The changes at Canada’s largest oil sands producer follow the departure this month of chief executive Mark Little. Mr. Little resigned after a worker was killed in an accident at Suncor’s base plant in northern Alberta, the latest in a series of deaths that Elliott had pointed to as a problem with corporate culture. Security lapses and unreliable operations are among the reasons the company lags behind its peers, the activist claimed. Under a deal with Elliott announced Monday, Suncor will undertake a “strategic review” of its retail network “with the goal of unlocking shareholder value.” One option is to sell the business, known for its maple leaf banner. An investment dealer, National Bank Financial, has estimated the unit’s value at $5-8 billion, depending on market conditions. Analysis: Suncor’s next CEO will have to fix more than safety issues. a new culture is necessary Other oil companies, such as Imperial Oil Ltd. IMO-A, Chevron Corp. CVX-N and Cenovus Energy Inc. CVE-T, have divested all of their gas stations, selling them to retailers like Parkland Corp. PKI-T, Alimentation Couche Tarde ATD-T and 7-Eleven. When previously asked about Petro-Canada, Mr. Little had ruled out a sale, saying the nationwide business – a one-time Crown company – was an integral part of the continent’s best refining and marketing operations. Elliott, which has a 3.4 percent stake in the company, pegged a potential sale price for Petro-Canada at $4.7 billion to $9 billion when it launched its campaign to force changes at Suncor in April. Suncor shares rose 3 percent to $40.53 on the Toronto Stock Exchange on Monday and are up 28 percent year-to-date. Prior to Elliott’s public offering, Suncor shares had underperformed peers such as Canadian Natural Resources Ltd. CNQ-T, Cenovus and Imperial, in the previous two years. In their initial letter to Suncor’s board, Elliott partner John Pike and portfolio manager Mike Tomkins criticized the company’s record of missing production targets, high costs, worker deaths and safety concerns stemming from what they said that it was a “slow, overly bureaucratic corporate culture.” Elliott pushed for five new independent directors. On Monday, Suncor announced it had appointed Canadian oil patch veterans Jackie Sheppard and Chris Seasons, as well as former BHP Billiton executive Ian Ashby, to its board. Ms. Sheppard is best known for her years as executive vice president, corporate and legal affairs with Talisman Energy Inc. Mr. Seasons is a partner at private equity firm ARC Financial Corp. and is a past president of Devon Canada. Ms. Sheppard and Mr. Seasons, along with associate director Russ Girling, will oversee the review of the Petro-Canada business and join the board committee tasked with searching for a new CEO. Two of the company’s existing directors will retire at the end of the year. Elliott said in a statement that the agreement with Suncor gives it the right to appoint another director if the company does not meet “certain performance criteria relative to peers” by the end of this year. National Bank analyst Travis Wood said he agrees with Elliott that Suncor needs changes at the corporate level, but he doesn’t think the path to improving value is to sell Petro-Canada. “In contrast, we only see Suncor’s once-premium multiple re-emerging after at least one year of outperformance, all else being equal,” Mr. Wood wrote in a research note. Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox morning or night. Sign up today.
