Suncor records second highest annual production, says safety record is improving

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Suncor Energy Inc. SU-T reported its second-highest level of production ever and a record-high dividend per share last year after several years of lacklustre performance that had made it a target for activist shareholders in 2022.

The energy giant produced an average of 746,000 barrels a day in 2023, chief executive Rich Kruger told shareholders at the company’s annual meeting on Tuesday. Suncor’s bitumen upgraders also processed a record amount, reaching a 92-per-cent utilization rate and hitting 99 per cent in the second half of 2023.

Suncor’s safety record has also improved markedly. Mr. Kruger said 2023 was the safest year in the company’s history, with no deaths, or life-threatening or life-altering injuries of any kind.

Two years ago, activist hedge fund Elliott Investment Management LP launched a campaign to oust several directors at the Calgary-based producer and explore a sale of its Petro-Canada gas station chain. Suncor’s share price had underperformed rivals since 2020, and Elliott wanted then-CEO Mark Little to be removed from the helm.

Elliott also took issue with Suncor’s safety record, pointing to the fact 12 employees and contractors had died working at Suncor sites since 2014. Mr. Little resigned in July, 2022, one day after another fatality at one of the company’s oil sands facilities.

Mr. Kruger took the reins of Suncor last April, lured out of retirement as the former head of Imperial Oil Ltd., and the company has undergone a significant overhaul under his watch.

“My priority since joining Suncor in April, 2023, can best be summarized by three words: Clarify, simplify and focus,” Mr. Kruger said Tuesday.

Mr. Kruger has said Suncor would focus on safety, reliability and profitability. That has included eliminating around 1,500 jobs not aligned with Suncor’s priorities which he said will save the company $450-million per year. Suncor also sold its assets in the North Sea and its renewable power business for a combined $1.8-billion, and purchased its remaining interests in the Fort Hills oil sands mine in Northern Alberta for $2.2-billion.

Suncor chief financial officer Kris Smith said the company returned $5-billion to shareholders through dividends and share repurchases in 2023. Its quarterly dividend rose to a record high of 54.5 cents per share last year.

Elliott has backed off since the departure of Mr. Little, seemingly placated by the changes at the company. But Suncor continues to be the target of activist investors, who made their voices known at Tuesday’s annual meeting.

Two shareholder proposals were put to the vote, coming from opposite perspectives on the response to climate change.

The first, submitted by InvestNow Inc. on behalf of shareholder Gina Pappano, called on the company to end its commitment to bring its greenhouse emissions to net zero by 2050.

Ms. Pappano told the meeting that Suncor’s net-zero pledge is a “costly and economically ruinous crusade” that is “based on dogma and ideology.” It is not legally mandated nor will it increase shareholder value, she argued, so Suncor has an economic and moral obligation to drop the target.

The board and management responded that the company is committed to decarbonizing its business and being part of the energy transition. The proposal was almost unanimously rejected, with close to 99 per cent of shareholders voting against it.

The second proposal urged Suncor to be more transparent in its reporting of how climate change will affect its bottom line. It was submitted by the Salal Foundation, a non-profit which was represented by Investors for Paris Compliance – a group that has pledged to hold Canadian publicly traded companies accountable to their net-zero promises.

IPC director of corporate engagement Duncan Kenyon told the meeting that Suncor is subject to significant risks with respect to disruptions to the market caused by climate change, but has been found wanting on its climate reporting in a study from investor-led group Climate Action 100+.

“This proposal is not a request for Suncor to do something extra, but rather a request for it to live up to the emerging financial reporting standards,” Mr. Kenyon said.

That resolution also failed, with 88 per cent of shareholder voting against.