31, 2024, and its ability to continue operations is dependent on securing financing and generating cash flow from operations[5]. Production and Sales - The average oil sands heavy oil production for the first quarter of 2024 was 1,185.9 barrels per day, with an average diluted oil sands heavy oil sales volume of 1,665.4 barrels per day[6]. - For the first quarter of 2024, the company reported heavy oil sales of 1,227 barrels per day, an increase from 1,025 barrels per day in the first quarter of 2023[10]. - The average production of oil sands heavy oil at West Ells rose to 1,186 barrels per day in Q1 2024, up from 913 barrels per day in Q1 2023, an increase of 273 barrels per day[17]. - The average sales volume of oil sands heavy oil increased to 1,227 barrels per day in Q1 2024, compared to 1,025 barrels per day in Q1 2023, an increase of 202 barrels per day[18]. Costs and Expenses - The operating costs for the first quarter of 2024 were CAD 4.29 million, slightly down from CAD 4.49 million in the first quarter of 2023[10]. - The total cost of diluent increased to CAD 4.94 million in Q1 2024 from CAD 3.86 million in Q1 2023, an increase of CAD 1.08 million[22]. - The transportation cost per barrel decreased from CAD 22.70 in Q1 2023 to CAD 16.11 in Q1 2024, a reduction of CAD 6.59 per barrel[24]. - Operating costs decreased from CAD 4.5 million in Q1 2023 to CAD 4.29 million in Q1 2024, a reduction of CAD 0.2 million, primarily due to lower natural gas prices[26]. - General and administrative expenses increased from CAD 4.54 million in Q1 2023 to CAD 4.604 million in Q1 2024, an increase of CAD 0.1 million, mainly due to higher municipal costs[27]. - Financing costs rose from CAD 2.536 million in Q1 2023 to CAD 2.74 million in Q1 2024, an increase of CAD 0.2 million, attributed to interest expenses from related companies and shareholder loans[29]. - Depreciation and depletion expenses increased from CAD 2.051 million in Q1 2023 to CAD 2.619 million in Q1 2024, an increase of CAD 0.568 million, driven by increased production and higher depletion rates[31]. Assets and Liabilities - The total assets of the company as of March 31, 2024, were CAD 745.96 million, showing a slight increase from CAD 745.93 million in the previous quarter[10]. - As of March 31, 2024, the company reported a net loss attributable to owners of CAD 22.1 million, with a working capital deficit of CAD 84.2 million[40]. - The company's total liabilities to total assets ratio increased to 91% as of March 31, 2024, compared to 88% as of December 31, 2023[40]. - The company has incurred unsecured debt totaling USD 55.3 million (approximately CAD 74.9 million) as of March 31, 2024[37]. - The company has unsecured loans from related parties totaling approximately CAD 52,845,000, with an interest rate of 10%[47]. Strategic Initiatives - The company plans to enter the second phase of the West Ells project, which aims to increase production by an additional 5,000 barrels per day once financing is secured[4]. - The company is focused on evaluating and developing its current oil sands assets in the West Ells project, which is located in the Athabasca region, known for its rich oil sands reserves[4]. - The West Ells project has fully resumed production in 2023, indicating a recovery in operations[80]. - The company is focusing on cost control and closely monitoring developments in the crude oil market[80]. - The company plans to restart activities in the Muskwa and Godin areas in collaboration with joint ventures[80]. Tax and Legal Matters - The company has approximately CAD 1.44 billion in available tax deductions, with unrecognized tax losses expiring between 2029 and 2044[34]. - The company is negotiating a settlement plan with the Regional Municipality of Wood Buffalo regarding property tax claims amounting to CAD 15.41 million, along with overdue penalties of CAD 17.65 million[37]. - The company has received a payment notice from the Regional Municipality of Wood Buffalo regarding municipal property taxes from 2016 to 2024, which it believes is not compliant with relevant laws[37]. - The company has a pending court judgment requiring it to pay approximately USD 19.69 million (approximately CAD 26.05 million) to non-tolerant bondholders[39]. - The company is actively seeking suitable insurance for legal claims against its directors[65]. Corporate Governance - The company has two independent non-executive directors and two audit committee members following a recent resignation[64]. - The company’s financial reporting controls have been assessed as effective as of March 31, 2024[56]. - The company has not identified any significant changes in internal control over financial reporting that could materially affect the financial statements[57]. Shareholder Information - The company’s executive chairman holds 150,232,591 shares, representing approximately 61.70% of the issued common shares[47]. - The company reported a total of 243,478,681 Class "A" common shares issued as of March 31, 2024[73]. - No dividends were declared or paid for the three months ended March 31, 2024, consistent with the previous year[75].

