Sunshine Oilsands Ltd. - Interim / Quarterly Report 2023

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SUNSHINE OILSANDS LTD. 陽光油砂有限公司 *

(a corporation incorporated under the Business Corporations Act of the Province of Alberta, Canada with limited liability)

(HKEX: 2012)

2023 INTERIM REPORT

*For identification purpose only

SUMMARY OF FINANCIAL FIGURES

For Q2 2023, net profit and comprehensive profit attributable to owners of the Company was approximately CAD 5.7 million, compared to a net profit and comprehensive profit attributable to owners of the Company of approximately CAD 46.2 million in Q2 2022.

As at June 30, 2023, December 31, 2022 and June 30, 2022, the Corporation notes the following selected financial figures.

For the three months ended June 30,	2023	2022
(Canadian $000s)
Net profit (loss) attributable to owners of the Company	5,745	46,173
Average Dilbit sales (bbl/day)	1,524.8	53.5

(Canadian $000s)	June 30,	December 31,
	2023	2022
Property, plant and equipment	481,953	485,222
Exploration and evaluation assets	235,657	235,044
Shareholders’ equity	104,030	110,009

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Management's Discussion and Analysis ("MD&A") of the financial condition and performance of Sunshine Oilsands Ltd. (" Sunshine " or the "Company") for the three and six months ended June 30, 2023 is dated August 11, 2023, and approved by the Company’s Board of Directors. This MD&A should be read in conjunction with the Company's unaudited condensed consolidated interim financial statements and notes thereto for the three and six months period ended June 30, 2023 and with the audited consolidated financial statements and notes thereto for the year ended December 31, 2022. All amounts and tabular amounts are stated in thousands of Canadian dollars unless indicated otherwise.

Overview

Sunshine is a holder and a developer of Athabasca region oil sands resources with approximately 0.91 billion barrels of risked best estimate contingent resources. The Company’s un-risked best estimate contingent resources at December 31, 2022 was approximately 1.53 billion barrels. With approximately 1 million acres of oil sands and petroleum and natural gas leases, the Company has significant commercial development potential. Phase I (5,000 barrels) of the West Ells 10,000 barrels thermal commercial project is in production. The Athabasca region is the most prolific oil sands region in the Province of Alberta, Canada. Canada’s oil sands represent the largest oil resource found in a stable political environment located in the Western Hemisphere and the third largest oil resource in the world. Canadian oil sands represent the largest single source of supply of oil imported into the United States. The Company has one business and geographical segment. Accordingly, no business and geographical segment information is presented.

The Company’s focus is on evaluating and developing its oil sands assets with the completion and operation of the 5,000 bbls/day Phase I commercial West Ells (the “Project”). When financing is available, the Company is planning to add an additional 5,000 barrels per day Phase II to the Project. On March 1, 2017, the West Ells Phase I commenced commercial production.

As at June 30, 2023, the Company had invested approximately $1.28 billion in oil sands leases, drilling operations, project engineering, procurement and construction, operation start-up, regulatory application processing and other assets. As at June 30, 2023, the Company had $0.23 million in cash.

The Company relies on its ability to obtain various forms of financing and cash flow from operations to fund administration expenses and future exploration and development cost of its projects. The Company’s ability to continue as a going concern is dependent on continuing operations and development in West Ells, marketing bitumen blends at favorable prices, achieving profitable operations and the ability to refinance current debt and access immediate additional financing. There can be no assurance that steps management will take will be successful. As such, there is significant doubt and there can be no assurance the Company will be able to continue as a going concern.

Operational Update

West Ells

On March 1, 2017, the Company achieved a key milestone. The Project commenced commercial production. Hence, effective March 1, 2017, the Company started recording revenue, royalties, expenses and depletion of the West Ells Project. On March 31, 2020, the Board has decided to temporarily suspend production due to volatility in the international crude oil market, severe decline in crude oil prices, and having considered the fact that the Company’s West Ells production equipment and road need repair, coupled with the outbreak of COVID-19 in Canada. On March 8, 2022, the Company announced that it has completed the preliminary preparatory work for resumption of production in the West Ells project. On April 11, 2022, the Company has announced that its West Ells project has fully resumed operation.

For the three and six months ended June 30, 2023, the Company’s average bitumen production was 1,267.5 bbls/day and 1,091.3 bbls/day. The bitumen is blended with diluent as part of the production process to create the marketable “Dilbit” blend product. For the three and six months ended June 30, 2023, the average Dilbit sales volume was 1,524.8 bbls/day and 1,380.1 bbls/day.

Thickwood and Legend

The Thickwood and Legend projects are each planned for initial phase one production of 10,000 barrels per day. Regulatory approval for Thickwood was received in the third quarter of 2013.

Muskwa and Godin Clastics Operations (Non-Operated 50% working interest)

As at the date of this report, Muskwa has no production. Development of Muskwa area is expected to be reactivated in due course under new ownership of Renergy, at no cost to Sunshine.

Summary of Quarterly Results

The following table summarizes selected unaudited financial information for the Company for the last eight quarters:

($ thousands except
pershare & bbl/d)	Q2 2023	Q1 2023	Q4 2022	Q3 2022	Q2 2022	Q1 2022	Q4 2021	Q3 2021
Bitumen sales (bbl/d)	1,294	1,025	816	802	30	-	-	-
Petroleum sales	11,064	7,192	7,275	7,765	589	-	-	-
Royalties	298	13	266	676	20	-	-	-
Diluent	3,528	3,863	3,596	3,094	294	-	-	-
Transportation	3,468	2,521	2,050	1,779	91	6	-	2
Operating costs	4,472	4,487	6,506	4,030	5,002	3,404	2,456	1,841
Finance cost	2,237	2,536	(28,063)	13,003	12,166	11,631	9,392	12,300
Net loss/(profit)	(5,671)	11,650	490,907	(322,871)	(46,099)	(56,232)	707	(27,306)
Net loss (profit) attributable to
owners of the company	(5,745)	11,573	490,832	(322,945)	(46,173)	(56,311)	632	(27,514)
Per share - basic and diluted	(0.02)	0.05	2.02	(1.33)	(0.19)	(0.23)	0.00	(0.11)
Capital expenditures1	593	(54)	514	(185)	1,137	181	1,428	460
Total assets	744,484	747,557	747,719	1,240,853	877,108	812,323	755,724	762,847
Working capital deficiency2	87,079	517,464	511,583	499,257	57,625	100,543	93,005	97,147
Shareholders’ equity	104,030	98,359	110,009	601,569	278,698	232,599	176,367	176,125

Includes payments for exploration and evaluation, property, plant and equipment.
The working capital deficiency includes the foreign exchange gain from conversion of current portion of HKD/CNY denominated loans from related companies and a shareholder into CAD at each period end exchange rate and the USD of the Notes converted to CAD at each period end exchange rate.

Results of Operations

Bitumen Realization

Bitumen Realization
	For the three months ended June 30,				For the six months		ended	June 30,
($ thousands, except $/bbl)		2023		2022		2023		2022
Dilbit revenue	$	11,064	$	589	$	18,256	$	589
Diluent blended		(3,528)		(294)		(7,391)		(294)
Realized bitumen revenue1	$	7,536	$	295	$	10,865	$	295
($ / bbl)		54.30		60.55		43.49		60.55

Realized bitumen revenue is used to calculate operating netbacks.

Bitumen realization represents the Company’s realized petroleum revenue (“Dilbit revenue”), net of diluent expenses. Dilbit revenue represents the Company’s revenue from its bitumen produced at West Ells project blended with purchased diluent. The cost of blending is impacted by the amount of diluent required and the Company’s cost of purchasing and transporting the diluent. A portion of the diluent expense is effectively recovered in the sales price of the blended product.

For the three and six months ended June 30, 2023, the Company’s realized bitumen revenue increased by $7.2 million and $10.6 million to $7.5 million and $10.9 million from $0.3 million and $0.3 million for the same period in 2022, respectively. The increase in bitumen realization revenue was primarily due to higher bitumen production and dilbit sales at West Ells partially offset by higher diluent blending expenses. Bitumen revenue for Q2 2022 was completely from sales of inventory as a result of production suspension since March 31, 2020. Bitumen realized price per barrel decreased year-on-year by $17.06/bbl to $43.49/bbl from $60.55/bbl for the six months ended June 30, 2023 primarily due to decreased crude oil price.

Operating Netback

Operating Netback
	For the three months ended June 30,				For the six months		ended	June 30,
($thousands,except$/bbl)		2023		2022		2023		2022
Realized bitumen revenue	$	7,536	$	295	$	10,865	$	295
Transportation		(3,468)		(91)		(5,989)		(97)
Royalties		(298)		(20)		(311)		(20)
Net bitumen revenues	$	3,770	$	184	$	4,565	$	178
Operating costs		(4,472)		(5,002)		(8,959)		(8,406)
Operating cash flow1	$	(702)	$	(4,818)	$	(4,394)	$	(8,228)
Operatingnetback($/ bbl)		(5.07)		(988.85)		(17.58)		(1,688.72)

Operating cash flow is a non-GAAP measure which is defined in the Advisory section of this MD&A.

The Operating cash flow for the three months ended June 30, 2023 was a net loss of $0.7 million compared to a net loss of $4.8 million for the three months ended June 30, 2022. Operating netback loss on a per barrel basis decreased $983.78 /bbl to a loss of $5.07/bbl from the loss of $988.85/bbl. The decrease in the operating cash flow deficiency was primarily due to the increase in bitumen sales volume as a result of full resumption of production in Q2 2023.

The Operating cash flow for the six months ended June 30, 2023 was a net loss of $4.4 million compared to a net loss of $8.2 million for the six ended June 30, 2022. Operating netback loss per barrel decreased $1,671.14/bbl to a loss of $17.58/bbl from the loss of $1,688.72/bbl. The decrease in the operating cash flow deficiency was primarily due to the significant increase in bitumen sales volume as a result of full resumption of production during the six months ended June 30, 2023.

Bitumen Production

Bitumen Production
	For the three months ended June 30,		For the six months ended June 30,
(Barrels/day)	2023	2022	2023	2022
Bitumenproduction	1,267	-	1,091	-

Bitumen production at West Ells for the three and six months ended June 30, 2023 averaged 1,267 Bbls/day and 1,091 Bbls/day compared to 0 Bbls/day for the same period in 2022. Bitumen production was zero for the six months ended June 30, 2022 due to temporary production suspension since March 31, 2020.

Bitumen Sales

Bitumen Sales
	For the three months ended June 30,		For the six months ended June 30,
(Barrels/day)	2023	2022	2023	2022
Bitumen Sales	1,294	30	1,160	15

Bitumen sales at West Ells for the three and six months ended June 30, 2023 averaged 1,294 bbls/day and 1,160 bbls/day compared to 30 bbls/day and 15 bbls/day for the three and six months ended June 30, 2022, respectively. Bitumen sales increased by 1,264 bbls/day and 1,145 bbls/day for the three and six months ended June 30, 2023 compared to the same period in 2022 as a result of resumption of bitumen production. Q2 2022 bitumen sales were mainly inventory sales at West Ells.

Petroleum Sales, net of royalties

	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,	For the six months	For the six months	ended	June 30,
($thousands,except$/bbl)		2023		2022		2023		2022
Petroleum sales	$	11,064	$	589	$	18,256	$	589
Royalties		(298)		(20)		(311)		(20)
Petroleum sales, net of
royalties	$	10,766	$	569	$	17,945	$	569
$ / bbl		77.58		116.79		71.84		116.79

Petroleum sales are from the sales of dilbit. Petroleum sales, net of royalties for the three and six months ended June 30, 2023 was $10.8 million and $17.9 million compared to $0.6 million for the three and six months ended June 30, 2022 respectively. The increase of petroleum sales (net of royalties) is mainly due to higher bitumen production and thus sales volume, partially offset by higher royalty expenses. Petroleum sales per barrel (net of

royalties) was $77.58/bbl and $71.84/bbl compared to $116.79/bbl for the same period in 2022. The decrease of $39.21/bbl and $44.95/bbl for the three and six months ended June 30, 2022 was primarily due to the decrease of realized bitumen price per barrel.

