Suncor’s strong earnings may not be enough to fend off shareholder pressure: experts
Suncor Vitality Inc. now has sturdy first quarter earnings in its arsenal and a publicized plan to enhance employee security, however some observers say that gained’t be sufficient for the Calgary-based oil large to fend off an aggressive activist investor.
Talking publicly Tuesday for the primary time since U.S.-based Elliott Funding Administration known as for adjustments to the corporate’s management in addition to the attainable sale of the Petro-Canada retail chain, CEO Mark Little mentioned Suncor is heading in the right direction.
“Whereas we nonetheless have work to do, I’m happy to report that we’re making progress and that every one elements of Suncor are shifting into excessive gear,” Little mentioned on a convention name to debate the corporate’s first quarter monetary outcomes.
“Our board and administration have nice confidence in our plan and the progress we’re making.”
Little touted Suncor’s first quarter earnings of $2.95 billion within the first quarter — up from $821 million in the identical interval of 2021 — in addition to the best quarterly money move within the firm’s historical past as proof.
READ MORE: Suncor studies earnings of $2.95B as oil costs surge
He additionally rejected Elliott’s premise that Suncor ought to spin off or promote its 1,800-location retail chain of fuel stations.
“(Petro-Canada) is a really sturdy performer and might go head-to-head with different retail companies,” Little mentioned. “We expect we have now the very best downstream enterprise in North America, and we expect it’s necessary that it stays collectively.”
Elliott — which has a 3.4 per cent financial curiosity in Suncor and a observe file of concentrating on giant firms it views as underperformers — has been crucial of Suncor’s lagging share worth in addition to a latest spate of operational difficulties and office security incidents.
The corporate has reported 12 office deaths since 2014, and struggled with manufacturing points associated to gear failure and climate.
READ MORE: Suncor’s security file in highlight as activist investor requires change
However Little mentioned Tuesday Suncor is already making adjustments, together with a third-party security evaluation, bringing on new administration together with former LNG Canada CEO Peter Zebedee (now Suncor’s govt vice-president of mining and upgrading), and incorporating new fatigue administration and collision avoidance know-how at its oilsands websites to scale back danger to staff and contractors.
“We all know we’ve had challenges in our mines, and we’ve taken concrete actions for the reason that fall of final 12 months to strengthen our mining functionality,” Little mentioned, including Suncor will host an “oilsands operational presentation” on July 13 to replace buyers on the adjustments it’s making in help of secure and dependable operations.
A spokesperson for Elliott Funding Administration couldn’t be reached for remark Tuesday.
However Eight Capital analyst Phil Skolnick mentioned buyers wish to see extra than simply phrases. He identified that Suncor’s first quarter report got here out the identical day the corporate skilled a minor hearth at its Colorado refinery. (The fireplace was extinguished and there have been no accidents, in line with information studies.)
“At this level it (Suncor’s security plan) is simply extra guarantees,” Skolnick mentioned. “Traders out there wish to see proof that adjustments have been made.”
Skolnick added he doesn’t anticipate Suncor’s newest earnings to be sufficient to stave off a groundswell of shareholder discontent, including that whereas Elliott didn’t nominate its personal slate of board of director candidates forward of Suncor’s annual basic assembly on Tuesday, that might be the activist’s subsequent transfer.
“It was a superb quarter (for Suncor) for positive… however I don’t suppose this satisfies Elliott Funding Administration,” Skolnick mentioned. “One of many key gadgets they’ve been pushing for is for Suncor to dump their retail property, and once more administration defended why they need to preserve it.”
On Tuesday, shareholders on the Suncor annual basic assembly voted almost 92 per cent in favour of the corporate’s method to CEO pay.
Arden Dalik, govt director with Calgary-based World Governance Advisors, mentioned buyers typically register their dissatisfaction with a administration group by voting towards govt pay packages — and whereas a 92 per cent majority falls inside the realm of “cheap,” it’s not an amazing endorsement both.
“They’re not likely in a hassle zone, however additionally they got here out with a file dividend Monday, so you’ll anticipate it to be slightly greater,” she mentioned. “For them, I undoubtedly wouldn’t calm down, however I feel the plan they’ve introduced might have purchased themselves some persistence from the Avenue.”
Suncor is streamlining its enterprise, together with with final month’s announcement that it will divest its wind and photo voltaic property. On Tuesday, Little mentioned the corporate has had a “large response” from potential patrons.
“A lot in order that it’s slowing down the method as a result of we’ve needed to course of so many various inquiries related to it,” he mentioned.
The corporate additionally plans to divest its exploration and manufacturing property in Norway and is exploring the sale of its complete U.Okay. portfolio.
On Monday, Suncor declared a quarterly dividend of 47 cents per widespread share payable June 24 to shareholders of file as of June 3. The corporate says the dividend is the best within the firm’s historical past and 12 per cent greater than the earlier quarter’s dividend.
The corporate’s web earnings amounted to $2.06 per widespread share, in comparison with 54 cents per widespread share within the first quarter of final 12 months.
Revenues had been $13.5 billion, up from $8.6 billion within the prior quarter.
Suncor reported whole upstream manufacturing of 766,100 barrels of oil equal per day (boe/d) within the first quarter of 2022, in comparison with 785,900 boe/d in the identical quarter final 12 months.
Refinery crude throughput elevated to 436,500 barrels per day and refinery utilization was 94 per cent within the first quarter of 2022, in comparison with 428,400 barrels per day and 92 per cent within the prior 12 months quarter.
Suncor shares closed at $44.73 on the Toronto Inventory Change Tuesday, down 1.21 per cent.