Financial Performance - For Q1 2024, Sunshine Oilsands Ltd. reported a net loss attributable to shareholders of approximately CAD 22.14 million, compared to a net loss of CAD 11.57 million in Q1 2023, representing an increase in loss of 91.5% year-over-year[3]. - The company reported a net loss of CAD 22,217,000 for the three months ended March 31, 2024, compared to a net loss of CAD 11,650,000 for the same period in 2023, representing an increase in losses[14]. - The basic and diluted loss per share for Q1 2024 was CAD 0.09, compared to CAD 0.05 in Q1 2023, reflecting a 80.0% increase in loss per share[9]. - The company reported a net loss attributable to shareholders of approximately $22,144,000 for the three months ended March 31, 2024, compared to a loss of $11,575,000 in the same period of 2023[69]. - The total expenses for Q1 2024 were CAD 21.64 million, compared to CAD 19.99 million in Q1 2023, indicating an increase of 8.2%[9]. Revenue and Sales - The company reported total revenue of CAD 11.19 million from oil sales in Q1 2024, a significant increase from CAD 7.18 million in Q1 2023, representing a growth of 55.5%[9]. - Oil sales revenue for the three months ended March 31, 2024, was $11,437,000, a significant increase from $7,192,000 for the same period in 2023, representing a growth of approximately 58.5%[59]. - Customer contract revenue for the same period was $11,192,000, compared to $7,179,000 in 2023, indicating a year-over-year increase of about 55.5%[59]. - Average diluted oil sands sales increased to 1,665.4 barrels per day in Q1 2024, up from 1,233.8 barrels per day in Q1 2023, reflecting a growth of 35.0%[3]. Assets and Liabilities - Total assets as of March 31, 2024, were CAD 745.96 million, slightly up from CAD 745.93 million as of December 31, 2023[7]. - Current liabilities increased to CAD 90.74 million as of March 31, 2024, compared to CAD 85.41 million as of December 31, 2023, marking an increase of 6.9%[7]. - The company’s equity attributable to shareholders decreased to CAD 68.83 million as of March 31, 2024, down from CAD 91.05 million as of December 31, 2023, a decline of 24.5%[7]. - The company’s total liabilities increased to CAD 1,245,000,000 as of March 31, 2024, compared to CAD 1,294,508,000 as of December 31, 2023, indicating a reduction in overall debt[11]. - The company’s total liabilities as of March 31, 2024, are CAD 666,849,000, compared to CAD 645,029,000 in 2023, indicating an increase of approximately 3.5%[96]. Cash Flow and Financing - The net cash used in operating activities for the three months ended March 31, 2024, is CAD (916,000), compared to CAD (3,062,000) for the same period in 2023, indicating an improvement in cash flow[14]. - The cash balance at the end of the period is CAD 388,000, a decrease from CAD 63,000 at the end of the previous period, indicating a decline in liquidity[14]. - The company incurred financing costs of CAD 2,740,000 for the three months ended March 31, 2024, compared to CAD 2,536,000 for the same period in 2023, reflecting an increase in financing expenses[14]. - The company has a total cash outflow related to financial liabilities of $622,871,000, with $90,174,000 due within one year[79]. - The company is actively monitoring its financing requirements and discussing refinancing options with existing shareholders and creditors[21]. Operational Strategies - Sunshine Oilsands Ltd. continues to focus on operational efficiency and cost management strategies to navigate the challenging market environment[3]. - The company continues to assess and develop oil sands resources in Alberta, Canada, with ongoing projects in the Athabasca oil sands region[16]. - The management's ability to maintain ongoing operations is contingent upon achieving forecasted revenues and obtaining additional financing[20]. - The group has significant control and flexibility over the timing and scope of capital and operating expenditures based on its 2024 budget[20]. Shareholder and Equity Information - The company’s issued and fully paid share capital remained unchanged at 243,478,681 shares, with a total value of $1,315,265 USD as of March 31, 2024[53]. - Shareholders' equity decreased to $68,830,000 as of March 31, 2024, compared to $91,047,000 as of December 31, 2023[72]. - Revenue from customer A contributed 63.2% of total group revenue as of March 31, 2024, down from 88.6% in the previous year[64]. Legal and Compliance Matters - The company has appealed a judgment requiring payment of approximately $19,694,000 due on December 13, 2023, with the appeal expected to take place in July 2024[87]. - The company is required to pay approximately $15,481,000 in principal and interest to non-deferring holders based on a judgment from the New York State Court[87]. Miscellaneous - The company has established a wholly-owned subsidiary in Hong Kong, Sunshine Oil Sands (Hong Kong) Limited, to seek new investment opportunities[88]. - The company has not engaged in any purchases, sales, or redemptions of its securities during the first quarter of 2024[54].