The royalty rate applicable to pre-payout oil sands operations starts at 1% of bitumen sales and increases for every dollar that the WTI crude oil price in Canadian dollars is priced above $55 per barrel, to a maximum of 9% when the WTI crude oil price is $120 per barrel or higher. The West Ells project is currently at pre-payout. For the three and six months ended June 30, 2023, royalties increased by $0.3 million compared to the same period of 2022 primarily due to higher bitumen sales and additional royalty expenses paid to Burgess Energy Holdings, LLC.

Diluent Costs

($ thousands, except $/bbl	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,	For the six months	For the six months	ended	June 30,
and blend ratio)		2023		2022		2023		2022
Diluent at CPF		2,320		293		4,372		293
Diluent at terminals		1,208		1		3,019		1
Total Diluent	$	3,528	$	294	$	7,391	$	294
$/bbl		25.43		60.34		29.59		60.34
Blend ratio (CPF)		15.1%		N/A		15.9%		N/A
Blend ratio(terminals)		23.3%		N/A		23.5%		N/A

At West Ells, diluent is blended with the bitumen as part of the production process to create a marketable dilbit blend product at West Ells. Diluent expense is mainly impacted by the required amount, cost of purchasing and transporting diluent, Canadian and U.S. benchmark pricing, the timing of diluent inventory purchases and changes in value of the Canadian dollar relative to the U.S. dollar.

Total diluent cost also include the diluent blended at terminals to adjust dilbit density for pipeline shipping purpose. Total diluent costs for the three and six months ended June 30, 2023 was $3.5 million and $7.4 million compared to $0.3 million for the same period in 2022. Total diluent costs increased by $3.2 million and $7.1 million was a result of fully resumed production at West Ells. For the three and six months ended June 30, 2023, diluent cost per barrel was $25.43/bbl and $29.59/bbl, compared to $60.34/bbl and $60.34/bbl for the same period last year. For the three and six months ended June 30, 2023, blending ratio at CPF was 15.1% and 15.9% and blend ratio at terminals was 23.3% and 23.5% respectively, there is no disclosure for blending ratio for Q2 2022 as there was no dilbit production, and the bitumen revenue for Q2 2022 was completely from sales of inventory.

Note:

1) The diluent costs per barrel for the three and six months ended June 30, 2022 were abnormally high because there was no production and therefore low dilbit sales volume.

Transportation

Transportation
	For the three months ended June 30,				For the six months		ended	June 30,
($ thousands, except $/bbl)		2023		2022		2023		2022
Transportation	$	3,468	$	91	$	5,989	$	97
$/ bbl		24.99		18.68		23.97		19.91

Transportation costs consist of trucking costs for dilbit and pipeline terminals fees. The transportation expense per barrel for the three and six months ended June 30, 2023 were $24.99/bbl and $23.97/bbl respectively compared to $18.68/bbl and $19.91/bbl for the same periods in 2022. The increase in the transportation cost per barrel was mainly due to increased rate charged by third party trucking companies especially during periods with regulated road ban.

Operating Costs

	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,	For the three months ended June 30,	For the six months	For the six months	ended	June 30,
($ thousands, except $/bbl)		2023		2022		2023		2022
Energy operating costs	$	1,293	$	2,457	$	3,131	$	3,354
Non-energy operating costs		3,179		2,545		5,828		5,052
Operating costs	$	4,472	$	5,002	$	8,959	$	8,406

Operating costs are comprised of the sum of non-energy operating costs and energy costs. Non-energy operating costs represent production-related operating activities, excluding energy operating costs. Energy operating costs represent the cost of natural gas for the production of steam and power at the West Ells facilities.

For the three months ended June 30, 2023, the operating costs decreased by $0.5 million to $4.5 million from $5.0 million for the same period in 2022. The decrease in operating costs from last year was primarily due to lower energy costs as a result of reduced gas price, partially offset by higher non-energy costs (chemical, treating, trucking, etc) at West Ells.

For the six months ended June 30, 2023, the operating costs increased by $0.6 million to $9.0 million from $8.4 million for the same period in 2022. The increase in operating costs from last year was primarily due to higher variable non-energy costs (chemical, treating, trucking, etc) as a result of resumed production at West Ells, partially offset by lower fixed maintenance costs. Since the majority of the operating costs at West Ells are fixed in nature, the operating costs per barrel of production is expected to reduce as production continues to increase at West Ells.

General and Administrative Costs

General and Administrative Costs
	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Salaries, consultants and benefits Rent Legal and audit Other Balance,end ofperiod	$ 1,539 $ 1,491 $ 3,307 $ 2,732 5 30 16 108 95 582 289 636 459 393 3,024 2,669
	$ 2,098 $ 2,496 $ 6,636 $ 6,145

The Company’s general and administrative costs were $2.1 million and $6.6 million for the three and six months ended June 30, 2023 compared to $2.5 million and $6.1 million for the same periods in 2022. General and administrative costs decreased by $0.4 million for the three months ended June 30, 2023 compared to the same periods in 2022 primarily due to higher audit fees charged in Q2 2022. For the six months ended June 30, 2023, General and administrative costs increased by $0.5 million compared to the same period in 2022 primarily due to increased workforce and higher municipal charges, partially offset by lower audit fees.

Finance Costs

Finance Costs
	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Interest expense on senior notes, including yield maintenance premium Interest expense on other loans Interest expense on loan from related companies and a shareholder Other Interest expenses-leases and others Unwinding of discounts on provisions Balance, end ofperiod	$ 289 $ 10,449 $ 583 $ 20,704 177 191 304 261 1,346 1,192 3,042 2,223 64 41 125 60 361 293 719 549
	$ 2,237 $ 12,166 $ 4,773 $ 23,797

For the three and six months ended June 30, 2023, the Company’s finance costs decreased by $10.0 million and $19.0 million to $2.2 million and $4.8 million from $12.2 million and $23.8 million for the same period in 2022, respectively. The decrease in finance costs was primarily attributed to interest waived on senior notes which was recorded as other income in 2022 as opposed to finance cost reduction in 2023.

Share-based Compensation

		Three months ended		Three months ended
		June 30, 2023		June 30, 2022
	Expensed	Capitalized Total	Expensed	Capitalized Total
Stock options	$-	$- $-	$-	$- $-

		Six months ended		Six months ended
		June 30, 2023		June 30, 2022
	Expensed	Capitalized Total	Expensed	Capitalized Total
Stock options	$-	$- $-	$-	$- $-

Share-based compensation expense for the three and six months ended June 30, 2023 and 2022 were $0 million. The fair value of share-based compensation associated with the granting of stock options is recognized by the Company in its condensed consolidated interim financial statements. Fair value is determined using the BlackScholes option pricing model.

Depletion and Depreciation

Depletion and Depreciation
	For the three months ended June 30,				For the six months		ended	June 30,
($ thousands, except $/bbl)		2023		2022		2023		2022
Depletion	$	2,582	$	-	$	4,422	$	-
Depreciation		227		217		438		467
Depletion and depreciation	$	2,809	$	217	$	4,860	$	467
Depletion($/bbl)		18.61		N/A		17.70		N/A

The Company commenced commercial production at West Ells Phase 1 Project on March 1, 2017. As at that time, the Company started recording depletion of West Ells Project I assets in the statement of comprehensive income (loss) for the three months ended March 31, 2017. The depletion rate is based on unit-of-production.

Depletion expense was $2.6 million and $4.4 million for the three and six months ended June 30, 2023 compared to $0.0 million for the same period in 2022. The increase in depletion expenses in 2023 mainly due to higher bitumen production since the resumption of operation in April 2022. Depreciation expense was $0.2 million and $0.4 million for the three and six months ended June 30, 2023 compared to $0.2 million and $0.5 million for the same period in 2022. For the six months ended June 30, 2023, depreciation expenses decreased $0.1 million primarily due to lower office lease depreciation expenses, partially offset by higher truck lease depreciation expenses.

Impairment / (Reversal)

Impairment /(Reversal)
	For the three months ended June 30,				For the six months		ended	June 30,
($ thousands, except $/bbl)		2023		2022		2023		2022
Impairment / (Reversal)	$	-	$	(68,652)	$	-	$	(126,947)

The Company assesses at each reporting date whether there is an indication that it’s E&E (exploration and evaluation assets) and PP&E assets may be impaired or that historical impairment may be reversed. The Company’s assets are aggregated into cash-generating units for the purpose of calculating impairment/impairment reversal. Cash generating units ("CGU"s) are based on an assessment of the units' ability to generate independent cash inflows. The company recognized impairment loss or reversal based on CGU which is identified with respect to geographical proximity, shared infrastructure and similarity of market risk exposure and materiality. The recoverable amount of the E&E and PP&E assets were determined using judgment and internal estimates. The recoverable amount is the higher of fair value less costs of disposal ("FVLCD") and value in use ("VIU"). FVLCD is the amount obtainable from the sale of an asset or CGU (cash-generating unit) in an arms-length transaction between knowledgeable, willing parties, less the costs of disposal. VIU is the present value of estimated future cash flows expected to arise from the continuing use of an asset or CGU and from the disposal at the end of its useful life.

For the purpose of impairment (reversal) testing, recoverable amounts for each CGU were estimated based on FVLCD methodology which is calculated using the present value of the CGUs’ expected future cash flows (aftertax). The cash flow information was derived from a report on the Group’s oil and gas reserves which was prepared by an independent qualified reserve evaluator, GLJ Petroleum Consultants (“GLJ”) and its latest oil price forecasts. The projected cash flows used in the FVLCD calculation reflect market assessments of key assumptions, including management forecast of long-term commodity prices, inflation rates, and foreign exchange rates (Level 3 fair value inputs). Cash flow forecasts are also based on GLJ’s evaluation of the Group’s reserves and resources to determine production profiles and volumes, operating costs, maintenance and future development capital expenditures.

The reversal is recognized in profit or loss only to the extent that it reverses an impairment loss that was previously recognized in profit or loss. Any additional increase is accounted for as a revaluation and is recognized in other comprehensive income.

A reversal of an impairment loss shall be recognized immediately in profit or loss. In allocating a reversal of an impairment loss for a cash-generating unit, the carrying amount of an asset shall not be increased above the lower of:

(a) Its recoverable amount; and

(b) The carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior periods.

Future depletion expenses are adjusted to allocate the CGU’s revised carrying amount over its remaining useful life.

As of June 30, 2023, the Group did not identify any indicators of further impairment loss (reversal) of the above E&E or West Ells CGU. For the three and six months ended June 30, 2022, the Company recognized an impairment reversal of $68.7 million and $126.9 million in its Exploration and Evaluation (E&E) and West Ells CGU primarily attributable to the increase in third party expert (GLJ) oil prices estimate as in the company’s reserve evaluation, future cash flows were discounted at a pre-tax risk-adjusted discount rates of 11.8% for E&E and West Ells CGU incorporated in Q2 2022.

Income Taxes

The Company did not recognize any deferred income tax assets, which relate primarily to unrecognized tax losses for the three and six months ended June 30, 2023 and 2022. Recognition of tax losses is based on the Company’s consideration of its internal development plan for its asset base and the assumption as to whether or not these tax losses will be utilized before their expiry dates. At June 30, 2023, the Company had total available tax deductions of approximately $1.53 billion, with unrecognized tax losses that expire between 2029 and 2043.

Liquidity and Capital Resources

Liquidity and Capital Resources
	June 30,2023 December31,2022
Working capital deficiency Shareholders’ equity	$ 87,079 $ 511,583 104,030 110,009
	$ 191,109 $ 621,592

On February 16, 2023, the Corporation and the Forbearing Holder entered into an interest waiver agreement (the “Interest Waiver Agreement”) pursuant to which the Forbearing Holder agrees to unconditionally and irrevocably waive the interest accrued between January 1, 2023 and December 31, 2023 (the “Waiver of Interest”). Based on the Forbearance Reinstatement and Amending Agreement (“FRAA”) dated August 8, 2021, the waived interest calculated at 10.0% per annum on the outstanding amounts (principal and interests) amounted to US$31.5 million. Save as the Waiver of Interest, all other terms and conditions as stipulated in the FRAA remain unchanged.

As of June 30, 2023, the Company had incurred unsecured Permitted Debt for a total of US$52.0 million (CAD$68.9 million equivalent).

The Group has presented the Forbearing part of Notes as a non-current liability on the unaudited condensed consolidated interim financial statements as at June 30, 2023.

