Suncor CEO Little Is Under Pressure After Activist Elliott Targets Him

Mark Little, CEO of Canadian oil and gas giant Suncor Energy (NYSE:SU), issued an apology three months ago.

In January, two trucks collided at an oil sands mine in northern Alberta, resulting in the death of one individual. Since 2014, Suncor has had 12 workplace fatalities, by far the poorest safety record among its Canadian competitors.

Little stated during a February earnings call, "I own this." Those words are now returning to haunt him.

The accident in January was the most recent in a series of operational problems at Suncor sites, and it compounded investor discontent with a significant dividend cut in 2020.

Elliott Management, a U.S. investment firm, recognized an opportunity when Suncor shares trailed behind its competitors and acquired a 3,4 percent position. The hedge fund stated last month that it would want to see a couple of new board members and management and strategic reviews.

Elliott, which is notorious for pressuring businesses to improve operations, is expected to meet with Suncor discreetly next week, according to sources.

Elliott's action raises questions about Little's effectiveness as CEO, a position he assumed in 2019 after serving as COO since December 2017.

"My sense is that Bay Street is not going to give (Suncor) the benefit of the doubt after a few years of blunders," said Laura Lau, chief investment officer at Suncor shareholder Brompton Group.

"Will they (shareholders) provide Mark Little with sufficient time? I'm not sure. There are increasing doubts as to whether he is the ideal candidate moving forward "He remarked,

Elliott did not mention Little by name in its letter to Suncor, but stated that the board must be responsible for assembling a management team capable of delivering superior operating and safety performance.

Suncor, which announces quarterly earnings on Monday, declined to comment on a request for comment.

Suncor is the most lucrative per barrel refining and marketing firm in North America and one of Canada's largest fuel wholesalers. However, it has frequently missed output forecasts and failed to satisfy a pledge made in 2018 to produce up to C$2 billion ($1.6 billion) of free cash flow improvement by the end of 2023, delaying the aim until 2025.

Little, 57, ascended the ranks after joining Suncor in 2008; he had previously worked for Imperial Oil (NYSE:IMO) and its primary owner Exxon Mo(NYSE:XOM). Suncor's recent operational troubles, according to some Canadian energy industry insiders, are the result of a push to automate operations as much as possible, which makes the company less adaptable when things go wrong.

One former Suncor employee who worked with Little remarked, "He (Little) is liked, he's clever, and he's brilliant, but he's all about procedures."

Because he still advises in the industry, the source declined to be named.

Elliott, a firm that invests $51.5 billion in assets, has campaigned for the removal of top executives at Twitter (NYSE:TWTR), Marathon Petroleum (NYSE:MPC), and eBay (NASDAQ:EBAY). It launched seventeen campaigns in 2021, won eleven board seats in the past year, and has a reputation for directing strategy from within the boardroom.

Elliott denied comment for this article. Suncor's stock price underperformance may be traced back to the early days of the epidemic, when, in response to dropping crude oil prices, the company cut its dividend while rival Canadian Natural (NYSE:CNQ) Resources Ltd maintained its dividend distribution.

In 2020, Canadian Natural surpassed Suncor as the country's most valued energy firm due to its lagging share price.

Then followed a series of accidents at Suncor's oil sands and refinery plants, including the July 2018 revelation that a major slope at its newly-opened Fort Hills mine was unstable and required repair before production could be ramped up.

Despite the concerns, Little received 127 percent of his yearly bonus opportunity for 2021, compared to 74 percent for 2020, according to corporate documents. Elliott stated in a public presentation that CEO salary levels over the past many years indicate that the board is "not adequately holding management accountable for present performance."

Matt Murphy, an analyst with Tudor Pickering Holt in Calgary, stated, "If you look at investor commentary over the past two years, there has been some dissatisfaction on the operations side, which boils down to management dissatisfaction."