Production and Sales Performance - The average oil sands heavy oil production for the year ended December 31, 2023, was 946.1 barrels per day, with an average diluted oil sands heavy oil sales volume of 1,152.8 barrels per day[5]. - The average production of diluted oil sands heavy oil for the three months and twelve months ended December 31, 2023, was 1,604.4 barrels/day and 946.1 barrels/day, respectively[157]. - The average diluted oil sands heavy oil sales for the fourth quarter of 2023 was 1,550 barrels/day, up from 816 barrels/day in the fourth quarter of 2022[160]. - The company reported diluted oil sands heavy oil revenue of CAD 11,932 thousand for the three months ended December 31, 2023, compared to CAD 7,275 thousand for the same period in 2022, representing a 64.5% increase[162]. - The company's oil sands heavy oil realized revenue increased from CAD 3.7 million in Q4 2022 to CAD 6.9 million in Q4 2023, a rise of CAD 3.2 million[163]. - For the twelve months ending December 31, 2023, the realized revenue from oil sands heavy oil rose to CAD 17.78 million, up CAD 9.2 million from CAD 8.64 million in 2022[163]. Financial Performance - The net loss for the year ended December 31, 2023, was CAD 19.6 million, compared to a net loss of CAD 65.7 million in 2022, representing a significant improvement[3]. - Operating cash flow net loss for the twelve months ended December 31, 2023, was CAD 9.5 million, down from CAD 15.2 million in 2022, indicating a reduction in losses[9]. - The company reported a net loss attributable to equity holders of CAD 2,184 thousand for the fourth quarter of 2023, compared to a net profit of CAD 490,832 thousand in the fourth quarter of 2022[160]. - The company reported a net loss attributable to shareholders of CAD 18.7 million for the twelve months ending December 31, 2023[195]. - As of December 31, 2023, total liabilities increased to CAD 654.9 million from CAD 637.7 million in 2022, while shareholders' equity decreased to CAD 91.0 million from CAD 110.0 million[6]. Cost Management - The company achieved a reduction in operating netback losses from CAD 80.52 per barrel in 2022 to CAD 22.59 per barrel in 2023, a decrease of CAD 57.93 per barrel[9]. - The company reported a decrease in operational costs by L%, improving overall profitability margins[19]. - The company's operating costs for the fourth quarter of 2023 were CAD 4,528 thousand, a decrease from CAD 6,506 thousand in the fourth quarter of 2022[160]. - Operating costs for the twelve months ended December 31, 2023, decreased to CAD 17,068,000 from CAD 18,942,000 in 2022, mainly due to lower natural gas prices[177]. Corporate Governance - The board consists of eight members, including two executive directors and three non-executive directors, with the remaining three being independent non-executive directors[28]. - The company has adopted a board diversity policy to enhance decision-making capabilities, considering factors such as gender, age, and professional experience[40]. - The board confirmed compliance with the corporate disclosure and trading policy throughout the reporting period[66]. - The company has established a whistleblowing policy for employees and business associates to report misconduct[50]. - The audit committee reviewed the financial statements for the year ending December 31, 2023, and discussed significant financial issues with management and external auditors[50]. Strategic Initiatives - The company is actively seeking opportunities to lower transportation costs by negotiating with Tidal Energy to transport diluted heavy oil to a closer terminal, Cheecham, starting February 2024[11]. - The company is committed to securing funding to support current operations and expansion plans for the West Ells project and other regional projects[14]. - The company is considering strategic acquisitions to enhance its product offerings and market presence, with potential targets identified in sectors I and J[19]. - The company is investing in R&D for new technologies, allocating $G million towards the development of innovative solutions in the upcoming fiscal year[19]. Market and Customer Relations - The company had three major customers contributing 100% of total revenue for the year ended December 31, 2023, with the largest customer accounting for approximately 84% of total revenue, amounting