Suncor must stop diagnosing and start executing workplace safety changes, says interim CEO
The new interim CEO of Suncor Energy Inc. says the oil and gas giant is ready to stop studying its workplace safety problem and start implementing solutions instead.
Kris Smith, who took the helm of the Canadian oil and gas producer in the wake of the departure of former CEO Mark Little — who stepped down last month one day after the death of a worker at Suncor’s Base Mine near Fort McMurray, Alta. — made the comments Friday during what was his first quarterly conference call with analysts since assuming his new role.
“We completed an independent safety assessment last year, and we’re clear on what we need to do to improve our safety performance,” Smith said. “We do not need more diagnosis, but what we do need to do is execute.”
At least 12 workplace deaths have occurred at Suncor sites since 2014, more than all the company’s oilsands peers combined.
‘Focus and attention’
Earlier this spring, Suncor’s safety performance — as well as a spate of recent operational and production problems — caught the attention of U.S.-based activist investor Elliot Investment Management, which publicly laid out its case for change at the Calgary-headquartered company.
Last month, Suncor announced it had reached a deal with Elliot that includes the appointment of three new independent directors to Suncor’s board, as well as a review of Suncor’s retail chain of Petro-Canada gas stations — a review that could culminate in the sale of that business.
Smith said in spite of his interim status, he doesn’t see himself as simply a placeholder until a new permanent CEO is hired. He said he feels an urgency to push ahead with new measures, such as the implementation of new technology at its oilsands sites — including collision awareness and driver safety systems — that should help to improve workplace safety.
But Smith added while technology is an important tool, addressing the company’s safety culture on the front lines will be even more important.
“If I go back to the incidents that we have had, it’s been how the work has been executed in the field,” Smith said. “While technology will be a huge enabler … it’s really about enabling and engaging to ensure that work is happening safely each and every day in the field.
“And so that’s really, I think, the area in my view, that needs focus and attention.”
‘This is cultural’
Phil Skolnick, a New York-based analyst with Eight Capital, said he agrees that it’s long past time for Suncor to take aggressive action on safety and operational performance.
“How many conference calls have we had now where we’ve heard that safety is the No. 1 priority?” Skolnick said in an interview. “And then there’s another unfortunate fatality, or another operational upset.”
Skolnick added he found the remarks by Smith and other Suncor executives on Friday’s analyst call “vague.”
“They weren’t able to pinpoint exactly what the problem was. They talked about technology, but this is cultural,” he said, adding when a company has a workplace safety problem, there are usually issues at the middle management and direct supervisory level.
“I think there’ll probably be more head count changes. Changes, not reductions. I think there are probably some people who are not in the right place,” Skolnick said.
Time, money needed to improve track recor: analyst
On Thursday, Suncor increased its budget for capital expenditures for the year from $4.7 billion to a new range of $4.9 billion to $5.2 billion. The company attributed the increase to inflationary pressures, as well as increased spending during turnarounds and maintenance to improve safety and reliability.
Skolnick said it will take time and money to improve Suncor’s track record, which is part of the reason he recently downgraded his rating on the stock to “sell.”
“I think this is just beginning days of seeing the money going up in order to address this,” he said.
Suncor has said it will provide more details about its plans to improve safety and operational performance at an investor day in the fall.
The company’s board has formed a committee to conduct a global search to find its next CEO. It hopes to have someone in place later this year or early in 2023.
Q2 net profit increases more than fourfold
Suncor Inc. reported late Thursday that it earned $3.99 billion in the second quarter of 2022, or $2.84 per common share, more than 4½ times the $868 million it earned in the same period of 2021.
The Calgary-based oil producer and refiner said its adjusted funds from operations hit $5.35 billion in the quarter, the highest in the company’s history by 33 per cent, as the war in Ukraine drove crude oil prices sky-high.
Production from the company’s oilsands assets increased to 641,500 barrels per day in the second quarter, up from to 615,700 bpd in the prior-year quarter, due to increased production at its Syncrude and Fort Hills sites.
Refinery crude throughput increased to 389,300 barrels per day and refinery utilization was 84 per cent in the second quarter of 2022, compared with 325,300 barrels per day and 70 per cent in the prior-year quarter.
The company also said Thursday it has reached an agreement for the sale of its Norway assets, pending regulatory approval, for gross proceeds of approximately $410 million. The sale is expected to be completed in the fourth quarter of 2022.
Suncor is also seeking to divest its wind and solar business, with a sale expected to close early in 2023, the company said Friday. It has also begun a sale process for its entire U.K. exploration and production portfolio.
As of mid-day Friday, Suncor shares were trading down 50 cents, or 1.27 per cent, to $38.96 on the Toronto Stock Exchange.