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Petro-Canada station at 55 Spadina Ave. in Toronto. May 21, 2024 (Abhijit Alka Anil/The Globe and Mail)Abhijit Alka Anil/The Globe and Mail

Suncor Energy Inc. SU-T is assessing its 1,800 Petro-Canada gas stations across the country, figuring out which ones to renovate and which ones to sell, as it picks up steam on a retail strategy to transform 20 per cent of its network by the end of 2026.

The strategy is far from a request made by activist hedge fund Elliott Investment Management LP, which two years ago launched a campaign to oust several directors at the major oil sands producer and explore a sale of its Petro-Canada gas-station chain.

But people close to Elliott say the fund is pleased with the improvement of Suncor’s fiscal fortunes under new chief executive Rich Kruger, and is happy to let the retail strategy play out.

The goal of that strategy is to deliver $200-million in marginal growth by 2026. It includes expanding quick-serve restaurant offerings and express formats and, under a new partnership, rebranding more than 200 Canadian Tire gas stations to Petro-Canada. Underperforming gas stations will be sold at a rate of around 10 a year, Suncor’s vice-president of downstream operations, Dave Oldreive, told analysts Tuesday during a business update.

Suncor updated 23 gas stations and added four new ones to its portfolio last year, and so far in 2024 has added two more and expanded offerings at 10 locations. It sold nine last year, targeting sites that didn’t have the right location, the right real estate or the right size to deliver expected returns, Mr. Oldreive said.

“We want to be sure that the component parts are of the highest value they possibly can be.”

Tuesday’s business update was a marked departure from two years ago, when the Calgary-based oil sands giant faced questions from analysts about its grim safety record and underperformance compared with its peers.

Instead, Mr. Kruger pointed to bumper production and operational performance, and the company’s quest to add an additional $3.3-billion of free cash flow per year by the end of 2026, reducing the break-even cost of a barrel of oil by US$10.

Mr. Kruger has routinely emphasized the importance of Suncor’s “focus on the fundamentals” since he took the reins just over a year ago. Tuesday’s business update was no different.

“Going back in recent history, Suncor needed to change. It was evident in our performance, evident to those both internal and external to the company,” he said.

“What we will show you is tangible, credible, challenging and bold. What we will convey to you is an unwavering commitment and determination to deliver.”

Executive management listed a ream of ways it plans to save money and increase profits, including reduced capital spending, a better maintenance strategy, more autonomous haul trucks and improved performance at its oil sands sites.

For its part, Elliott remains bullish on Suncor. It recently increased its total common shares in the company to US$1.9-billion, according to its most recent 13F, a quarterly report filed by investment managers to the U.S. Securities and Exchange Commission that discloses equity holdings.

Much like Elliott’s strategy with U.S. oil and gas producer Hess Corp. HES-N, which it targeted for underperformance in 2017, the activist hedge fund has no intention of pulling out of Suncor any time soon – and believes the stock remains undervalued, according to people familiar with Elliott.

As for its complaints on safety, 2023 was the first year since 2015 in which Suncor had no deaths or serious injuries. Mr. Kruger said that while he was pleased with the improvements, he will “never declare victory on safety.”

More than a dozen workers died working at Suncor sites between 2014 and the resignation of former CEO Mark Little in July, 2022.

Mr. Kruger said Tuesday that Suncor has turned around that record by listening to workers on the front lines to determine hazards.

“Our entire processes are geared toward ensuring that we have input from the people doing the work, then that leadership listens and responds to put the safest workplace inside,” he said. “I’m never satisfied, there’s more work to do, but it is front and centre of everything we do.”

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