Suncor Reports Highest Quarterly Dividend in Company History as It Faces Lawsuits from Activist Investors

Suncor Energy Inc. SU-T reported the highest quarterly dividend in the company’s history on Monday, a much-needed salve as it faces demands for significant structural change from a powerful activist investor.

Suncor’s fortune comes amid an energy sector windfall this earnings season, driven largely by a surge in oil and gas prices due to global supply fears related to Russia’s war on Ukraine. In the last two weeks, for example, Canadian Natural Resources Ltd. announced that it had doubled its quarterly net profit, and Cenovus Energy Inc. reported a more than sevenfold increase.

In a statement late Monday, Suncor attributed the boost to a combination of high commodity prices and operational improvements, including the $3.4 billion it earned from its tar sands operations. That’s despite the fact that its total upstream production was down by some 20,000 barrels a day compared to the first quarter of 2021.

Suncor said it is exploring the sale of its entire UK portfolio based on buyer interest, reiterating plans to sell its wind and solar assets to “focus on areas of energy expansion that are more complementary to its core business.” , with an emphasis on hydrogen, renewable fuels and continued involvement in low-carbon energy.” It expects to close the sale of its wind and solar farms in the next 12 months.

Suncor’s net income was $2.9 billion in the first quarter (compared to $821 million in the prior year quarter) and the company reduced its net debt by $728 million.

However, the oil company’s fortunes will come under the microscope on Tuesday, when executives take questions from analysts during their quarterly earnings call and, a few hours later, from shareholders at the annual general meeting.

And the elephant in the room will be activist hedge fund Elliott Investment Management LP, a Florida-based group pushing for a Suncor reorganization and one of the company’s largest shareholders, with a 3.4 percent stake.

Those responding to inquiries will include Chairman and CEO Mark Little, whom Elliott doesn’t think should remain as CEO, the sources told The Globe and Mail.

In a letter to Suncor directors on April 28, Elliott said the proposals he has made would add $30 billion to the energy company’s market capitalization, “a potential increase of 50 percent or more from today”.

Suncor said in a news release at the time that the company “appreciates the views of its shareholders and will take the time to carefully evaluate the recommendations and materials provided.”

Elliott declined to comment on his next moves when asked for comment Monday, nor did he update a website called “Restore Suncor” that defends his public push for change.

The fund has made no secret of the fact that it wants to fire several directors of the leading tar sands producer, elect five of its own choosing and explore the sale of Suncor’s Petro-Canada service station chain, one of the Canada’s largest service stations. .

The fund also wants an overhaul of executive leadership, an overhaul of Suncor’s safety and operating culture, and better returns on capital.

In his April letter, Elliott said missed production targets, high costs and a number of employee deaths and other safety incidents “are rooted in an overly bureaucratic and slow-moving corporate culture that seems to have lost the dynamism it long ago made Suncor the most valuable energy company in Canada.”

Suncor’s shares on the Toronto Stock Exchange jumped 12 percent as Elliott made his demands public.

Although they had fallen slightly on Monday amid a general market decline, they were still up more than 60 percent year-on-year when markets closed.

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