Suncor Energy Inc. SU-T has gone outside the company to choose a new chief executive officer, appointing oil and gas veteran Rich Kruger to the top job as it bows to pressure from U.S.-based activist investor Elliott Investment Management LP.
Mr. Kruger, the former head of Imperial Oil Ltd. IMO-T, will take the reins of the Calgary-based energy giant on April 3, following a months-long search to replace Mark Little, who resigned as CEO last July, following a spate of safety incidents and worksite fatalities.
Suncor’s safety woes were part of a swath of complaints issued by Elliott last spring, when it publicly demanded improvements to Suncor’s operations and change at the top echelons of the Canadian oil major.
Two of the directors serving on Suncor’s CEO search committee were named to its board last July, as part of a deal the company struck to appease Elliott.
A source familiar with Elliott told The Globe and Mail that the hedge fund was pleased the board went with an external CEO candidate, which is what the firm believes Suncor needs to achieve necessary safety and operational improvements.
The source said Elliott looks forward to Mr. Kruger’s progress in delivering on a new culture at Suncor, specifically focusing on enhancing safety, operational efficiency and overall better performance. The Globe is not naming the source because they are not permitted to speak publicly for Elliott.
Mr. Kruger was president and CEO of Imperial from 2013 until his retirement in 2019, the culmination of his 39-year career with U.S. parent company Exxon Mobil Corp XOM-N.
Under his leadership, Imperial sold off close to 500 company-owned Esso retail stations in Canada in 2016, bolstering profits.
Suncor owns one of the country’s largest networks of gas stations, with 1,800 Petro-Canada locations. Elliott pushed Suncor in April to review its retail division, arguing it represented $5-billion in “trapped value.”
However, following a four-month review, Suncor said in November it would retain the assets, arguing that it could extract more value by keeping the familiar brand and streamlining operations as gasoline demand wanes in the coming decades, than by selling it.
While at Imperial, Mr. Kruger focused sharply on safety, reliability and operational excellence, Bank of Nova Scotia analyst Jason Bouvier said in a research note on Tuesday.
Mr. Bouvier said Mr. Kruger’s appointment was a positive change for Suncor, particularly because the new CEO “brings considerable oil sands experience and a strong history of operational safety to the role.”
Many analysts believe Elliott was pushing for new leadership at Suncor. However, Eight Capital analyst Phil Skolnick said the naming of Mr. Kruger was a surprise.
“While there was speculation that an outsider was about to be named as the new president and CEO, this was not a name thrown out there in recent conversations with investors,” Mr. Skolnick said in a note.
Mr. Skolnick added Mr. Kruger was “held in high regard” by the investment community during his time at Imperial, and said investors are likely to expect a “complete positive change” in the safety culture at Suncor under his leadership.
Mr. Kruger was one of the most outspoken critics of Canadian federal and provincial energy policy during his time as Imperial CEO – a vastly different approach than that of Mr. Little when he was at the helm of Suncor.
Mr. Kruger often complained publicly about red tape, focusing in the years before his retirement on how long it took to win Alberta regulatory approval for the two-phase, 150,000-barrel-per-day Aspen thermal oil sands project, first proposed in 2013.
Imperial announced it would go ahead with Aspen late in 2018, within months of finally winning approval for the $2.6-billion project. But it was put on hold in March, 2019, because of what Mr. Kruger called market uncertainty caused in part by the then-NDP provincial government’s oil production curtailment program, enacted in January of that year to reduce a glut of oil trapped in the province by output outgrowing pipeline capacity.
Mr. Kruger’s appointment will see interim Suncor CEO Kris Smith shuffled to the role of chief financial officer and executive vice-president of corporate development at the conclusion of the company’s annual general meeting on May 9.
Current CFO Alister Cowan plans to retire, but has offered to remain with the company through the end of the year to support the leadership transition and provide advisory services.
RBC analyst Greg Pardy said in a note on Tuesday that Mr. Smith remaining in a leadership role “lays a clear CEO succession path.”
With a report from The Canadian Press