Given the frustration of investors in Suncor Energy Inc. On the oil company’s performance in recent years, many shareholders say they are skeptical of Elliott Investment Management LP’s proposal to reform the company’s board, management and operations.
Elliott, founded by billionaire Paul Singer, has a track record of upsetting large, underperforming oil and gas companies. In 2019, it called for the dissolution of Marathon Petroleum and the dismissal of its CEO, which garnered the support of other institutional investors.
Elliott uses a similar playbook at Suncor. It requested that five directors be added to Suncor’s board of directors and demanded a management review after accidents and operational accidents at oil sands projects led to production failures and caused the company’s share price to fall below its peers. Suncor is the largest Canadian oil sands producer with the worst performance over the past year, trailing Canadian Natural Resources Ltd. and Cenovus Energy Inc. and Imperial Oil Ltd. and MEG Energy Corp.
Ahead of its annual meeting on Tuesday, where disgruntled shareholders may have a chance to share their grievances, Suncor raised its quarterly dividend by 12 percent, to 47 Canadian cents a share. The company beat analysts’ expectations for revenue and profit in the first quarter despite higher total operating costs, according to Bloomberg data. The Calgary-based company is now looking to sell its UK assets as well as its projects in Norway and its wind energy portfolio.
Elliott did not nominate directors for the meeting. The investment firm, which says it has a 3.4 percent economic stake in Suncor, could raise that amount or partner with other shareholders to call a private meeting if the company resists change, according to a person familiar with the matter.
Suncor investors contacted by Bloomberg News said they wanted changes, but not all of them supported Elliott’s full suite of plans. They were particularly concerned about its proposal to retail Petro-Canada gas stations from Suncor, which it claims could be $5 billion in “trapped value.”
“There is no guarantee that selling those things will unlock a lot of value,” said Laura Lau, chief investment officer at Brompton Funds. She said that although there are reasonable buyers in Canada for the assets, Parkland Corp and Alimentation Couche-Tard Inc. They may be subject to significant antitrust scrutiny.
The terminals provide “steady cash flow and profits” regardless of the oil price, said Norman Levine, recently retired managing director of Portfolio Management Corp. who says he has owned Suncor for decades and currently owns shares worth “a few hundred thousand.” of dollars.
Suncor’s operational problems and outages in directing production last year at its massive Fort Hills mine on unstable slopes have raised questions about the future of Mark Little, Suncor’s chief executive since 2019.
“They need someone to rock them and manage them better,” Levine said.
Even some investors critical of Suncor question why Elliott was given five seats on a board that currently has 11 people, arguing that a small minority stake does not justify such an effect.
The President and CEO of Cation Capital Inc. Sandy Edmonston said five seats would be too much, but he still wanted to see a change of board. This includes the lifting of board memberships for Lauren Michelmore and Ross Gerling, who were previously president of Shell Canada and TC Energy Corp. , respectively, for president and vice president. (The current president, Michael Wilson, comes from the chemical and agricultural industries.)
Suncor’s share price has risen about 8 percent since Elliott announced his proposal on April 28, as of Monday’s close, despite the energy share sale. “I think the price reaction to the news is self-explanatory: investors are happy and wishing for changes in the future,” said Georgin Aivazian, a private investor, via chat.
Aivazian said he owns thousands of shares in Suncor and that Suncor is his largest. “It is frustrating that their peers are constantly falling behind and having operational issues,” he wrote. “I hope Elliott succeeds and makes changes.”