Suncor’s Mark Little pledges to ‘do better’ as safety concerns eclipse profit trend

A year ago, the Canadian oil giant recorded a loss of $ 168 million

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The chief executive of Suncor Energy Inc. said the energy giant “needs to do better” on worker safety and other operational challenges that are clouding an influx of cash thanks to higher oil prices.


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Chief Executive Mark Little has pledged to improve safety and operational issues at the Calgary-based oil producer and refiner after the recent death of a worker and incidents that halted production at two sites in December.

“These results are unacceptable and we know we need to do better,” Little said on a conference call Thursday.

A truck driver died in a crash at a company facility on Jan. 6, the fourth on-site death at Suncor since 2020, according to Bank of Nova Scotia analysts. Suncor will implement collision avoidance and fatigue management technology to address safety issues, Little said, adding that Suncor will be the first oil sands company to adopt the technology commonly used in mining.


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The company also plans to standardize security processes across the company and implement technology
to improve productivity.

Suncor shares fell about 3% on Thursday after the company reported fourth-quarter results that slightly beat analysts’ expectations.

Suncor revealed the operational difficulties earlier in January. Analysts have questioned whether the company will turn around its operations after a few years of “missteps” and “poor operational performance”.

Suncor Energy Chief Operating Officer Mark Little during a tour of the Fort Hills oil sands project on September 10, 2018.
Suncor Energy Chief Operating Officer Mark Little during a tour of the Fort Hills oil sands project on September 10, 2018. Photo by Vincent McDermott/Fort McMurray Today/Postmedia Network Files

National Bank analyst Travis Wood said in a January note that he “suspects major changes will be required to right the ship when it comes to the company’s operational and safety culture.”

Despite the production snafus caused by faulty equipment and cold weather, Suncor posted a profit of $1.55 billion in the three months ended Dec. 31, compared with a loss of $168 million in the same period in 2020, a tumultuous year for oil companies thanks to falling commodity prices and falling demand amid the global pandemic.


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Suncor attributed the improved business environment to the earnings performance. Oil prices began to recover to pre-pandemic levels in 2021 and continue to rise amid global tensions and rising demand.

Historically, Canadian oil producers have used cash flow from rising prices to invest in new projects, but the biggest players in the industry are currently focused on returning cash to shareholders and improvement of existing operations. Suncor doubled its dividend in the fourth quarter and earlier this week Imperial Oil announced it would increase its dividend by 26%.

Suncor has underlined its intention to use the influx of cash for share buyback and debt repayment in 2022.

During the year, it spent $2.3 billion on share buybacks, or 5.5% of its public shares. In 2022, it plans to buy back another 5% of its public shares. It also paid off $3.7 billion in debt in 2021, bringing the total down to $16.1 billion, closing in on its target range of $12 billion to $15 billion.


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“Obviously the macro environment has changed a lot, everything is accelerating from debt repayments, share buybacks as well as the dividend,” Little said. “The faster we move forward on our debt metrics, the more likely we are to secure further dividend increases.”

Suncor is seeking buyers for its Norwegian assets and assessing market interest in its UK assets,
but will only pursue mergers and acquisitions if it makes “imminent sense” to shareholders, Little said. “We feel our current portfolio of assets is complete, we don’t have any major gaps.”

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Suncor’s revenues rose from $6.6 billion to $11.1 billion. Adjusted funds from operations rose from $1.2 billion to $3.1 billion, breaking the company’s record since 2014, the last time oil prices soared.

Despite slightly lower quarterly production, which fell to 743,000 barrels of oil equivalent per day from 769,000 in 2020, revenues fell from $6.6 billion to $11.1 billion. Adjusted funds from operations rose from $1.2 billion to $3.1 billion, a record for the company, Little said in a statement.

North American benchmark oil prices rose above US$85 a barrel during the fourth quarter, boosting producer profits and the wave of the Omicron coronavirus did not depress fuel demand as much as we feared him.

The oil producer used some of the cash to double its dividend to 42 cents per common share from 21 cents. During the year, it also spent $2.3 billion on share buybacks, or 5.5% of its public shares, and $3.7 billion to pay down debt.

Suncor intends to repurchase an additional 5% of its public shares in 2022. Suncor attributes the improvement in the business environment for the variation in results from 2020, the phase of the pandemic when the significant decline in demand for Transportation fuel has driven down oil and gas prices.



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