Suncor CEO Little faces scrutiny after activist Elliott takes aim

By Nia Williams and Svea Herbst-Bayliss

(Reuters) – Three months in the past Mark Little, the chief government of Canadian oil and fuel main Suncor Power, issued a mea culpa.

In January two vehicles had crashed at an oil sands mine in northern Alberta, killing one individual. This raised the variety of on-the-job fatalities at Suncor since 2014 to 12, by far the worst security file amongst its Canadian friends.

“I personal this,” Little advised an earnings name in February. Now these phrases are coming again to hang-out him.

The accident in January was the most recent in a string of operational incidents at Suncor websites, and got here on prime of investor dissatisfaction with a serious dividend reduce in 2020.

As Suncor shares lagged its friends, U.S. funding agency Elliott Administration noticed a chance and constructed a 3.4% stake. Final month the hedge fund mentioned it wish to see a handful of recent administrators be a part of the corporate’s board, in addition to administration and strategic opinions.

Elliott, which is understood for pushing corporations to enhance operations, is anticipated to fulfill privately with Suncor subsequent week, sources mentioned.

Elliott’s transfer is bringing scrutiny over Little’s efficiency as CEO, a job he took in 2019 after serving as chief working officer since December 2017.

“My feeling is Bay Road is not going to provide (Suncor) the advantage of the doubt as a result of it has been just a few years of missteps,” mentioned Laura Lau, chief funding officer at Brompton Group, a Suncor shareholder.

“Will they (shareholders) give Mark Little time? I do not know. There are extra questions on whether or not he’s the appropriate man going ahead,” Lau mentioned.

In its letter to Suncor, Elliott didn’t discuss with Little by title however mentioned the board have to be liable for having a administration workforce in place that may ship excellence in working and security efficiency.

Suncor, which experiences quarterly earnings on Monday, didn’t reply to a request for remark.

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Suncor is North America’s most worthwhile refining and advertising and marketing firm on a per barrel foundation and one among Canada’s main gas retailers. Nevertheless it has repeatedly missed manufacturing steerage and failed to fulfill a 2018 promise to ship as much as C$2 billion ($1.6 billion) of free funds circulate enchancment by the top of 2023, as a substitute pushing that focus on out to 2025.

Little, 57, rose by means of the ranks after becoming a member of Suncor in 2008 and beforehand labored for Imperial Oil and its majority proprietor Exxon Mobil. Some Canadian vitality trade executives mentioned Suncor’s current operational points stem from a push to automate operations as a lot as potential, which makes the corporate much less nimble when issues go mistaken.

“He (Little) is well-liked, he is a shiny, sensible man… however he is all about procedures,” mentioned one former Suncor worker who labored with Little.

The supply declined to be named as a result of he nonetheless consults within the trade.

Elliott, which invests $51.5 billion in property, has pushed to take away prime executives at corporations together with Twitter , Marathon Petroleum and eBay. It launched 17 campaigns in 2021, and up to now yr received 11 board seats and has a fame for steering technique from contained in the boardroom.

Elliott declined to remark for this story.

Suncor’s inventory worth underperformance could be traced again to the early days of the pandemic when, confronted with collapsing crude costs, it halved its dividend at the same time as rival Canadian Pure Assets Ltd held payout regular.

The lagging share worth allowed Canadian Pure to overhaul Suncor as Canada’s most respected vitality firm in 2020.

Then got here a string of mishaps at Suncor’s oil sands and refining operations, together with the revelation final July {that a} vital slope at its new Fort Hills mine, which began working in 2018, was unstable and required fixing earlier than manufacturing may very well be absolutely ramped up.

Regardless of the issues, Little earned 127% of his 2021 annual bonus alternative after incomes 74% of his bonus alternative for 2020, firm paperwork present. Elliott mentioned in a public presentation that CEO compensation ranges over the previous few years counsel the board is “not sufficiently holding administration accountable for present efficiency.”

“If you happen to take a look at investor suggestions during the last two years there’s been some frustration on the operations facet, and these come all the way down to a frustration with administration,” mentioned Matt Murphy, an analyst with Tudor Pickering Holt in Calgary.

(Reporting by Nia Williams and Svea Herbst-Bayliss; Enhancing by Denny Thomas and Chizu Nomiyama)