Contrast in meetings as oil prices fluctuate
Companies still grapple with volatility as Suncor, Imperial plan for the future
Suncor Energy Inc.’s annual meeting this week was so actionpacked, they should have sold popcorn outside the Telus Convention Centre.
In contrast, Friday’s annual meeting at Imperial Oil Ltd. was more sedate — informative, but distinctly to the point.
Regardless of style points, both gatherings captured the impact of big Canadian oil companies caught on a commodity price roller-coaster — trimming costs on the way down with big growth plans for the way up.
Suncor’s meeting had a little bit of everything Thursday: talk about an acquisition, questions over oil prices, discussions about national pipelines and carbon policies — even a query about the world’s most famous investor, Warren Buffett.
Firmly in the spotlight, CEO Steve Williams faced no less than a dozen questions from shareholders during the 102-minute session on topics as diverse as tailings pond management, corporate lobbying and executive pay.
“You see, I am earning some of my money today,” he quipped at one point.
During the first quarter, a period during which benchmark crude prices dip below US$27 a barrel, the company posted an operating loss of $500 million.
Williams spoke about his company’s new $937-million deal to buy Murphy Oil Corp.’s stake in Syncrude, which will give Suncor 54 per cent of its historic oilsands rival.
While Suncor has no plans to take over operatorship of Syncrude, Williams believes his firm can help drive down costs at the development.
The CEO also discussed his own company’s cost-cutting efforts as Suncor eliminated 1,700 positions and chopped operating costs by almost $1 billion last year.
It also has plans to sell $1 billion to $1.5 billion of assets over the next year.
Yet future growth remains a key selling point.
Suncor expects to boost output to 800,000 barrels a day in 2019 — up from 691,000 in the first quarter — as big-ticket developments such as the Fort Hills oilsands project starts.
At the meeting, two intriguing shareholder motions got split results.
One successful proposal from NEI Investments, backed by the company, wanted more information about Suncor’s plans to deal with the future of a low-carbon economy.
Another, which called for an annual report that would disclose funding for corporate lobbying, was turned down.
Questions from shareholders were the most intriguing part of the show.
Asked about Suncor’s most famous shareholder — Buffett’s Berkshire Hathaway Inc., which owns about two per cent of the oil company’s shares — Williams said he’s set to meet with the so-called Oracle of Omaha in a couple of weeks.
“He’s a very engaged shareholder,” Williams said.
On the issue of building new pipelines to improve market access, Williams said he believes more support is building in Canada for such necessary developments.
He noted the country is estimated to be giving away just under $30 billion a year because of market access limitations.
“It really is important for Canada that we get the full price,” Williams added.
“I can start to see a period where this market access issue gets solved.”
Friday’s annual meeting of Imperial Oil Ltd. was a more lowkey, focused affair.
Held in Imperial’s new headquarters in Quarry Park in southeast Calgary, it ended precisely one hour and one minute after it began, with only two shareholders asking questions.
In his address, CEO Rich Kruger focused on the company’s moves to ramp up production, drive down costs and improve efficiency both upstream and downstream.
The integrated oil company, whose majority owner is ExxonMobil Corp., announced firstquarter results Friday with a $101-million loss, its first in 22 years.
However, it has not laid off a single person while reducing expenses, Kruger noted.
The company produced 421,000 barrels of oil equivalent per day during the quarter, up 26 per cent from a year ago, and has several future oilsands projects in the hopper.
Like Williams, Kruger spoke about the ongoing difficulties facing Canada over building pipelines and gaining access to new export markets.
The issue continues to loom larger over the sector and the province, with the Keystone XL project rejected by the U.S. government last year, hearings extended recently for the Trans Mountain pipeline expansion to the West Coast and growing opposition to the Energy East development.
“The uncertainties around expanded market access are as great or greater today than they were a year ago,” he told shareholders.
Kruger noted the past year brought a whirlwind of change, including new governments, federally and provincially, and evolving regulations surrounding climate change.
The Alberta government is implementing an economywide carbon tax in 2017 at $20 a tonne, which will rise to $30 the following year.
The NDP government is also introducing an emissions limit of 100 megatonnes a year on the oilsands sector, which currently emits about 70 megatonnes of greenhouse gases annually.
Speaking to reporters, Kruger said there are good aspects to Alberta’s climate plan, but he disagrees with the cap on emissions for the oilsands industry.
“There’s still a lot to be determined about what exactly (and) how the cap will work, how do you get space under the cap,” said Kruger, whose company filed applications last month with provincial regulators for an expansion project at Cold Lake.
“We didn’t think the cap was necessary. We did think with the existing regulatory practices and procedures, the drive to improve overall environmental performance, there are other ways to do it.”