Suncor should return to its oil production roots, focus on ‘fundamentals’ over energy transition, says CEO

Suncor Energy Inc. SU-T needs to return to its roots as an oil company and focus on the business of low-cost production and profits rather than the longer-term energy transition, says its new chief executive.

Rich Kruger said Suncor has a new goal: to concentrate on what he called “the fundamentals” – safety, operational integrity, reliability and profitability.

Mr. Kruger, the former CEO of ExxonMobil’s Canadian subsidiary Imperial Oil Ltd. IMO-T, was lured out of retirement earlier this year to lead a restructuring at Suncor in the wake of a spate of high-profile operational and financial challenges at the company.

He told analysts on an earnings call Tuesday that he believes Suncor has been neglecting “the business drivers of today” in pursuit of future-focused, clean and low-carbon energy pursuits, with a “disproportionate emphasis on the longer-term energy transition.”

While these pursuits are important, he added, they won’t make money for shareholders today.

“Our current strategic framework is insufficient in terms of what it takes to win,” he said. “Today, we win by creating value through our large integrated asset base underpinned by oil sands.”

Suncor’s move to refocus on its oil-sands assets comes even as the company has publicly committed to achieving net-zero greenhouse gas emissions by 2050.

Changes at the Calgary-based energy giant also include a rejig of the company’s top brass, with the retirement of three senior executives. That includes Suncor’s chief sustainability officer, Arlene Strom, who will leave her post near the end of the year.

Ms. Strom played a key role in Suncor’s work with the Pathways Alliance, a group of major oil-sands companies that have pledged to reach net-zero production by 2050.

New Suncor CEO Rich Kruger says company’s performance is lacking but it can be an industry leader

Her job won’t be filled. Rather, sustainability will be rolled into the duties of a new senior vice-president, who will also be responsible for strategy and corporate development. Bruno Francoeur, vice-president of business and operations, and Paul Gardner, chief people officer, will both retire on Aug. 31.

“The changes are consistent with developing a simpler, more focused, high performing organization,” Mr. Kruger said.

He has visited all of Suncor’s major production facilities since he took the reins this spring.

And while he praised steps that have been taken on site to improve Suncor’s lacklustre safety record, he said what he liked best as he toured operations was the opportunities he saw “to improve our financial and operating performance in almost all aspects of our business.”

“Suncor is pedal to the metal. Our opportunities are abundant, and they’re clear,” he said.

Further restructuring at Suncor since June includes more than 1,500 job reductions to save about $125-million. And Mr. Kruger said the company will continue to find ways to improve its financial performance, delving into all areas of operations – for example, by examining the makeup of its truck fleet sizes.

The focus is on improving “efficiency and lowering that cost structure so that we are resilient in the tough times. And then in the good times, we have more free funds flow available for rewarding shareholders,” he said.

“It’s not rocket science.”

Mr. Kruger also addressed a significant cyberattack on Suncor on June 25, when an unidentified third party gained access to the company’s IT network. Suncor isolated its operational systems and backup databases as a result. With employees unable to access e-mail, the company was forced to establish a separate, secure IT system.

While the incident “certainly caused disruption,” he said it didn’t have a material impact on Suncor’s financial and operating results.

“I’d rather have a root canal than go through one of these attacks again,” Mr. Kruger said.

Suncor said Tuesday it earned $1.88-billion in the second quarter of 2023, down from approximately $4-billion in the same period last year when oil prices were higher.

It took a $275-million restructuring charge in the quarter related to the previously announced job-cut plans.

As a result of this restructuring charge, Suncor said its adjusted funds from operations for the three months ended June 30, amounted to $2.7-billion or $2.03 per share, compared with $5.3-billion or $3.80 per share in the prior year’s quarter.

With a report from The Canadian Press