The Company received a demand notice from the Regional Municipality of Wood Buffalo (“RMWB”) in relation to the 2016-2023 municipal property taxes of CAD $14.4 million. The Group was also charged with overdue penalties of CAD $13.6 million. Since then the Group was in active negotiation with RMWB for a settlement plan with proposals to waive overdue penalties. As at the date of this report, the Group believes that notices issued by RMWB relating to property taxes did not comply with relevant legislation and the Group has sought judicial review to determine the effect of non-compliant tax notices on RMWB’s property tax claim.

The Company is involved in various claims including claims described above and actions arising in the course of operations and is subject to various legal actions, pending claims and exposures. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. Unfavorable outcome were to occur against such claims or pending claims, there exists the possibility of a material adverse impact on the Company’s consolidated net income or loss in the period in which the outcome is determined. Accruals for litigation, claims and assessments are recognized if the Company determines that the loss is probable and the amount can be reasonably estimated. The Company believes it has made adequate provision for such claims. While fully supportable in the Company’s view, some of these positions, if challenged may not be fully sustained on review. From time to time, the Company receives liens or claims on accounts payable balances, and the Company continues to work toward resolution of any liens or claims. At June 30, 2022, the Company had incurred $0.82 million (US $0.62 million equivalent using the period end exchange rate) in Builders’ liens (not related mineral leases) against them during the ordinary course of business.

The Company received a judgment from the Court of the State of New York, New York County (the “Judgment”) that the Company shall pay the Non-forbearing holder all the amounts due and owing on the Senior Notes issued under the notes indenture dated 8 August 2014 (including principal and interests) in an aggregate amount of approximately US$15,481,000.00. On May 25, 2023, the group received notice from Supreme Court of the State of New York that the Judgment is vacated.

The Notes are translated into Canadian dollars at the period end exchange rate of $1USD = $1.3240 CAD.

The Company’s strategy is to access sufficient capital, through equity issuances, monetization, joint ventures and the utilization of debt, in order to maintain a capital base that properly supports the objectives of maintaining financial flexibility and of sustaining future development of the business. The Company manages its capital structure in order to continue as a going concern and makes adjustments relative to changes in economic conditions and the Company’s risk profile. In order to manage risk, the Company may from time to time issue shares and adjust its capital spending to manage current working capital deficiency levels. The Company’s liquidity may be adversely affected if the Company’s access to the capital markets is hindered because of financial market conditions generally, or as a result of conditions specific to the Company.

For the six months ended June 30, 2023, the Company reported a net loss and comprehensive loss attributable to owners of the Company of CAD $5.8 million. At June 30, 2023, the Company had a working capital deficiency of $87.1 million.

The Company’s debt-to-asset ratio, measured based on total liabilities divided by total assets was 86% as at June 30, 2023, compared to 85% as at December 31, 2022.

The Company is exposed to risks arising from fluctuations in foreign currency exchange rates. Thus, exchange rate fluctuations can affect the fair value of future cash flows. The Group is exposed to currency risks primarily through senior notes, loans from related companies and a shareholder, other loans, accounts payables and bank balances that are denominated in a foreign currency, i.e. a currency other than the functional currency of the operations to which the transactions relate. The foreign currencies giving rise to this risk are primarily Hong Kong dollar (“HK$”), United States dollar (“US$”) and Renminbi (“RMB”).

The Company manages this risk by monitoring foreign exchange rates and evaluating their effects on using Canadian or U.S. vendors as well as timing of transactions. The Company had no forward exchange rate contracts in place as at or during the six months ended June 30, 2023.

If exchange rate to convert from USD to CAD had been one percent higher or lower with all other variables held constant, foreign cash held at June 30, 2023 would have been impacted by $Nil (2022: $Nil) and the carrying value of the debt at June 30, 2023 would have been impacted by $2.6 million (2022: $2.6 million).

If exchange rate to convert from HKD to CAD had been one percent higher or lower with all other variables held constant, foreign cash held at June 30, 2023 would have been impacted by $Nil (2022: $Nil) and the carrying value of the debt at June 30, 2023 would have been impacted by $0.5 million (2022: $0.4 million).

Royalty Agreement

On August 31, 2021 (Calgary time), the Company entered into a Royalty Agreement (together with its ancillary documents, the “Royalty Agreement”) with Burgess Energy Holdings, L.L.C. (“BEH”), pursuant to which, the Corporation has granted to BEH a royalty interest in the bitumen within, upon, under or produced from the royalty lands owned by the Corporation and/or its affiliates, free and clear of any and all encumbrances for an aggregate consideration of CAD 20,000,000 (the “Aggregate Consideration”), subject to the terms and conditions stipulated therein. The arrangement under the Royalty Agreement is perpetual. On June 8, 2023, the Corporation entered into an amended Royalty Agreement (together with its ancillary documents, the “Amended Royalty Agreement”) with BEH, pursuant to which, the Corporation will receive an accelerated payment of CAD$5 million from the aggregate consideration of CAD$20 million, subject to the terms and conditions stipulated therein. In accordance with the Amended Royalty Agreement, the royalty rate calculation for WCS prices above US$80/bbl is amended as follows: When average daily WCS price of the month is US$80/bbl, the royalty rate is 8.75% and proportionally increases up to a maximum of 25.00% when the WCS price rises to US$113/bbl (based on the original Royalty Agreement, the royalty rate increases from 8.75% up to a maximum of 15.00% when the WCS price rises to US$100/bbl).

Commitments and Contingencies

Management estimated the contractual maturities of the Company's obligations. These estimated maturities may differ significantly from the actual maturities of these obligations. For a detailed discussion regarding to the Company’s commitments and contingencies, please refer to the Company's Unaudited Condensed Consolidated interim Financial Statements and notes thereto for the three and six months period ended June 30, 2023 and with the Audited Consolidated Financial Statements and notes thereto for the year ended December 31, 2022.

Transactions with Related Parties

For the six months ended June 30, 2023, a consulting Company, to which a director of Sunshine is related, charged the Company $0.25 million (December 31, 2022 – $0.5 million) for management and advisory services .

As at 30 June 2023, Mr. Kwok Ping Sun, the Company’s Executive Chairman, has beneficial ownership of, or control or direction of 150,232,591 common shares of the Company, which represents approximately 61.70% of the Company’s outstanding common shares.

As at June 30, 2023, the Company had loans from related companies and a shareholder, which are unsecured, interest bearing at 10% per annum. Loans from related companies totaling approximately CAD $55,479,000 can be rolled over for a period of 2 to 3 years (December 31, 2022: CAD 53,944,000). Total loans from a shareholder are approximately CAD $12,006,000 which are expected to be settled in 2025 (December 31, 2022: CAD $12,342,000).

Off-balance Sheet Arrangements

As at June 30, 2023, the Company did not have any other off-balance sheet arrangements.

Subsequent Event

On August 8, 2023 (Calgary time), the Company and the Forbearing Holder confirmed the signing of the Forbearance Reinstatement and Amending Agreement (the “ FRAA2023 ”). The principal terms of the FRAA2023 include:

The FRAA2023 covers the period from September 1, 2023 to August 31, 2025 (“ Period of Forbearance ”);
Same as the Forbearance Reinstatement and Amending Agreement executed on August 8, 2021, all outstanding amounts (principal and interests) will continue to be accrued at an interest of 10% per annum until August 31, 2025, unless otherwise waived in separate interest waiver agreements. During the Period of Forbearance, there will not be any forbearance fee and yield maintenance premium based on the initial Forbearance Agreement executed on September 12, 2016.

Changes in Accounting Policies

Our significant accounting policies have remained unchanged since December 31, 2022. A summary of our significant accounting policies is included in our 2022 Annual Report.

Critical Accounting Policies and Estimates

The Group’s critical accounting estimates are those estimates having a significant impact on the Group’s financial position and operations and that require management to make judgments, assumptions and estimates in the application of IFRS. Judgements, assumptions and estimates are based on historical experience and other factors that management believes to be reasonable under current conditions. As events occur and additional information is obtained, these judgements, assumptions and estimates may be subject to change.

For a detailed discussion regarding to the Company’s critical accounting policies and estimates, please refer to Note 4 to the consolidated annual financial statements for the year ended December 31, 2022.

Risk Factors

The business of resource exploration, development and extraction involves a high degree of risk. Material risks and uncertainties affecting the Company, their potential impact and the Company’s principal risk management strategies are substantially unchanged from those disclosed in the Company’s MD&A for the year ended December 31, 2022, which is available at www.hkexnews.hk. The 2022 annual report of the Company is available at the Company’s website at www.sunshineoilsands.com, and the website of the SEHK, www.hkexnews.hk.

Disclosure Controls and Procedures

Ms. Gloria Ho, Executive Director of the Board and Chief Financial Officer and Mr. Jiangping Sun, Chief Executive Officer, have designed, or caused to be designed under their supervision, disclosure controls and procedures (“DC&P”) to provide reasonable assurance that: (i) material information relating to the Group is made known to the Group's CFO by others, particularly during the period in which the annual and quarterly filings are being prepared; and (ii) information required to be disclosed by the Group in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time period specified in securities legislation. As at June 30, 2023, the Chief Financial Officer and the Chief Executive Officer evaluated the design and operation of the Group’s DC&P. Based on that evaluation, the Executive Director of the Board and the Chief Financial Officer and the Chief Executive Officer concluded that the Group’s DC&P were effective as at June 30, 2023.

Internal Controls over Financial Reporting

Gloria Ho, Executive Director of the Board and Chief Financial Officer and Mr. Jiangping Sun, Chief Executive Officer, have designed, or caused to be designed under their supervision, internal controls over financial reporting (“ICFR”) to provide reasonable assurance regarding the reliability of the Group's financial reporting and the preparation of financial statements for external purposes in accordance with IFRS. Furthermore, the Group used the criteria established in “Internal Control – Integrated Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework); they have evaluated, or caused to be evaluated under their supervision, the effectiveness of the Group’s ICFR at June 30, 2023, and concluded that the Group’s ICFR are effective at June 30, 2023 for the foregoing purpose.

No material changes in the Group's ICFR were identified during the three months period ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, the Group's ICFR. It should be noted that a control system, including the Group's disclosure and internal controls and procedures, no matter how well conceived, can provide only reasonable, but not absolute, assurance that the objectives of the control system will be met and it should not be expected that the disclosure and internal controls and procedures will prevent all errors or fraud. In reaching a reasonable level of assurance, management necessarily is required to apply its judgment in evaluating the cost/benefit relationship of possible controls and procedures. ADVISORY SECTION

Non-GAAP Measures

This MD&A includes references to certain measures which do not have a standardized meaning as prescribed by IFRS, such as “operating netbacks” and “funds from operations”, and therefore are considered non-GAAP measures. These non-GAAP measures are commonly used in the oil and gas industry and the Company believes including such measures is useful to investors. Investors are cautioned that these non-GAAP measures should not be construed as an alternative to measures calculated in accordance with IFRS as, given the non-standardized meanings, these measures may not be comparable to similar measures presented by other issuers.

Cash Flow Used in Operations

Cash flow used in operations is non-GAAP measure utilized by the Company to analyze operating performance and liquidity. Cash flow used in operations excludes the net change in non-cash operating working capital and decommissioning expenditures while the IFRS measurement “Net cash used in operating activities” includes these items. Cash flow used in operations is reconciled to Net cash used in operating activities in the table below:

	For the	three months ended	three months ended	June 30,	For the six months	For the six months	ended	June 30,
($ thousands)		2023		2022		2023		2022
Net cash used in operating
activities	$	1,072	$	(6,158)	$	(1,990)	$	(10,572)
Deduct (add):
Net change in non-cash
operating working capital		1,515		620		6,359		3,060
Cash flowusedinoperations	$	(443)	$	(6,778)	$	(8,349)	$	(13,632)

Forward‐Looking Information

Certain statements in this MD&A are forward-looking statements that are, by their nature, subject to significant risks and uncertainties and the Company hereby cautions investors about important factors that could cause the Company’s actual results to differ materially from those projected in a forward-looking statement. Any statements that express, or involve discussions as to expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will”, “expect”, “anticipate”, “estimate”, “believe”, “going forward”, “ought to”, “may”, “seek”, “should”, “intend”, “plan”, “projection”, “could”, “vision”, “goals”, “objective”, “target”, “schedules” and “outlook”) are not historical facts, are forward-looking and may involve estimates and assumptions and are subject to risks (including the risk factors detailed in this MD&A), uncertainties and other factors some of which are beyond the Company’s control and which are difficult to predict. Accordingly, these factors could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

Since actual results or outcomes could differ materially from those expressed in any forward-looking statements, the Company strongly cautions investors against placing undue reliance on any such forward-looking statements. Statements relating to “reserves” or “resources” are deemed to be forward-looking statements, as they involve the implied assessment, based on estimates and assumptions that the resources and reserves described can be

profitably produced in the future. Further, any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events.

