Page 5 - NorthAmOil Week 19 2022

NorthAmOil COMMENTARY NorthAmOil

Suncor has come
under pressure from
activist investor
Elliott Investment
Management over
its operational
performance.

lower-than-expected output was largely attrib- what it describes as a recent decline in perfor-
uted to extreme cold weather in Northern mance. Elliott is seeking to overhaul Suncor’s
Alberta, which caused an extended unplanned board and management team. However, the
outage at Imperial’s Kearl oil sands mine. company’s shareholders voted at its annual gen-
Suncor beat analyst expectations with eral meeting this week to re-elect all 11 existing
earnings of CAD2.95bn ($2.29bn), up from board members, and Elliott had not publicly put
CAD821mn ($636mn) a year ago. The company forward any names.
noted that it had also achieved its highest ever Suncor’s president and CEO, Mark Little, said
adjusted funds from operations, which reached on the company’s earnings call that the board
CAD4.1bn ($3.2bn) and included record and management team was looking forward
adjusted funds from its oil sands assets. to engaging in “constructive” discussions with
Like Imperial, though, Suncor reported a y/y Elliott.
decrease in production in the first quarter at
766,100 boepd, down from 785,900 boepd. What next?
And Cenovus reported a more than sev- As well as such individual challenges, all four
en-fold jump in quarterly profit, at CAD1.63bn companies have the bigger, longer-term chal-
($1.26bn), compared with a net loss of lenge of decarbonisation to contend with. All
CAD408mn ($316mn) a year ago. The company four companies are members of the Oil Sands
said it would nearly trip its dividend and return Pathways to Net Zero alliance, together with
100% of excess free funds to shareholders once MEG Energy and ConocoPhillips. There is a
its net debt falls below CAD4bn ($3.1bn). As of Their collective goal to reach net-zero green-
the end of March, it had reduced its net debt to house gas (GHG) emissions from their oil sands trend of more
CAD8.4bn ($6.5bn). operations is a long-term one, but the pressure questions coming
Cenovus’ production for the latest quarter to act now appears only set to intensify, and
came in at roughly 798,600 boepd, marking a indeed some actions are already being taken. up, including
y/y increase from 769,300 boepd but a sequen- For example, CNRL’s president, Tim McKay,
tial decrease on 825,300 boepd in the fourth said on his company’s earnings call that the from analysts
quarter of 2021. group of six producers had submitted an appli-
cation to Alberta government for pore space at on earnings
Challenges the end of April for their proposed carbon cap- calls, about the
Higher profits come as good news for the four ture and storage (CCS) project.
producers, but do not guarantee an easy path “Key in my mind is first to get the pore space companies’ CCS
forward. While certain challenges, such as the in a timely manner and then we can start to put
unplanned outage at Kearl for Imperial, were together a cost profile for everyone,” McKay investments.
limited to the first quarter and are now resolved, said.
others continue to weigh on some of the produc- There is a trend of more questions coming up,
ers among the group. including from analysts on earnings calls, about
For example, Suncor has come under pres- the companies’ CCS investments. This can be
sure over its operational performance, including expected to continue, and the more time passes,
from activist investor Elliott Investment Man- the more the companies will be expected to pro-
agement, which has criticised the company for vide details and answers.™

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