Canadian oil and gas producer Suncor Energy, which is under pressure from an activist investor firm, on May 10 said it is making progress on safety and operational improvements after posting stronger-than-expected first-quarter results.
Elliott Management last month publicly called for new board directors, a management overhaul and a strategic review at Suncor, arguing its shares have lagged oil and gas peers even as crude prices surged to multi-year highs.
On Tuesday's call to discuss the quarterly earnings, Suncor CEO Mark Little said the company looked forward to engaging in constructive discussions with Elliott.
However, he pushed back against the activist firm's suggestion that Suncor explore selling its fuel retail business to provide additional shareholder returns. Suncor is an integrated oil company, meaning it has both upstream production and downstream refining and marketing operations.
"We think it (retail) is key to maximizing value across the integrated business chain," Little said. "We think we have the best downstream business in North America and we think it's important that it stay together."
Suncor also held its annual general meeting on Tuesday, and shareholders voted to re-elect all 11 existing board members. One of Elliott's demands was to add five new independent directors, although it has not publicly put forward any names.
Little pointed to new executives in the company's oil sands business as a sign of concrete action to address repeated operational mishaps that have resulted in four fatalities on Suncor sites since late 2020 and raised questions about Little's future as CEO.
Suncor late on Monday reported net income of C$2.95 billion ($2.27 billion) in the first quarter, increased its dividend and said it was exploring the sale of its UK North Sea assets.
"We applaud Suncor for the better-than-expected results; however, we believe the market needs to see consistent meet (or) beats and a lack of operational mishaps," Phil Skolnick, an analyst at Eight Capital, wrote in a note, referring to Suncor meeting or exceeding analyst forecasts.
Suncor shares were last down 4.4% at C$43.28 on the Toronto Stock Exchange amid a broad sell-off in energy stocks.
2022-05-16 - Grey Rock will contribute oil and gas assets in the Permian Basin, Bakken, Eagle Ford Shale, D-J Basin and Haynesville Shale plays to form Granite Ridge Resources.
2022-05-09 - Elliott's move is bringing scrutiny over Little's performance as Suncor's CEO, a role he took in 2019 after serving as chief operating officer since December 2017.
2022-04-28 - Suncor said it will study Elliott’s recommendations and looks forward to engaging with the firm but added that it is “confident” in its strategy and “will continue to execute” on it.
2022-05-10 - The Calgary, Alberta-based company said it is exploring the sale of its entire UK business based on interest received in the exploration and production assets.
2022-04-27 - Canada's Cenovus Energy announced its plans to return 50% of excess free funds flow to its shareholders after upstream production increased by nearly 30,000 boe/d from first quarter 2021.