All forward-looking statements in this MD&A are expressly qualified by reference to this cautionary statement.

ADDITIONAL INFORMATION

Additional information required by the SEHK and not shown elsewhere in this report is as follows:

Compliance of Corporate Governance Code (the “Code”)

The Company is committed to maintaining high standards of corporate governance. The Company recognizes that corporate governance practices are fundamental to the effective and transparent operation of a company and its ability to protect the rights of its shareholders and enhance shareholder value.

As Mr. Alfa Li (“Mr. Li”) did not offer himself for re-election at the Annual General Meeting of the Company (the “AGM”) held on June 28, 2023 (Hong Kong time) / June 27, 2023 (Calgary time), upon conclusion of the AGM, Mr. Li retired as independent non-executive director and all his offices in the Company ceased accordingly.

Following Li’s departure, the Company has two independent non-executive directors and two members of Audit Committee. The Board is fully aware of the requirements: (i) under Rule 3.10(1) of the Listing Rules that an listed issuer should have at least three independent non-executive directors; (ii) Rule 3.21, the audit committee should comprise of a minimum of three members.

The Company will use its best endeavor to identify suitable candidate(s) to fill up the vacancy of independent nonexecutive director and the vacancy of audit committee soonest as practicable for proper compliance with the Listing Rules. The Company will make further announcement(s) as and when appropriate.

The Company confirms that the Code, as set out in Appendix 14 to the Rules Governing the Listing of Securities on the SEHK (the “Hong Kong Listing Rules”), has been complied with save that the Company is in course of identifying suitable insurers for appropriate insurance coverage for legal actions against the Company's Directors.

Compliance with the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”)

The Company confirms that it has adopted the Model Code, as set out in Appendix 10 to the Hong Kong Listing Rules, following its public listing. Having made specific enquiries with all directors, the directors have confirmed and compiled with the required standard set out in the Model Code and its code of conduct regarding directors’ securities transactions.

Movements in Stock Options

The table below presents the movements in stock options for Directors, the chief executive and other executive management of the Group during the period ended June 30, 2023.

Name	December 31, 2022	Grante d	Exercise d	Forfeite d	Expired	June 30, 2023
Kwok Ping Sun	6,000,000	-	-	-	-	6,000,000
Gloria Ho	300,000	-	-	-	-	300,000
Yi He	100,000	-	-	-	-	100,000
GuangzhongXing	100,000	-	-	-	-	100,000
Sub-total for Directors	6,500,000	-	-	-	-	6,500,000
Sub-total for other
share option holders	-	-	-	-	-	-
Total	6,500,000	-	-	-	-	6,500,000

Please refer to our consolidated financial statements included in the 2022 Annual Report for additional details on our stock option plans and movements for the year ended December 31, 2022.

Fair Value of Share Options Granted

The weighted average fair value of the share options granted in previous years was 0.60 (2022 - $0.60). Options were valued using the Black-Scholes model. Where relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of non- transferability, exercise restrictions (including the probability of meeting market conditions attached to the option), and behavioral considerations.

The table below details the input variables used in the Black-Scholes model to determine the fair value of options granted in previous years.

Input Variables	Six month period ended	Year ended
	June 30, 2023	December 31, 2022
Grant date share price ($)	0.60-2.00	0.60-2.00
Exercise Price ($)	0.60-2.00	0.60-2.00
Expected volatility (%)	61.88-63.91	61.88-63.91
Option life (years)	0.01-1.20	0.51-1.69
Risk-free interest rate (%)	1.48-1.95	1.48-1.95
Expected forfeitures(%)	0.00-15.39	0-15.39

Purchase, Sale or Redemption of Sunshine’s Listed Securities

Class “A” Common Shares

General mandate

2023 activity

There was not any purchase, sale or redemption of Sunshine’s listed securities as of June 30, 2023.

Shares Outstanding

As at June 30, 2023, the Company had 243,478,681 Class “A” common shares issued and outstanding.

Employees

As at June 30, 2023, the Group has 33 full-time employees. For the six months ended June 30, 2023, total staff costs amounted to $3.3 million.

Changes in Directors’ Information

During the period under review and up to the date of this report, the Directors and the Board have the following changes:

i) On May 1, 2023 (Hong Kong time), Ms. Gloria Ho was appointed as an independent non-executive director and a member of each of the audit committee and remuneration committee of New World Department Store China Limited (Stock Code 0825) ; and
ii) On June 28, 2023 (Hong Kong time), following the conclusion of the AGM, Mr. Alfa Li retired as an Independent Non-executive Director of the Company and all his offices in the Company ceased on the same day accordingly.

The Board is fully aware of the requirements: (i) under Rule 3.10(1) of the Hong Kong Listing Rules that an listed issuer should have at least three independent non-executive directors; (ii) Rule 3.21, the audit committee should comprise of a minimum of three members.

The Company will use its best endeavor to identify suitable candidate(s) to fill up the vacancy of independent non-executive director and the vacancy of audit committee soonest as practicable for proper compliance with the Hong Kong Listing Rules. The Company will make further announcement(s) as and when appropriate.

Saved as mentioned above, all other Directors’ information remains unchanged pursuant to Rule 13.51B.

Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures

As at June 30, 2023, the interests or short positions of the Directors and chief executives of the Company in the Shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (“SFO”)) which were notified to the Company and The Stock Exchange of Hong Kong Limited (“Stock Exchange”) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company under Section 352 of the SFO, or which were required, pursuant to the Model Code for Securities Transactions by Directors adopted by the Company (“Model Code”), to be notified to the Company and the Stock Exchange, were as follows:

Long positions in the Shares of the Company


Name	Company	Nature of Interest	Number of Common	Approximate % interest in the
			Shares held	Common Shares
Kwok Ping Sun	Sunshine Oilsands Ltd.			61.70%
		Direct / Indirect	150,232,591

Michael J Hibberd	Sunshine Oilsands Ltd.			0.89%
		Direct / Indirect	2,165,981
Gloria Ho	Sunshine Oilsands Ltd.			-
		N/A	-

Yi He	Sunshine Oilsands Ltd.			0.06%
		Direct	139,682

Xijuan Jiang	Sunshine Oilsands Ltd.			0.04%
		Direct	104,814

Linna Liu	Sunshine Oilsands Ltd.			-
		N/A	-
Guangzhong Xing	Sunshine Oilsands Ltd.	N/A	-	-
Alfa Li	Sunshine Oilsands Ltd.	N/A	-	-

Long positions in stock options of the Company

Name	Date of grant	As at January 1, 2023	Granted	Exercised	Lapsed	Cancelled	As at June 30, 2023	Exercise price (HKD)2	Market Closing price (HKD)2	End of Vesting period 3	End of Exercise period3
Gloria Ho	7/5/2018	300,000	-	-	-	-	300,000	11.8	11.5	7/5/2020	7/5/2023
Kwok Ping Sun	7/5/2018	6,000,000	-	-	-	-	6,000,000	11.8	11.5	7/5/2020	7/5/2023
Yi He	9/9/2019	100,000	-	-	-	-	100,000	3.65	3.6	9/9/2021	9/9/2024
Guangzhong Xing	9/9/2019	100,000	-	-	-	-	100,000	3.65	3.6	9/9/2021	9/9/2024
	Subtotal	6,500,000	-	-	-	-	6,500,000	-	-	-	-

Notes:

1) The Company conducted a share consolidation on the basis that every fifty (50) existing Class “A” Common Voting Shares be consolidated into one (1) consolidated share effective February 26, 2020. All numbers of share options above are adjusted on a post share-consolidation basis.
2) The exercise prices and the market closing price immediately before the date of grant of options are adjusted on a post share-consolidation basis. Details are set out in the Company's announcement dated February 26, 2020.
3) Under the Post-IPO share option scheme, the first 1/3 of the options granted are vested and exercisable on the date of grant, and each remaining 1/3 of the total options will become vested and exercisable in each subsequent two years immediately after the date of grant and the options will expire in five years from the date of grant.

Save as disclosed above, none of the Directors or chief executives of the Company had, as at June 30, 2023, any interests or short positions in the Shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which would have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO), or which were recorded in the register required to be kept by the Company under Section 352 of the SFO, or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

Interests and Short Positions of Shareholders

So far as is known to the Directors, as at 30 June 2023, other than the interests of Directors or chief executive of the Company as disclosed above, the Company had not been notified by any persons who had interests or short positions in the Shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept by the Company under Section 336 of the SFO.

Dividends

The Company has not declared or paid any dividends in respect of the six months period ended June 30, 2023 (six months period ended June 30, 2022 - $Nil).

Review of Interim Results

The condensed consolidated interim financial statements for the Company for the three and six months ended June 30, 2023, were reviewed by the Audit Committee of the Company and approved by the Board.

Publication of Information

This Quarterly results report is published on the websites of SEDAR (www.sedar.com), the SEHK (www.hkexnews.hk) and the Company's website at www.sunshineoilsands.com.

This report is prepared in both English and Chinese and in the event of inconsistency, the English text of this report shall prevail over the Chinese text.

2023 Outlook

Sunshine will continue to focus on cost controls and carefully monitor developments in crude oil. During 2022, the Company's West Ells project has fully resumed production. The Company is working with its joint venture partners for re-activation of the Muskwa and Godin Area activities.

Condensed Consolidated Interim Statements of Financial Position

(Expressed in thousands of Canadian dollars)

	Notes	June 30, 2023 December 31, 2022
Assets Current assets Cash and cash equivalents Loan receivables Trade and other receivables Non-current assets Loan receivables Exploration and evaluation Property, plant and equipment Right-of-use assets Total assets Liabilities and Shareholders’ Equity Current liabilities Trade payables, interest payables and accrued liabilities Loans from related companies Other loans Senior notes Lease liabilities Non-current liabilities Interest payables Loans from related companies Loans from a shareholder Other loans Senior notes Lease liabilities Provisions Total liabilities Shareholders’ Equity Share capital Reserve for share-based compensation Capital reserve Exchange fluctuation reserve Accumulated deficit Equity attributable to owners of the Company Non-controlling interests Total shareholders’ equity Total liabilities and shareholders’ equity Going concern (Note 2) Commitments and contingencies (Note 22) Subsequent events (Note 25) Approved by the Board	4	$ 234 $ 542 - 1,514 9,691 8,330
	4
		9,925 10,386
		11,891 11,347 235,657 235,044 481,953 485,222 5,058 5,720
	4
	5
	6
	7
		734,559 737,333
		$ 744,484 $ 747,719

		$ 72,489 $ 233,330 12,323 15,200 1,428 4,008 10,592 269,040 172 391




	8
	21.3
	9.1
	9.2
	7
		97,004 521,969
		175,355 7,470 43,156 38,744 12,006 12,342 13,587 12,230 252,409 - 735 811 46,202 44,144
	8
	21.3
	21.4
	9.1
	9.2
	7
	10
		543,450 115,741
		640,454 637,710
		1,315,265 1,315,265 76,416 76,416 (4,453) (4,453) (1,042) (1,042) (1,281,006) (1,275,178)

	12
	13.3



		105,180 111,008 (1,150) (999)
		104,030 110,009
		$ 744,484 $ 747,719

“David Yi He” “Kwok Ping Sun” Independent Non-Executive Director Executive Director

See accompanying notes to the Condensed Consolidated Interim Financial Statements.

