Suncor resists pressure to drop Petro-Canada chain
CEO says the 1,800-location retail network is a key element of its business
Suncor Energy Inc. is not interested in selling off its Petro-Canada retail network, the oil giant’s chief executive said Tuesday, in spite of pressure from an aggressive activist investor.
Speaking publicly for the first time since U.S.-based Elliott Investment Management called for changes to Suncor’s leadership as well as the possible sale of Petro-Canada, company CEO Mark Little told analysts that the 1,800-location retail chain is a key element of Suncor’s business.
“It’s intertwined with our wholesale and industrial business as well,” Little said during a conference call to discuss the company’s first quarter financial results.
Petro-Canada is “a very strong performer and can go head-to-head with other retail businesses ... We think we have the best downstream business in North America, and we think it’s important that it stays together.”
The recent proposal by Elliott — a well-known activist investor that holds a 3.4 per cent economic interest in Suncor and which has a track record of targeting large corporations it views as underperformers — had the Calgary-based oil producer on the defensive on Tuesday’s call.
Elliott has been critical of Suncor’s lagging share price as well as a recent spate of operational difficulties and workplace safety incidents, and analysts wanted to know how the company is responding to these concerns.
But Little pointed to Suncor’s first quarter profits of $2.95 billion in the first quarter — up from $821 million in the same period of 2021 — as well as the highest quarterly cash flow in the company’s history as proof that Suncor is on the right track.
“While we still have work to do, I’m pleased to report that we’re making progress and that all parts of Suncor are shifting into high gear,” Little said. “Our board and management have great confidence in our plan and the progress we’re making.”
Suncor, which was the most valuable Canadian energy company by market capitalization from 2000 until 2018, has been in a slump recently. The company’s share price has lagged that of its closest oilsands peer, Canadian Natural Resources Ltd., by 137 per cent over the last three years, according to a letter from Elliott to Suncor’s board.
The company has also reported 12 workplace deaths since 2014, and struggled with production issues related to equipment failure and weather.
But Little said Tuesday Suncor is already making changes, including a third-party safety review, bringing on new management including former LNG Canada CEO Peter Zebedee (now Suncor’s executive vice-president of mining and upgrading), and incorporating new fatigue management and collision avoidance technology at its oilsands sites to reduce risk to workers and contractors.
The company also plans to divest its exploration and production assets in Norway and is exploring the sale of its entire U.K. portfolio.
On Monday, Suncor declared a quarterly dividend of 47 cents per common share payable June 24 to shareholders of record as of June 3. The company says the dividend is the highest in the company’s history and 12 per cent higher than the previous quarter’s dividend.
The company’s net earnings amounted to $2.06 per common share, compared with 54 cents per common share in the first quarter of last year.
Revenue was $13.5 billion, up from $8.6 billion in the prior quarter.
Suncor reported total upstream production of 766,100 barrels of oil equivalent per day (boe/d) in the first quarter of 2022, compared with 785,900 boe/d in the same quarter last year.
Refinery crude throughput increased to 436,500 barrels per day and refinery utilization was 94 per cent in the first quarter of 2022, compared with 428,400 barrels per day and 92 per cent in the prior year quarter.