to CAD 25.4 million[131]. - The second largest customer contributed approximately 15% of total revenue, totaling CAD 4.69 million for the year ended December 31, 2023[132]. - The company continues to seek to expand its customer base to achieve optimal pricing for its products[132]. Legal and Compliance Issues - The company received a court ruling on December 13, 2023, requiring it to pay approximately USD 19.69 million (approximately CAD 26.05 million) to non-exempt holders[146]. - The company is appealing the court ruling, with the appeal expected to take place in July 2024[146]. - The company has received a property tax notice from RMWB for CAD 15.1 million, along with overdue penalties of CAD 14.9 million[192]. Environmental and Social Responsibility - The company emphasizes a "safety first" principle in health, safety, and environmental practices, maintaining a good safety record in 2023[60]. - Environmental protection and management are fundamental operational principles, with ongoing monitoring and compliance with established procedures[128]. - The company’s environmental, social, and governance report will be published after the annual report and will be available on the Hong Kong Stock Exchange and the company’s website[87].

Production and Revenue - As of December 31, 2023, the company reported an average oil sands heavy oil production of 1,604.4 barrels per day for the last three months and 946.1 barrels per day for the full year[5]. - The company achieved a diluted heavy oil revenue of CAD 11,932 thousand for the fourth quarter of 2023, compared to CAD 7,275 thousand in the same quarter of 2022, representing a year-over-year increase of approximately 64.5%[11]. - The average diluted heavy oil sales volume was 1,847.7 barrels per day for the last three months of 2023, up from 1,152.8 barrels per day for the full year[5]. - For the three months ended December 31, 2023, the realized oil sands heavy oil revenue increased by 320,000 CAD to 690,000 CAD from 370,000 CAD in the same period of 2022[12]. - For the twelve months ended December 31, 2023, the realized oil sands heavy oil revenue rose by 920,000 CAD to 1,780,000 CAD from 860,000 CAD in the same period of 2022[13]. - The average production of oil sands heavy oil for Q4 2023 was 1,604 barrels per day, an increase of 670 barrels per day compared to 934 barrels per day in Q4 2022[17]. - The average sales volume of oil sands heavy oil for Q4 2023 was 1,550 barrels per day, up from 816 barrels per day in Q4 2022, reflecting an increase of 734 barrels per day[18]. - Oil sales (net of royalties) for the twelve months ended December 31, 2023, were CAD 29.6 million, up from CAD 14.7 million in the same period of 2022, driven by increased sales following the full resumption of production at West Ells and a decrease in royalties due to lower WCS prices[20]. Financial Performance - The company reported a net loss attributable to equity holders of CAD 2,184 thousand for the fourth quarter of 2023, compared to a profit of CAD 490,832 thousand in the same quarter of 2022[9]. - The operating cash flow net loss for Q4 2023 was 1,450,000 CAD, a reduction from a net loss of 5,140,000 CAD in Q4 2022[15]. - The total operating cash flow net loss for the twelve months ended December 31, 2023, was 9,506,000 CAD, down from 15,185,000 CAD in the previous year[15]. - The company reported a net loss of CAD 18.7 million and a working capital deficit of CAD 79.5 million for the twelve months ending December 31, 2023[47]. - The debt-to-asset ratio increased to 88% as of December 31, 2023, compared to 85% as of December 31, 2022[47]. Costs and Expenses - Total capital expenditures for the fourth quarter of 2023 were CAD 378 thousand, a decrease from CAD 514 thousand in the fourth quarter of 2022[9]. - Total diluent costs for the three months ended December 31, 2023, were CAD 5.04 million, compared to CAD 3.60 million in the same period of 2022, with a per-barrel cost decrease of CAD 9.15, from CAD 38.80/barrel to CAD 29.65/barrel[22][23]. - Total diluent costs for the twelve months ended December 31, 2023, were CAD 12.46 million, up from CAD 6.98 million in 2022, with a per-barrel cost decrease of CAD 7.41, from CAD 37.03/barrel to CAD 29.62/barrel[24]. - Transportation costs for the three months ended December 31, 2023, were CAD 3.44 million, compared to CAD 