Condensed Consolidated Interim Statements of Operations and Comprehensive Loss

(Expressed in thousands of Canadian dollars, except for per share amounts)

	Three months ended June 30,	Six months ended June 30,
Notes	2023 2022	2023 2022
Revenues Petroleum sales, net of royalties 14 Other income 16 Foreign exchange gains/(losses) 20.4 Expenses Diluent Transportation Operating Depletion and depreciation 6,7 General and administrative 17 Finance costs 18 Impairment loss (reversal) on exploration and evaluation assets and PP&E assets Stock based compensation 13.3 Profit/(Loss) before income taxes Income taxes 11 Net profit/(loss) Net profit/(Loss) attributable to Non- controlling interests Net profit/(loss) and comprehensive profit/(loss) for the year attributable to owners of the Company Basic and diluted profit/(loss) per share 19	$ 10,766 $ 569 $ 2,359 10,452 11,158 (13,308)	17,945 $ 569 2,684 20,642 12,000 (6,621)
	24,283 (2,287)	32,629 14,590
	3,528 294 3,468 91 4,472 5,002 2,809 217 2,098 2,496 2,237 12,166 - (68,652) - -	7,391 294 5,989 97 8,959 8,406 4,860 467 6,636 6,145 4,773 23,797 - (126,947) - -
	$ 18,612 $ (48,386) $	38,608 $ (87,741)
	5,671 46,099 - -	(5,979) 102,331 - -
	5,671 (74) 46,099 (74)	(5,979) (151) 102,331 (153)
	5,745 46,173	(5,828) 102,484
	$ 0.02 $ 0.19 $	(0.02) $ 0.42

See accompanying notes to the Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

(Expressed in thousands of Canadian dollars)

	Attributable toowners of the Company Share capital Reserve for share based compensation Capital Reserve Exchange fluctuation reserve Accumulated Deficit Total	Non- controlling interests Total Equity
Balance at December 31, 2022 Net gain (loss) and comprehensive gain (loss) Exchange fluctuation reserve FX Gain/loss Issue of common shares (note 12) Issue of shares under employee share savings plan Issue of shares Director Share Arrangement (note 12) Issue of shares upon exercise of share options Share option reserve transferred on exercise of stock options Recognition of share-based payments (note 13.3) Share issue costs, net of deferred tax ($Nil) Six Months Ended June 30, 2023 Balance at December 31, 2021 Net gain (loss) and comprehensive gain (loss) Exchange fluctuation reserve FX Gain/loss Convertible bond-conversion option Issue of common shares (note 12) Issue of shares under employee share savings plan Issue of shares Director Share Arrangement (note 12) Issue of shares upon exercise of share options Share option reserve transferred on exercise of stock options Recognition of share-based payments (note 13.3) Share issue costs, net of deferred tax ($Nil) Six Months Ended June 30, 2022	$ 1,315,265 $ 76,416 $ (4,453) $ (1,042) $ (1,275,178) $ 111,008 - - - - (5,828) (5,828) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -	$ (999) $ 110,009 (151) (5,979) - - - - - - - - - - - - - - - - - - $ (1,150) $104,030 $ (683) $ 176,367 (153) 102,331 - - - - - - - - - - - - - - - - - - - - $ (836) $278,698
	$1,315,265 $76,416 $ (4,453) $ (1,042) $ (1,281,006) $105,180
	$ 1,315,265 $ 76,416 $ (4,453) $ (403) $ (1,209,775) $ 177,050 - - - - 102,484 102,484 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
	$1,315,265 $76,416 $ (4,453) $ (403) $ (1,107,291) $279,534

See accompanying notes to the Condensed Consolidated Interim Financial Statements

Condensed Consolidated Interim Statements of Cash Flows

(Expressed in thousands of Canadian dollars)

(Expressed in thousands of Canadian dollars)
Notes	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022 $ 5,671 $ 46,099 $ (5,979) $ 102,331 2,237 12,166 4,773 23,797 (11,158) 13,308 (12,000) 6,621 (2) (10,062) (3) (20,045) 2,809 (68,289) 4,860 (126,336) - - - - 1,515 620 6,359 3,060
Cash flows from operating activities Net profit/(loss) Finance costs 18 Unrealized foreign exchange (gains)/losses 20.4 Other income 16 Depletion, depreciation and impairment 6,7 Share-based compensation 13.3 Movement in non-cash working capital 24 Net cash (used in) operating activities Cash flows from investing activities Other income received 16 Payments for exploration and evaluation asset 5 Payments for property, plant and equipment 6 Movement in non-cash working capital 24 Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of common shares 12 Payment for share issue costs 12 Payment for finance costs 18 Payments for the notes principal Proceeds from other loan 9.1 Payments for other loan 9.1 Proceeds from related companies’ loans 21.3 Repayment of related companies’ loans 21.3 Payment of lease liabilities Movement in non-cash working capital 24 Net cash provided by financing activities Net increase / (decrease) in cash Cash, beginning of period Effect of exchange rate changes on cash held in foreign currency 20.4 Cash, end of period
	1,072 (6,158) (1,990) (10,572)
	2 1 3 3 (366) (360) (479) (391) (227) (778) (60) (927) - 109 - (3)
	(591) (1,028) (536) (1,318)
	- - - - - - - - (209) (139) (383) (214) - - - - 572 442 579 1,440 (1,387) - (1,387) - 935 7,411 3,846 11,159 - - - - (174) (141) (343) (354) - (144) - -
	(263) 7,429 2,312 12,301
	218 243 (213) 141 63 190 542 312 (47) (4) (95) (24)
	$ 234 $ 429 $ 234 $ 429

See accompanying notes to the Condensed Consolidated Interim Financial Statements.

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended June 30, 2023 and 2022 (Expressed in thousands of Canadian dollars, unless otherwise indicated)

1. General information

Sunshine Oilsands Ltd. (the “Company”) was incorporated under the laws of the Province of Alberta on February 22, 2007. The address of its principal place of business is 1910, 715-5th Avenue S.W., Calgary, Alberta, Canada T2P 2X6. The Company’s shares were listed on the Stock Exchange of Hong Kong Limited (“SEHK”) on March 1, 2012 pursuant to an initial public offering (“IPO”) and trades under the stock code symbol of “2012”. On November 16, 2012, the Company completed a listing of its common shares on the Toronto Stock Exchange (“TSX”) and traded under the symbol of “SUO”. On September 30, 2015, the Company completed a voluntary delisting from the TSX. The Company continues to be a reporting issuer in Canada. The Company and its subsidiaries are collectively referred to as the “Group”.

The Group is engaged in the evaluation and the development of oil properties for the future production of bitumen in the Athabasca oilsands region in Alberta, Canada. Details of the subsidiaries are set out in note 23.

On April 15, 2019, Sang Xiang Petroleum & Chemical (Hebei) Limited (“Sunshine Hebei”) was incorporated in China and is a joint venture company in which the Company owns 51% interests. The address of the principal place of business for Sunshine Hebei is Techno Building, Level 4, Room 0430, Chengde Hi-Tech Industry Development Zone, Hebei Province.

2. Basis of preparation

Going Concern

The Condensed Consolidated Interim Financial Statements have been prepared on a basis which asserts that the Group will continue to have the ability to realize its assets and discharge its liabilities and commitments in a planned manner with consideration to expected possible outcomes. Conversely, if the assumption made by management is not appropriate and the Group is unable to meet its obligations as they fall due the preparation of these Financial Statements on a going concern basis may not be appropriate and adjustments to the carrying amounts of the Group’s assets, liabilities, revenues, expenses, and balance sheet classifications may be necessary and such adjustments could be material. Specifically, in the absence of additional financing and the restructuring of current debt (Note 9) the Group would be unlikely to be able to continue the development of the West Ells project and the Group would be required to consider divestiture of the West Ells project and other assets. Such curtailment of activity would likely materially and negatively impact the Group’s assessment of the carrying values of assets and liabilities associated with the West Ells project.

The Group incurred a net loss and comprehensive loss attributable to owners of the Company of CAD $5.8 million for the six months ended June 30, 2023, and as at June 30, 2023, the Group had net current liabilities of CAD $87.1 million. The Group will need to refinance or restructure its current debt and obtain additional financing in order to meet its nearterm operating cash requirements, debt payments and sustaining capital expenditures. The validity of which depends upon that the Group will be able to successfully refinance or restructure its current debt and obtain additional financing to meet its liabilities as they fall due in the foreseeable future.

Management has applied significant judgment in preparing forecasts supporting the going concern assumption. Specifically, management has made assumptions regarding projected oil sales volumes and pricing, scheduling of payments arising from various obligations as at June 30, 2023, the availability of additional financing, and the timing and extent of capital and operating expenditures.

The Company’s ability to continue as a going concern is dependent on its ability to realize forecasted revenues, achieve profitable operations, restructure projected cash outflows arising from existing arrangements, control the timing and extent of projected expenditures, and refinance current debt, access immediate additional financing and maintain compliance with all terms in debt and forbearance agreements. The timing and extent of forecast capital and operating expenditures is based on the Company’s 2023 budget and on management’s estimate of expenditures expected to be incurred beyond 2023. The Company has a significant degree of control and flexibility over both the extent and timing of expenditures under its future capital investment program. There is a material risk that the Company will be unable to meet its financing obligations including payments of outstanding interest and principal balances on its Senior Notes (Note 9.2). Management continually monitors the Company’s financing requirements and is pursuing negotiations to refinance current debt and access immediate additional financing to fund its ongoing operations. Management is engaged in discussions with existing shareholders and creditors on proposed transactions and agreements which would reduce anticipated cash outflows and provide the additional financing required to fund capital and operating expenditures, and to meet obligations as they fall due in the 12 months following June 30, 2023.

2.1 Statement of compliance

The Condensed Consolidated Interim Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and the applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and by the Hong Kong Companies Ordinance. The Condensed Consolidated Interim financial statements have been prepared on the historical cost basis. Any financial instruments are measured at fair value. The Condensed Consolidated Interim financial statements are presented in Canadian Dollars (“$”).

The Condensed Consolidated Interim Financial Statements reflect management’s best estimates after giving consideration to likely outcomes. The Group has consistently applied the accounting policies to all periods presented in these financial statements. Certain information and disclosures normally included in the audited annual consolidated financial statements, prepared in accordance with International Financial Reporting Standards (“IFRS”), have been condensed or omitted, except for the adoption of IFRS 15 Revenue from Contracts with Customers, IFRS 9 Financial Instruments and IFRIC 22 Foreign Currency Transactions and Advance Consideration. Accordingly, these Condensed Consolidated Interim Financial Statements should be read in conjunction with the audited annual Consolidated Financial Statements for the year ended December 31, 2022.

3. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

(“IFRSs”)

The Group has applied for the first time the following new and amendments to IFRSs issued by the International Accounting Standards Board (the “IASB”).

Amendments to IFRS 3 Reference to the Conceptual Framework Amendment to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use Amendments to IAS 37 Onerous contracts: Cost of fulfilling a contract Amendments to IFRSs Annual Improvements to IFRS 2018 - 2020 cycle

The application of other new and amendments to IFRSs in the current year has had no material impact on the Group’s financial performance and position for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

New and amendments to IFRSs issued but not yet effective

The Group has not early applied the following new and amendments to IFRSs and interpretation that have been issued but are not yet effective:

Amendments to IFRS 16 Lease Liability in a Sale and Leaseback[1] Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and Its Associate or Joint Venture[2] Amendments to IAS 1 Classification of liabilities as Current or Non-current[1] Amendments to IAS 1 Non-current Liabilities with Covenants[1]

1 Effective for annual periods beginning on or after January 1, 2024

2 Effective for annual periods beginning on or after a date to be determined

The directors of the Company anticipate that, the application of the new and amendments to IFRSs will have no material impact on the results and the financial position of the Group.

4. Trade and other receivables

4. Trade and other receivables
	June 30, 2023 December 31, 2022
Trade receivables Other receivables – current Other loan receivables-non-current	$ 3,359 6,332 $ 1,304 8,540 11,891 11,347
	$ 21,582 $ 21,191

The Group allows an average credit period of 30 days to its trade customers. The Group transacts with a number of oil and natural gas marketing companies, and the marketing companies typically remit amounts to the Group by the 25th day of the month following production.

The Group measures the loss allowance for trade receivables at an amount equal to lifetime ECL. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.

There has been no change in the estimation techniques or significant assumptions made during the current reporting period.

The Group recognised lifetime ECL for trade receivables based on individually significant customer or the ageing of customers collectively that are not individually significant.

As at June 30, 2023, the directors of the Company considered the ECL on trade receivables was insignificant.

