Interim CEO says Suncor should stop diagnosing, start implementing workplace safety changes IG News

IG news Update,

The oil and gas giant is ready to stop studying its workplace safety problem and start implementing solutions instead, says the new interim CEO of Suncor Energy Inc.

Chris Smith, who took charge of the Canadian oil and gas producer following the departure of former CEO Mark Little – who stepped down last month a day after an employee died at Suncor’s base mine near Fort McMurray, Alta. — commented on Friday during his first quarter conference call with analysts since assuming his new role.

“We completed an independent security assessment last year, and we are clear about what we need to do to improve our security performance,” Smith said. “We don’t need more diagnostics, but what we have to do is perform.”

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There have been at least 12 workplace deaths at Suncor sites since 2014, more than the combined number of all of the company’s oil and other peers.

Earlier this spring, Suncor’s safety performance—as well as recent operational and production problems—drawn the attention of US-based activist investor Elliott Investment Management, which publicly called for a change to the Calgary-headquartered company. He made his case.

Last month, Suncor announced that it had reached an agreement with Elliott 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 end up in a sale.

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Smith said that despite his interim position, he doesn’t see himself as merely a placeholder until a new permanent CEO is appointed. He said he feels the urgency to move forward with new measures, such as the implementation of new technology at its oil sites – including collision awareness and driver safety systems – that should help improve workplace safety.

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But Smith said that 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 happened to us, this is how the work has been carried out in the field,” Smith said. “While technology will be a huge enabler…

“And so that’s really, I think, an area in my view that needs attention and attention.”

Phil Skolnick, a New York-based analyst at At Capital, said he agrees that it’s time for Suncor to take aggressive action on security and operational performance.

“How many conference calls do we have now where we’ve heard that safety is the number one priority?” Skolnik said in an interview. “And then there’s another unfortunate death, or another operational upset.”

Skolnick said he found the comments of Smith and other Suncor executives on Friday’s analyst call “vague.”

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“They weren’t able to pinpoint exactly what the problem was. They talked about technology, but it’s cultural,” he said, adding that when a company has a workplace safety problem, it’s usually middle management and Issues occur at the direct supervisory level.

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“I think there will probably be more head count changes. Changes, not cuts. I think maybe there are some people who are not in the right place,” Skolnik said.

On Thursday, Suncor increased its budget for capital spending for the year from $4.7 billion to $4.9 billion to $5.2 billion. The company attributed this to increased inflationary pressures, as well as increased expenses during turnaround and maintenance to improve safety and reliability.

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Skolnik said it will take time and money to improve Suncor’s track record, which is why it recently downgraded its rating on the stock to “sell.”

“I think it’s just the beginning days for the money to grow to address this,” he said.

Suncor has said it will provide more details about its plans to improve safety and operating performance at an investor day in the fall.

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The company’s board has set up a committee to conduct a global search to find its next CEO. Some are expected to be in place later this year or early 2023.

Suncor Inc. reported late Thursday that it earned $3.99 billion, or $2.84 per share, in the second quarter of 2022, which is four and a half times more than the $868 million it earned in the same period of 2021.

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The Calgary-based oil producer and refiner said its adjusted funds from operations reached $5.35 billion in the quarter, a 33 percent jump in the company’s history, as the war in Ukraine sent crude prices skyrocketing.

Production from the company’s oil and assets increased to 641,500 barrels per day in the second quarter, up from 615,700 bpd in the prior-year quarter, driven by increased production at the Syncrude and Fort Hills sites.

Refinery crude throughput increased to 389,300 barrels per day and refinery utilization stood at 84 per cent in the second quarter of 2022, as against 325,300 barrels per day and 70 per cent in the prior-year quarter.

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The company also said on Thursday that it has reached an agreement for the sale of its Norway assets for gross proceeds of approximately $410 million, pending regulatory approval. The sale is expected to be completed in the fourth quarter of 2022.

Suncor is also seeking to sell its wind and solar business, which is expected to close in early 2023, the company said on Friday. It has also started the sale process for its entire UK exploration and production portfolio.

As of mid-Friday, Suncor shares were trading down 50 cents, or 1.27 percent, at $38.96 on the Toronto Stock Exchange.

© 2022 Canadian Press

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