2.05 million in the same period of 2022, with a per-barrel cost decrease of CAD 1.91, from CAD 22.12/barrel to CAD 20.21/barrel[25]. - Transportation costs for the twelve months ended December 31, 2023, were CAD 9.53 million, up from CAD 3.93 million in 2022, with a per-barrel cost increase from CAD 20.82/barrel to CAD 22.65/barrel[26]. - Total operating costs for the three months ended December 31, 2023, were CAD 4.53 million, down from CAD 6.51 million in the same period of 2022, with a per-barrel cost of CAD 26.64[27][28]. - Total operating costs for the twelve months ended December 31, 2023, were CAD 17.07 million, down from CAD 18.94 million in 2022, primarily due to lower natural gas prices[28]. - For the three months ended December 31, 2023, general and administrative expenses were CAD 2.883 million, an increase of CAD 0.5 million compared to CAD 2.391 million in the same period of 2022[29]. - For the twelve months ended December 31, 2023, general and administrative expenses totaled CAD 12.553 million, up from CAD 11.064 million in 2022, reflecting an increase of CAD 1.489 million[29]. Impairment and Asset Evaluation - The company evaluates its exploration and evaluation (E&E) and property, plant, and equipment (PP&E) assets for impairment indicators on each reporting date, using future cash flow estimates for impairment testing[35]. - As of December 31, 2023, the company did not recognize any impairment losses in its income statement for the E&E cash-generating unit and West Ells cash-generating unit[36]. - The estimated recoverable amounts for the E&E and West Ells cash-generating units were CAD 236.3 million and CAD 497.6 million, respectively, leading to an impairment of CAD 19.7 million for E&E and a reversal of CAD 20 million for West Ells as of December 31, 2022[38]. Financing and Debt - The company has incurred a total of USD 55 million (approximately CAD 72.8 million) in unsecured permitted debt as of December 31, 2023[41]. - The company has entered into a waiver agreement with deferral holders, allowing for a waiver of accrued interest amounting to USD 31.5 million from January 1, 2023, to December 31, 2023[40]. - The company is involved in ongoing negotiations regarding a municipal property tax claim of CAD 15.1 million, along with overdue penalties of CAD 14.9 million[44]. - A court ruling requires the company to pay USD 19.7 million (approximately CAD 26.0 million) to non-deferral holders, with an appeal expected to take place in July 2024[46]. - The total amount of unsecured loans from related companies is approximately CAD 51.93 million, with a term of 1 to 3 years[54]. Corporate Governance and Management - The company has committed to maintaining high standards of corporate governance to enhance shareholder value[68]. - The company's internal controls over financial reporting (ICFR) were assessed as effective as of December 31, 2023, with no significant changes identified that could materially impact financial reporting[62]. - The management discussion includes forward-looking statements that involve significant risks and uncertainties, which may cause actual results to differ materially from those projected[65]. - The company has applied for a three-month exemption from compliance with certain listing rules due to difficulties in finding suitable candidates for independent non-executive directors[68]. - The company is in the process of obtaining appropriate insurance for legal claims against its directors[69]. Shareholder Information - As of December 31, 2023, Sunshine Oilsands has issued a total of 243,478,681 Class "A" common shares[76]. - The company’s chairman holds approximately 61.70% of the issued common shares[53]. - No dividends were declared or paid for the twelve-month period ending December 31, 2023, consistent with the previous year[78]. Future Plans and Market Outlook - The company plans to enter the second phase of the West Ells project, which aims to increase production by an additional 5,000 barrels per day once financing is secured[3]. - The company will continue to focus on cost control and closely monitor developments in the crude oil market[81]. - The West Ells project has fully resumed production as of the date of this announcement[81]. - The company plans to restart activities in the Muskwa and Godin areas in collaboration with joint ventures[81].