Suncor CEO Mark Little pushes back against activist investor proposal to sell Petro-Canada

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Suncor Energy Inc. SU-T chief executive Mark Little is pushing back against a key proposal from a U.S. activist investor, insisting Suncor should retain ownership of its Petro-Canada gas-station chain.

In his first public comments since Elliott Investment Management LP targeted the oil company in late April, Mr. Little said Suncor’s integrated downstream holdings – which include its refineries and gas stations – must stay together.

“We see this as something that we’re very good at. It drives a lot of value and it underpins high utilization rates within our refineries that are generating tremendous cash flow for our shareholders,” he told The Globe and Mail in an interview after the company’s annual general meeting.

“We think we have a fantastic business that we’re going to move forward with.”

Mr. Little’s comments on Tuesday came after Suncor reported the highest quarterly dividend in the company’s history. It was the latest in a windfall across the energy sector this earnings season, buoyed largely by a surge in oil and gas prices because of global supply fears related to Russia’s war on Ukraine.

Suncor’s results were something of a salve for Suncor, which has seen activist hedge fund Elliott take aim with a series of proposals to shake up the Canadian oil-sands giant.

One of Elliott’s demands is that Suncor explore the sale of Petro-Canada, a major Canadian gas-station network.

Elliott went public on April 28 with a letter to Suncor directors containing a swath of proposals it said would add $30-billion to the energy company’s market capitalization, “a potential increase of 50 per cent or more from today.”

It also wants an executive leadership review, an overhaul of Suncor’s operational and safety culture, and to replace several directors at the company with five of its own choosing.

How oil sands giant Suncor became vulnerable to a U.S. activist

Mr. Little told The Globe that Suncor hasn’t yet had any substantial conversations with the fund, and doesn’t know who Elliott would like to see on the board.

“Our focus is to have a constructive dialogue with them – as we would with any of our shareholders – to get their feedback and hear their proposals and understand the rationale from it. Elliott’s a capable, competent group of people and obviously they’re an important shareholder to us,” he said.

At the end of the day, he believes Elliott wants the same as Suncor’s board and management: Safe and reliable operations with increasing shareholder returns.

“There’s no dispute on this,” he said. “We all share the same ambition.”

Suncor’s quarterly dividend of 47 cents per share, announced Monday, was a 12-per-cent increase over the prior quarter, and the highest in the company’s history. It attributed the boost to a combination of high commodity prices and operational improvements, including the $3.4-billion it brought in from its oil-sands operations. That’s despite the fact that its total upstream production was down about 20,000 barrels per day compared with the first quarter of 2021.

Suncor’s net earnings were $2.9-billion in Q1 of 2022, and the company reduced its net debt by $728-million.

And while Suncor’s financial results set the stage for Tuesday morning’s earnings call, Mr. Little took pains to emphasize changes the company has made to improve safety and performance at its oil-sands operations.

Suncor’s safety record is one of the issues that Elliott highlighted in its letter to Suncor brass on April 28. That includes the Jan. 6 death of a worker in a collision between two heavy haul trucks at Suncor’s Base Plant operation, north of Fort McMurray, which also sent two other workers to hospital. The incident followed three workplace fatalities at Suncor’s Alberta operations in December, 2020, and January, 2021.

Suncor’s response was a plan to deploy collision-mitigation technology across its entire oil-sands business and beef up the company’s senior leadership team to focus more on safety and operations.

A research bulletin from National Bank of Canada Tuesday noted that while it has been a vocal critic of Suncor lately, it believes those and other changes demonstrate that management is focused on improved upstream execution – and that Elliott’s activism may accelerate the company’s improved performance.

Suncor will also hold an open house in July, which Mr. Little said would be a chance for shareholders who are interested in the company’s safety improvements to hear directly about the progress it’s making.

Suncor is also exploring the sale of its entire U.K. portfolio, and reiterated its plans to divest its wind and solar assets to “focus on areas of energy expansion that are more complementary to its base business, with an emphasis on hydrogen, renewable fuels and an ongoing participation in low-carbon power.”

Mr. Little said during Tuesday morning’s earnings call that the market has shown “massive interest” in Suncor’s wind and solar assets, to the point where it’s slowing down the sale because the company has had to field so many inquiries.

“I’m very confident that that will move forward, and we’ll get really good value associated with it,” he said.

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