5. Exploration and evaluation

5. Exploration and evaluation
	CAD’000
Balance, December 31, 2021 Capital expenditures Non-cash expenditures1 Impairment loss Balance, December 31, 2022 Capital expenditures Non-cash expenditures1 Balance, June 30, 2023	$ 255,696 1,053 (2,052) (19,653) $ 235,044 479 134
		479 134
	$ 235,657

Non-cash expenditures include capitalized share-based compensation and changes in decommissioning obligations.

At the end of the reporting period, the Group assessed impairment for its E&E CGU. For the purpose of impairment (reversal) testing, recoverable amounts for each CGU were estimated based on FVLCD methodology which is calculated using the present value of the CGUs’ expected future cash flows (after-tax). The cash flow information was derived from a report on the Group’s oil and gas reserves which was prepared by an independent qualified reserve evaluator, GLJ Petroleum Consultants (“GLJ”) and its latest oil price forecasts. The projected cash flows used in the FVLCD calculation reflect market assessments of key assumptions, including management forecast of long-term commodity prices, inflation rates, and foreign exchange rates (Level 3 fair value inputs. Cash flow forecasts are also based on GLJ’s evaluation of the Group’s reserves and resources to determine production profiles and volumes, operating costs, maintenance and future development capital expenditures.

(b) the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior periods.

For the six months ended June 30, 2023, the Group did not recognize any impairment loss (reversal) for E&E CGU.

6. Property, plant and equipment

6. Property, plant and equipment
	Crude oil assets (CAD’000) Corporate assets (CAD’000) Total (CAD’000)
Cost Balance, December 31, 2021 Disposal of Asset Capital expenditures Non-cash expenditures1 Exchange alignment Balance, December 31, 2022 Capital expenditures Non-cash expenditures1 Exchange alignment Balance, June 30, 2023	$ 895,484 $ 5,775 $ 901,259 - - - 513 30 543 (9,812) - (9,812) - 45 45
	$ 886,185 $ 5,850 $ 892,035
	57 3 60 1,205 - 1,205 - (21) (21)
	$ 887,447 $ 5,832 $ 893,279

Non-cash expenditures include capitalized share-based compensation and changes in decommissioning obligations.

	Crude oil assets (CAD’000) Corporate assets (CAD’000) Total (CAD’000)
Accumulated depletion, depreciation and impairment Balance, December 31, 2021 Depletion and depreciation expense Impairment loss (reversal) Exchange alignment Balance, December 31, 2022 Depletion and depreciation expense Impairment loss (reversal) Exchange alignment Balance, June 30, 2023 Carrying value, December 31, 2022 Carrying value, June 30, 2023	$ 418,578 $ 5,057 $ 423,635 3,104 60 3,164 (20,028) - (20,028) - 42 42
	$ 401,654 $ 5,159 $ 406,813
	4,422 92 4,514 - - - - (1) (1)
	$ 406,076 $ 5,250 $ 411,326
	$ 484,531 $ 691 $ 485,222
	$ 481,371 $ 582 $ 481,953

At the end of the reporting period, the Group assessed impairment for its West Ells CGU. For the purpose of impairment (reversal) testing, recoverable amounts for each CGU were estimated based on FVLCD methodology which is calculated using the present value of the CGUs’ expected future cash flows (after-tax). The cash flow information was derived from a report on the Group’s oil and gas reserves which was prepared by an independent qualified reserve evaluator, GLJ Petroleum Consultants (“GLJ”) and its latest oil price forecasts. The projected cash flows used in the FVLCD calculation reflect market assessments of key assumptions, including management forecast of long-term commodity prices, inflation rates, and foreign exchange rates (Level 3 fair value inputs). Cash flow forecasts are also based on GLJ’s evaluation of the Group’s reserves and resources to determine production profiles and volumes, operating costs, maintenance and future development capital expenditures.

(b) the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset in prior periods.

Future depletion expenses are adjusted to allocate the CGU’s revised carrying amount over its remaining useful life.

For the six months ended June 30, 2023, the Group did not recognize any impairment loss (reversal) for West Ells CGU.

7. Right-of-use Assets and Leases Liabilities

(a) Right-of-use Assets

	Leasehold land	Offices	Truck	Equipment	Total
	(CAD’000)	(CAD’000)	(CAD’000)	(CAD’000)	(CAD’000)
Balance, January 1, 2022	4,744	771	-	-	5,515
Lease terminated	-	-	-	-	-
Additions	-	556	287	147	990
Depreciation	(118)	(549)	(5)	(34)	(706)
Exchange alignment	(78)	(1)	-	-	(79)
December 31, 2022	4,548	777	282	113	5,720
Additions	-	-		-	-
Depreciation	(59)	(240)	(29)	(18)	(346)
Exchange alignment	(316)	-	-	-	(316)
June 30, 2023	4,173	537	253	95	5,058

(b) Leases Liabilities

(b) Leases Liabilities
	June 30, 2023
Lease liabilities	$ 907
(c) Cash Flow Summary	Six Months Ended
	June 30, 2023
Totalcash flowusedfor leases	$ 343

The lease liabilities are initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease, which is 10% for the offices premised, trucks and equipment.

8. Trade and accrued liabilities

	June 30, 2023 December 31, 2022
Trade payables Interest payables Other payables Accrued liabilities	$ 19,339 $ 16,433 186,840 187,400 22,555 20,472 19,110 16,495
	$ 247,844 $ 240,800

The following is an aged analysis of trade payables based on dates of invoices at the end of the reporting period:

		June 30, 2023		December 31, 2022
Trade
0 - 30 days	$	855	$	377
31 - 60 days		347		6
61 - 90 days		604		37
> 90 days		17,533		16,013
	$	19,339	$	16,433

9. Debt

9.1 Other loans

	June 30, 2023 December 31, 2022
Current Non-current	$ 1,428 $ 4,008 13,587 12,230
	$ 15,015 $ 16,238

As at June 30, 2023, the balances are unsecured and bearing interest of 0%-36% (December 31, 2022: 0 - 36%) per annum. Approximately CAD $1,428,000 (December 31, 2022: CAD $4,008,000) have a maturity date within one year.

Included in the above balance is approximately CAD $13,587,000 (December 31, 2022: $13,966,000) for which the Group and an independent Hong Kong-based investment holding company entered into loan agreements and under which the Group provided Renminbi (“CNY”) loan and received Hong Kong dollar (“HKD”) loan from the investment holding company. The Group has to repay HKD to receive CNY from the investment holding company.

9.2 Senior notes

On April 24, 2020, the Company and the Forbearing Holders confirmed the signing of the Forbearance Reinstatement and Amending Agreement (the “ FRAA ”). The principal terms of the FRAA include:

The FRAA covers the period from December 31, 2019 to August 31, 2021 (“Period of Forbearance);
Same as the Forbearance Reinstatement and Amending Agreement executed on November 1, 2018, all outstanding amounts (principal and interests) will continue to be accrued at an interest of 10% per annum until August 31, 2021, and during the Period of Forbearance, there will not be any forbearance fee and yield maintenance premium based on the initial Forbearance Agreement executed on September 12, 2016.

During the year ended December 31, 2021, the independent note holders (“Transferee Holders”) entered into note assignment and transfer agreements with the ultimate controlling party, Mr. Sun (the “Note transferee”), and agreed to assign the initial nominal principal amount of notes from the transferee Holders of approximately USD $188,658,000 (equivalent to approximately CAD $240,200,000) to the Note transferee.

On August 8, 2021, the Company and the Forbearing Holder confirmed the signing of the Forbearance Reinstatement and Amending Agreement (the “ FRAA ”). The principal terms of the FRAA include:

The FRAA covers the period from September 1, 2021 to August 31, 2023 (“Period of Forbearance);
Same as the Forbearance Reinstatement and Amending Agreement executed on April 24, 2020, all outstanding amounts (principal and interests) will continue to be accrued at an interest of 10% per annum until August 31, 2023, and during the Period of Forbearance, there will not be any forbearance fee and yield maintenance premium based on the initial Forbearance Agreement executed on September 12, 2016.

The Board believes the entering into of the FRAA is in the interests of the Company and its shareholders as a whole in view that the FRAA will provide the Company with additional time to repay or refinance the indebtedness owned by the Company to the Noteholders under the Notes, whilst at the same time the financing cost has been substantially lowered to a reasonable market level.

On September 28, 2021 (Calgary time), the Company and the Forbearing Holder entered into the interest waiver agreement (the “Interest Waiver Agreement”) pursuant to which the Forbearing Holder agreed to unconditionally and irrevocably waive the interest accrued between January 1, 2021 to December 31, 2021 at 10.0% per annum on the outstanding amounts (principal and interests) under the FRAA dated April 24, 2020 (the “Waiver of Interest”) which amounted to USD $31.5 million. Save as the Waiver of Interest, all other terms and conditions as stipulated in the FRAA remain unchanged.

On May 12, 2022, the Company and the Forbearing Holder entered into the interest waiver agreement (the “Interest Waiver Agreement”) pursuant to which the Forbearing Holder agreed to unconditionally and irrevocably waive the interest accrued between January 1, 2022 to December 31, 2022 at 10.0% per annum on the outstanding amounts (principal and interests) under the FRAA dated August 8, 2021 (the “Waiver of Interest”) which amounted to US$31.5 million. Save as the Waiver of Interest, all other terms and conditions as stipulated in the FRAA remain unchanged. On February 16, 2023, the Group and the Forbearing Holder entered into an interest waiver agreement (the “Interest Waiver Agreement”) pursuant to which the Forbearing Holder agreed to unconditionally and irrevocably waive the interest accrued between January 1, 2023 and December 31, 2023 (the “Waiver of Interest”). Based on the Forbearance Reinstatement and Amending Agreement (“FRAA”) dated August 8, 2021, the waived interest calculated at 10.0% per annum on the outstanding amounts (principal and interests) amounted to approximately US$31,500,000. Save as the Waiver of Interest, all other terms and conditions as stipulated in the FRAA remain unchanged.

The FRAA2023 covers the period from September 1, 2023 to August 31, 2025 (“Period of Forbearance”);
Same as the Forbearance Reinstatement and Amending Agreement executed on August 8, 2021, all outstanding amounts (principal and interests) will continue to be accrued at an interest of 10% per annum until August 31, 2025, unless otherwise waived in separate interest waiver agreements. During the Period of Forbearance, there will not be any forbearance fee and yield maintenance premium based on the initial Forbearance Agreement executed on September 12, 2016.

10. Provisions

Decommissioning obligations, non-current		June 30, 2023		December 31, 2022
Balance, beginning of year	$	44,144	$	54,770
Effect of changes in estimates		1,339		(11,864)
Unwinding of discount rate		719		1,238
Balance,end ofperiod	$	46,202	$	44,144

As at June 30, 2023, the Group’s share of the estimated total undiscounted cash flows required to settle asset decommissioning obligations was $71.4 million (December 31, 2022 - $73.0 million). Expenditures to settle asset decommissioning obligations are estimated to be incurred up to 2040. Decommissioning costs are based on estimated costs to reclaim and abandon crude oil properties and the estimated timing of the costs to be incurred in future years, discounted using an annual risk-free rate from 3.10% to 4.13% per annum and inflated using an inflation rate of 2.0% per annum.

11. Income taxes

The components of the net deferred income tax asset are as follows:

	June 30, 2023 December 31, 2022
Deferred tax assets (liabilities) Exploration and evaluation assets and property, plant and equipment Decommissioning liabilities Share issue costs Non-capital losses Total Debt Deferred tax benefits not recognized	$ (75,674) $ (71,242) 10,626 10,153 125 27 271,356 246,680 - - (206,433) (185,618)
	$ - $ -

12. Share capital

The Group’s authorized share capital is as follows:

an unlimited number of Class “A” and Class “B” voting common shares without par value; and
an unlimited number of Class “C”, Class “D”, Class “E” and Class “F” non-voting common shares without par value; and,
an unlimited number of Class “G” and Class “H” non-voting preferred shares.

Issued and fully paid(after share consolidation)	June 30, 2023 December 31, 2022
	Number of shares $ Number of shares $
Balance, beginning of year Issue of Shares – general mandate Director Share Arrangement Share issue costs, net of deferred tax ($Nil) Balance,end ofperiod	243,478,681 1,315,265 243,478,681 1,315,265 - - - - - - - - - - - -
	243,478,681 1,315,265 243,478,681 1,315,265

Common shares consist of fully paid Class “A” common shares, which have no par value, carry one vote per share and carry a right to dividends.

