Suncor Energy Inc. said it is on track to cut its contractor work force by 20 per cent by mid-2023, with cuts affecting its mining and upgrading business.Todd Korol/Reuters
Energy giant Suncor Energy Inc. SU-T said it is on track to cut its contractor work force by 20 per cent by mid-2023, in an attempt to cut costs and address safety issues, as it announced it earned $2.74-billion in the fourth quarter of 2022, a 76-per-cent increase from the $1.55-billion it earned in the same three months of 2021.
Interim chief executive officer Kris Smith told an investor call Wednesday morning that the work force changes target the company’s mining and upgrading business.
“And to be clear, these reductions will not be replaced by our in-house work force,” he said.
Mr. Smith added that the 20-per-cent figure was far from arbitrary. Instead, he said, it’s about “how low can we get that contractor work force down, while ensuring we’re maintaining safe, reliable operations and getting the work done?”
The contractor cuts are part of Suncor’s response to a spate of worker fatalities and injuries at its sites – a safety record targeted by U.S.-based activist investor Elliott Investment Management LP, which last spring publicly demanded improvements to Suncor’s operations and change at the top echelons of the Calgary-based company.
Then chief executive Mark Little resigned not long afterward, in July, the day after the most recent site fatality. He was replaced by Mr. Smith, who was then the executive vice-president of Suncor’s downstream division.
Suncor has said that a permanent replacement for Mr. Little would be announced in mid-February. Mr. Smith said Wednesday he wasn’t in a position to make that announcement, but added he expects the decision will be made “very soon.”
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Mr. Smith has implemented a range of changes to try and improve safety since he was named interim CEO eight months ago, including plans for new collision awareness systems at Syncrude’s Aurora mine and across all of Suncor’s oil sands sites. He told analysts that he is pleased with the progress made on workplace safety so far.
“I always say, this is a journey, and you don’t measure this thing in days and months,” he said.
Suncor is also mulling over what to do about replacing bitumen supplies from its main oil sands mine, north of Fort McMurray, Alta. It’s due to reach the end of its life in the mid-2030s.
Mr. Smith said the company is exploring various options to keep its oil upgraders full. Those include extending the current mine, moving ahead with its proposed Lewis in situ project or expanding its nearby Firebag lease, which Mr. Smith said still has “significant resources left.”
The final decision will boil down to which approach is the most economic and least risky.
“I expect over the next 24 months we’re going to start landing on which option is going to be the lead horse,” he said.
Along with safety issues, Elliott publicly expressed frustration last spring at what it called a recent decline in performance at the energy producer. At Elliott’s urging, Suncor recently completed a strategic review of its downstream retail business, a review that considered possibly selling off the Petro-Canada service station chain. However, the company ultimately decided to keep it.
Suncor attributed its increased profit in the fourth quarter to the higher price of crude and stronger results for refined products, as well as higher upstream production, partially offset by increased operating expenses.
Suncor said it earned $2.43-billion, or $1.81 per common share, compared with $1.30-billion, or 89 cents per common share, in the fourth quarter of 2021.
The energy giant said its total upstream production increased to 763,100 barrels of oil equivalent per day in the fourth quarter of 2022, compared with 743,300 boe/d in the same quarter a year earlier, primarily driven by increased production from the company’s oil sands assets.
With a report from The Canadian Press