General mandate

2023 activity

There was no purchase, sale or redemption of Sunshine’s listed securities as of June 30, 2023.

13. Share-based compensation

13.1 Employee stock option plan

Post-IPO Stock Option Plan

The maximum number of Class “A” common shares that may be reserved for issuance pursuant to the Post-IPO Stock Option Plan is 10% of the total number of issued and outstanding shares, less the maximum aggregate number of shares underlying the options already granted pursuant to the Pre-IPO Stock Option Plan. Options granted under the Post-IPO Stock Option Plan have an exercise price that is determined by the Board of Directors but is not less than the higher of: the closing price on the Stock Exchange of Hong Kong on the option offer date, which must be a business day; the volume weighted average trading price (VWAP) of the shares on the Stock Exchange of Hong Kong for the five trading days immediately preceding the option offer date; and the average closing price of the shares on the Stock Exchange of Hong Kong for the five trading days immediately preceding the option offer date. .

13.2 Movements in stock options

The following reconciles the stock options outstanding at the beginning and end of each period:

	June 30, 2023	December 31, 2022
	Number of options Weighted average exercise price $	Number of options Weighted average exercise price $
Balance, beginning of period Granted Forfeited Expired Balance, end of period Exercisable,end ofperiod	6,500,000 1.96 - - - - - -	6,580,000 1.96 - - - - (80,000) 2.50
	6,500,000 1.96	6,500,000 1.96
	6,500,000 1.96	6,500,000 1.96

As at June 30, 2023, stock options outstanding have a weighted average remaining contractual life of 0.05 years (December 31, 2022: 0.55 years).

13.3 Share-based compensation

Share-based compensation has been recorded in the Condensed Consolidated Interim financial statements for the years presented as follows:

		Three months ended		Three months ended
		June 30, 2023		June 30, 2022
	Expensed	Capitalized Total	Expensed	Capitalized Total
Stockoptions	$-	$- $-	$-	$- $-

		Six months ended		Six months ended
		June 30, 2023		June 30, 2022
	Expensed	Capitalized Total	Expensed	Capitalized Total
Stock options	$-	$- $-	$-	$- $-

14. Revenue

	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Petroleum sales Royalties Revenue from contracts with customers	$ 11,064 $ 589 $ 18,256 $ 589 (298) (20) (311) (20)
	$ 10,766 $ 569 $ 17,945 $ 569

Note:

1) Royalties include Oil sands royalty paid to the Government of Alberta and royalty paid to Burgess Energy Holdings.

All revenue from contracts with customers is derived from Canada and recognized at a point in time.

Revenues associated with the sale of crude oil are recognized at a point in time when control of goods have transferred, which is generally when title passes from the Group to the customer. Revenues are recorded net of crown royalties. Crown royalties are recognized at the time of production.

The royalty rate at West Ells is based on price sensitive royalty rates set by the Government of Alberta. The applicable royalty rates change dependent upon whether a project is pre-payout or post-payout, with payout being defined as the point in time when a project has generated enough net revenues to recover its cumulative costs. The royalty rate applicable to pre-payout oil sands operations starts at 1% of bitumen sales and increases for every dollar that the WTI crude oil price in Canadian dollars is priced above $55 per barrel, to a maximum of 9% when the WTI crude oil price is $120 per barrel or higher. The West Ells project is currently in pre-payout.

Revenue is allocated to each performance obligation on the basis of its standalone selling price and measured at the transaction price, which is the fair value of the consideration and represents amounts receivable for goods or services provided in the normal course of business. The price is allocated to each unit in the series as each unit is substantially the same and depicts the same pattern of transfer to the customer.

The Group’s petroleum sales are determined pursuant to the terms of the marketing agreements and spot sales agreements. The transaction price for crude oil is based on the commodity price in the month published during the delivery month and adjusted for premiums, quality adjustments and equalization adjustments. Commodity prices are based on market indices that are determined on a daily or monthly basis. Petroleum sales are received one month after the crude oil is produced and shipped and typically collected on the 25th day of the month following production.

15. Segment information

The Group operates in one business unit based on their products, and has one reportable and operating segment: mining, production and sales of crude oil products. The directors of the Company monitor the revenue of its business unit as a whole based on the monthly sales and delivery reports for the purpose of making decisions about resource allocation and performance assessment.

Information about geographical area

As all of the Group’s revenue is derived from the customers based in the Canada (country of domicile) and majority of the Group’s non-current assets are located in Canada, no geographical information is presented.

Information about major customers

Gross revenue from customers contributing over 10% of the total gross revenue of the Group is as follows:

		June	30, 2023		June 30, 2022
Customer A	$		13,385	$	589
Customer B			4,689		-

Customer A contributed 73.3% of the group’s revenue (June 30 2022: 100%)

16. Other income

	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Interest income Other Income Balance, end ofperiod	$ 2 $ 1 $ 3 $ 3 2,357 10,451 2,681 $ 20,639
	$ 2,359 $ 10,452 $ 2,684 $ 20,642

17. General and administrative costs

	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Salaries, consultants and benefits Rent Legal and audit Other Balance, end ofperiod	$ 1,539 $ 1,491 $ 3,307 $ 2,732 5 30 16 108 95 459 582 393 289 3,024 636 2,669
	$ 2,098 $ 2,496 $ 6,636 $ 6,145

18. Finance costs

	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Interest expense on senior notes, including yield maintenance premium Interest expense on other loans Interest expense on loan from related companies and a shareholder Other Interest expenses-leases and others Unwinding of discounts on provisions Balance, end ofperiod	$ 289 $ 10,449 $ 583 $ 20,704 177 191 304 261 1,346 1,192 3,042 2,223 64 41 125 60 361 293 719 549
	$ 2,237 $ 12,166 $ 4,773 $ 23,797

19. Profit (Loss) per share

The calculation of basic profit (loss) per share attributable to owners of the Company is based on the profit (loss) for the year attributable to owners of the Company of approximately CAD ($5,828,000) (2022: CAD $102,484,000 profit) and the weighted average number of Class “A” common shares in issue during the years as presented in the following table.

	Six months ended June 30, 2023 2022
Basic and diluted – Class “A” common shares Profit (loss) per share	243,478,681 243,478,681
	$ (0.02) $ 0.42

20. Capital and financial risks management

20.1 Capital risk management

The Group can be exposed to financial risks on its financial instruments and in the way that it finances its capital requirements. The Group manages these financial and capital structure risks by operating in a manner that minimizes its exposure to volatility.

The Group’s strategy is to access sufficient capital, through equity issuances and the utilization of debt, in order to maintain a capital base for the objectives of maintaining financial flexibility and to sustain the future development of the business. The Group manages its capital structure in order to continue as a going concern and makes adjustments relative to changes in economic conditions and the Group’s risk profile. In order to manage risk, the Group may from time to time issue shares and adjust its capital spending to manage current working capital levels.

The Group’s capital structure currently includes shareholders’ equity and working capital deficiency as follows:

	June 30, 2023 December 31, 2022
Working capital deficiency Shareholders’ equity	$ 87,079 $ 511,583 104,030 110,009
	$ 191,109 $ 621,592

There is no change in the Group’s objectives and strategies of capital management for the six months ended June 30, 2023.

20.2 Categories of financial instruments

The Group’s financial assets and liabilities include other receivables, loan receivables, cash and cash equivalents, trade payables and accrued liabilities, lease liabilities, loans from related companies, other loans, senior notes, interest payables and convertible bonds. The carrying value or fair value of the Group’s financial instruments carried on Condensed Consolidated Interim Statements of Financial Position are classified in the following categories:

	June 30, 2023 December 31, 2022
	Carrying amount Fair value Carrying amount Fair value
Financial assets Financial assets at amortised cost Financial liabilities Financial liabilities at amortised cost	$19,572 $19,572 $18,426 $18,426
	$ 593,345 $ 593,345 $ 592,364 $ 592,364

20.3 Fair value of financial instruments

The fair values of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates from observable current market transactions as input. The directors of the Company consider that the carrying amounts of the financial assets and financial liabilities recorded at amortised cost using the effective interest rate method in the consolidated financial statements approximate their fair values.

20.4 Currency risk

The Group is exposed to risks arising from fluctuations in foreign currency exchange rates. Thus, exchange rate fluctuations can affect the fair value of future cash flows. This exposure primarily relates to certain expenditure commitments, deposits, accounts payable and long term debt which are denominated in United States dollars (“USD”) and Hong Kong dollars (“HKD”). The Group manages this risk by monitoring foreign exchange rates and evaluating their effects on using Canadian or U.S. vendors as well as timing of transactions. The Group had no forward exchange rate contracts in place as at or during the six months ended June 30, 2023.

If exchange rate to convert from HKD to CAD had been one percent higher or lower with all other variables held constant, foreign cash held at June 30, 2023 would have been impacted by Nil (2022: $Nil) and the carrying value of the debt at June 30, 2023 would have been impacted by $0.5 million (2022: $0.4 million).

The following table summarizes the components of the Group’s foreign exchange (gains)/ losses:

Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Unrealized foreign exchange loss/(gain) on translation of: U.S. denominated senior secured notes H.K. denominated loan Foreign currency denominated cash balances Foreign currency denominated accounts payable balances Realized foreign exchange loss/(gain) Total foreign exchange loss/(gain)	$ (9,659) $ 12,819 $ (10,021) $ 6,840 (1,702) 655 (2,018) 35 47 5 95 24 156 (172) (57) (279)
	(11,158) 13,307 (12,001) 6,620 - 1 1 1
	$ (11,158) $ 13,308 $ (12,000) $ 6,621

20.5 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they become due. The Group’s approach to managing liquidity risk is to plan that it will have sufficient liquidity to meet its liabilities when due, using either equity or debt proceeds.

The timing of cash outflows relating to financial liabilities as at June 30, 2023, are as follows:

		Total		1year		1-3years
Trade and accrued liabilities	$	247,844	$	72,489	$	175,355
Debt1		346,408		24,515		321,893
	$	594,252	$	97,004	$	497,248

Principal amount of Notes and loans based on the month end exchange rate of $1 US = 1.3240 CAD and $1HKD = $0.1690 CAD.

21. Related party transactions

In addition to the transactions and balances disclosed elsewhere in these Condensed Consolidated Interim financial statements, during the year, the Group entered into the following material related party transactions.

21.1 Trading transactions

For the six months ended June 30, 2023, a consulting Group, to which a director of Sunshine is related, charged the Group $0.25 million (December 31, 2022 – $0.5 million) for management and advisory services .

As at June 30, 2023, Mr. Kwok Ping Sun, the Company’s Executive Chairman, has beneficial ownership of, or control or direction of 150,232,591 common shares of the Company, which represents approximately 61.70% of the Company’s outstanding common shares.

21.2 Compensation of key management personnel and directors

The remuneration of the directors and key management executives is determined by the Compensation Committee and consists of the following amounts:

	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Directors’ fees Salaries and allowances Share-based compensation	$ 73 492 -	$ 88 $ 180 567 983 - -	$ 179 1,133 -
	$ 565	$ 655 $ 1,163	$ 1,312
*21.3 Related companies’ loans*

Current Non-current

As at June 30, 2023, the Group had loans from related companies which are unsecured, interest bearing at 10% per annum, and of which approximately CAD $55,479,000 can be rollover for a period of 2 to 3 years (December 31, 2022: CAD $53,944,000).

21.4 Loan from a shareholder

As at June 30, 2023, the Group had loans from a shareholder which are unsecured, interest bearing at 10% per annum, and of which approximately CAD $12,006,000 expected to be settled in 2025 (December 31, 2022: CAD12,342,000).

22. Commitments and contingencies

22.1 Commitments

As at June 30, 2023, the Group’s commitments are as follows:

At June 30, 2023	Total 2023 2024
Drilling, other equipment and contracts not provided the consolidated financial statements	in 73 24 49
	$ 73 24 49

Note: The Group has an annual obligation for oil sands mineral lease rentals and surface lease rentals. Annual payment is approximately CAD 1,500,000.

22.2 Litigation

The Group received a demand notice from the Regional Municipality of Wood Buffalo (“RMWB”) in relation to the 20162023 municipal property taxes and have accrued up to June 30, 2023 which amounted to a total of CAD $14.4 million. The Group was also charged with overdue penalties of $13.6 million. Since then the Group was in active negotiation with RMWB for a settlement plan with proposals to waive overdue penalties. As at the date of this report, the Group believes that notices issued by RMWB relating to property taxes did not comply with relevant legislation and the Group has sought judicial review to determine the effect of non-compliant tax notices on RMWB’s property tax claim.

The Group is involved in various claims including claims described above and actions arising in the course of operations and is subject to various legal actions, pending claims and exposures. Litigation is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. Unfavorable outcome were to occur against such claims or pending claims, there exists the possibility of a material adverse impact on the Group’s consolidated net income or loss in the period in which the outcome is determined. Accruals for litigation, claims and assessments are recognized if the Group determines that the loss is probable and the amount can be reasonably estimated. The Group believes it has made adequate provision for such claims. While fully supportable in the Group’s view, some of these positions, if challenged may not be fully sustained on review. From time to time, the Group receives liens or claims on accounts payable balances, and the Group continues to work toward resolution of any liens or claims. At June 30, 2023, the Group

had incurred $0.82 million (US $0.62 million equivalent using the period end exchange rate) in Builders’ liens (not related to mineral leases) against them during the ordinary course of business.

The group received a judgment from the Court of the State of New York, New York County (the “Judgment”) that the Company shall pay the Non-forbearing holder all the amounts due and owing on the Senior Notes issued under the notes indenture dated 8 August 2014 (including principal and interests) in an aggregate amount of approximately US$15,481,000 (equivalent to approximately CAD 20,950,000). On May 25, 2023, the group received notice from Supreme Court of the State of New York that the Judgment is vacated.

23. Subsidiaries

On May 4, 2012, Sunshine Oilsands (Hong Kong) Limited was incorporated in Hong Kong and is a wholly-owned subsidiary of the Company. The address of its principal place of business is 20/F, Two Chinachem Central, No.26 Des Voeux Road Central, Hong Kong. As of June 30, 2023, the subsidiary had no business activity.

On July 14, 2015, Boxian Investments Limited was incorporated in the British Virgin Islands and is a wholly-owned subsidiary of the Company. The address of its principal place of business is P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands. The purpose of the subsidiary is to pursue new investment opportunities. As of June 30, 2023, the subsidiary had no business activity.

On March 24, 2017, Sang Xiang Petroleum & Chemical (Shanghai) Limited was incorporated in China and is a whollyowned subsidiary of the Company. The address of its principal place of business is Building 1, Level 6, Room 41, 39 Jia Tai Road, the China (Shanghai) Pilot Free Trade Zone. As of June 30, 2023, the subsidiary had no business activity.

On April 15, 2019, Sang Xiang Petroleum & Chemical (Hebei) Limited was incorporated in China and is a subsidiary in which the Company owns 51% interests. The address of its principal place of business is Techno Building, Level 4, Room 0430, Chengde Hi-Tech Industry Development Zone, Hebei Province. As of June 30, 2023, the subsidiary had no business activity.

24. Supplemental cash flow disclosures

	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Cash provided by (used in): Trade and other receivables Prepaid expenses and deposits Trade and other payables Foreign Exchange changes Changes in non-cash working capital relating to: Operating activities Trade and other receivables Prepaid expenses and deposits Trade and other payables Investing activities Property, plant and equipment Financing activities Foreign Exchange Changes-Loans Debt settlement	$ (903) $ (333) $ (2,419) $ (1,010) (237) (333) 1,058 (745) 2,626 1,680 7,605 5,091 29 (285) 115 (279)
	$ 1,515 $ 729 $ 6,359 $ 3,057
	$ (903) $ (333) $ (2,419) $ (1,010) (237) (333) 1,058 (745) 2,655 1,286 7,720 4,815
	$ 1,515 $ 620 $ 6,359 $ 3,060
	$ - $ 109 $ - $ (3)
	$ - $ 109 $ - $ (3)
	$ - $ - $ - $ - - - - -
	$ - $ - $ - $ -
	$ 1,515 $ 729 $ 6,359 $ 3,057

25. Subsequent events

The FRAA2023 covers the period from September 1, 2023 to August 31, 2025 (“Period of Forbearance”);
Same as the Forbearance Reinstatement and Amending Agreement executed on August 8, 2021, all outstanding amounts (principal and interests) will continue to be accrued at an interest of 10% per annum until August 31, 2025, unless otherwise waived in separate interest waiver agreements. During the Period of Forbearance, there will not be any forbearance fee and yield maintenance premium based on the initial Forbearance Agreement executed on September 12, 2016.

26. Approval of Condensed Consolidated Interim Financial Statements

The Condensed Consolidated Interim Financial Statements were approved by the Board of Directors and authorized for issue on August 10, 2023 (Calgary Time) /August 11, 2023 (Hong Kong Time).

Appendix to the consolidated financial statements (Unaudited)

Additional Stock Exchange Information

Additional information required by the SEHK and not shown elsewhere in these Condensed Consolidated Interim financial statements is as follows:

A1. Sunshine Oilsands Ltd. Non-Consolidated Statement of Financial Position

Notes Asset Current assets Trade and other receivables Loan receivables Cash and cash equivalents Non-current assets Exploration and evaluation assets Property, plant and equipment Right-of-use assets Other receivables Loan receivables Amounts due from subsidiaries Total Asset Liabilities and Shareholders’ Equity Current liabilities Trade payables, interest payable and accrued liabilities Lease liabilities Loans from related companies Other loans Senior notes Amount due to subsidiaries Non-current liabilities Interest payables Lease liabilities Loans from related companies Loan from a shareholder Other loans Senior notes Provisions Total liabilities	2023 CAD’000 9,442 - 111 9,553 235,657 481,835 885 - 11,891 14,955	2022 CAD’000 8,074 1,514 322
		9,910
		235,044 485,053 1,172 - 11,347 14,871
	745,223 754,776 72,055 172 12,323 1,428 10,592 2,678 99,248 172,767 735 34,349 12,006 13,587 252,409 46,202 532,055 631,303	747,487
		757,397
		233,024 391 14,246 4,008 269,040 2,756
		523,465
		5,241 811 30,260 12,342 12,230 - 44,144
		105,028
		628,493

Shareholders’ Equity Share capital Reserve for share-based compensation Capital reserve Exchange fluctuation reserve Accumulated Deficit Total shareholders’ equity Total Liabilities and Shareholders’ Equity	1,315,265 76,416 (4,453) (1,042) (1,262,713) 123,473 754,776	1,315,265 76,416 (4,453) (1,042) (1,257,282)
		128,904
		757,397

Appendix to the Condensed Consolidated Interim Financial Statements (Unaudited)

A2. Directors’ emoluments and other staff costs

The Directors’ emoluments and other staff costs are broken down as follows:

	Three months ended June 30, Six months ended June 30, 2023 2022 2023 2022
Directors’ emoluments Directors’ fees Salaries and allowances Share-based compensation Other staff costs Salaries and other benefits Share-based compensation Total staff costs, including directors’ emoluments Less: staff costs capitalized to qualifying assets	$ 73 $ 88 $ 180 $ 179 492 567 983 1,133 - - - -
	565 655 1,163 1,312
	974 836 2,144 1,420 - - - -
	974 836 2,144 1,420

	1,539 1,491 3,307 2,732

	$ 1,539 $ 1,491 $ 3,307 $ 2,732

CORPORATE INFORMATION

BOARD OF DIRECTORS:

Executive Directors:

Mr. Kwok Ping Sun (Chairman) Ms. Gloria Pui Yun Ho

Non-Executive Directors:

Mr. Michael John Hibberd (Vice-Chairman) Ms. Linna Liu Ms. Xijuan Jiang

Independent Non-Executive Directors:

Mr. Yi He Mr. Guangzhong Xing

AUTHORIZED REPRESENTATIVES:

Mr. Kwok Ping Sun Ms. Man Ngan Chow

AUDITORS:

Prism Hong Kong and Shanghai Limited

LEGAL ADVISERS:

Robertson Solicitors

COMPETENT PERSONS:

GLJ Ltd Boury Global Energy Consultants Ltd.

AUDIT COMMITTEE:

Mr. Yi He (Chairman) Mr. Guangzhong Xing

COMPENSATION COMMITTEE:

Mr. Kwok Ping Sun (Chairman) Mr. Guangzhong Xing Ms. Xijuan Jiang

RESERVES COMMITTEE:

Mr. Yi He (Chairman) Mr. Guangzhong Xing Mr. Kwok Ping Sun

CORPORATE GOVERNANCE COMMITTEE:

Mr. Kwok Ping Sun (Chairman) Mr. Michael John Hibberd Mr. Yi He Mr. Guangzhong Xing

CORPORATE HEADQUARTERS:

Suite 1910, 715-5th Ave SW, Calgary AB, T2P 2X6

REGISTERED OFFICE IN ALBERTA:

Suite 4000, 421 Seventh Avenue SW Calgary, Alberta T2P 4K9 Canada

PRINCIPAL BANKERS:

PRINCIPAL PLACE OF BUSINESS IN HONG KONG:

Bank of China (Hong Kong) Limited Bank of China (Canada)

PLACE OF SHARE LISTING AND STOCK CODE:

The Stock Exchange of Hong Kong Limited: 2012

WEBSITE:

www.sunshineoilsands.com

20/F, Two Chinachem Central, No. 26 Des Voeux Road Central, Central, Hong Kong

SHARE REGISTRAR IN ALBERTA:

Odyssey Trust Company

SHARE REGISTRAR IN HONG KONG:

Computershare Hong Kong Investor Services Limited

AI assistant

Sunshine Oilsands Ltd. — Interim / Quarterly Report 2023

50340_rns_2023-08-29_ebdd8ce2-030e-4cb8-9140-ed94fef74906.pdf

SUNSHINE OILSANDS LTD. 陽光油砂有限公司 *

2023 INTERIM REPORT

SUMMARY OF FINANCIAL FIGURES

MANAGEMENT'S DISCUSSION AND ANALYSIS

Overview

Operational Update

West Ells

Thickwood and Legend

Muskwa and Godin Clastics Operations (Non-Operated 50% working interest)

Summary of Quarterly Results

Results of Operations

Bitumen Realization

Operating Netback

Bitumen Production

Bitumen Sales

Petroleum Sales, net of royalties

Diluent Costs

Transportation

Operating Costs

General and Administrative Costs

Finance Costs

Share-based Compensation

Depletion and Depreciation

Impairment / (Reversal)

Income Taxes

Liquidity and Capital Resources

Royalty Agreement

Commitments and Contingencies

Transactions with Related Parties

Off-balance Sheet Arrangements

Subsequent Event

Changes in Accounting Policies

Critical Accounting Policies and Estimates

Risk Factors

Disclosure Controls and Procedures

Internal Controls over Financial Reporting

Non-GAAP Measures

Cash Flow Used in Operations

Forward‐Looking Information

ADDITIONAL INFORMATION

Compliance of Corporate Governance Code (the “Code”)

Compliance with the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”)

Movements in Stock Options

Fair Value of Share Options Granted

Purchase, Sale or Redemption of Sunshine’s Listed Securities

Class “A” Common Shares

General mandate

2023 activity

Shares Outstanding

Employees

Changes in Directors’ Information

Directors’ Interests and Short Positions in Shares, Underlying Shares and Debentures

Interests and Short Positions of Shareholders

Dividends

Review of Interim Results

Publication of Information

2023 Outlook

Condensed Consolidated Interim Statements of Financial Position

Condensed Consolidated Interim Statements of Operations and Comprehensive Loss

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

Condensed Consolidated Interim Statements of Cash Flows

1. General information

2. Basis of preparation

Going Concern

2.1 Statement of compliance

3. APPLICATION OF NEW AND AMENDMENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

New and amendments to IFRSs issued but not yet effective

4. Trade and other receivables

5. Exploration and evaluation

6. Property, plant and equipment

7. Right-of-use Assets and Leases Liabilities

(a) Right-of-use Assets

8. Trade and accrued liabilities

9. Debt

9.1 Other loans

9.2 Senior notes

10. Provisions

Sunshine Oilsands Ltd. Interim / Quarterly Report 2023