Hedge fund Elliott Administration has launched an activist marketing campaign towards Suncor Power, certainly one of Canada’s greatest oil producers, calling for an overhaul of firm management in a guess on the way forward for the nation’s controversial oil sands.
Elliott, which mentioned it was certainly one of Suncor’s prime shareholders with a 3.4 per cent stake, hit out at a “slow-moving, overly bureaucratic company tradition” that left the corporate underperforming friends and failing to take advantage of a powerful place atop the world’s third-largest confirmed oil reserves.
“With the suitable management, the corporate can restore its prior success,” Elliott wrote in a letter to the board dated Thursday. “Suncor’s built-in oil sands operations are a vital a part of the worldwide power provide, and we consider these belongings are dramatically undervalued.”
Whereas the marketing campaign displays Elliott’s unhappiness with Suncor’s board and technique, it’s also a vote of confidence in Canada’s oil sands, the place producers take away tarlike bitumen from the bottom in a carbon-intensive course of.
Oil sands corporations had fallen out of favour when crude costs had been decrease and traders targeted on the environmental impression of their operations. Suncor is among the many oil sands corporations which have proposed an enormous new mission to seize carbon from their initiatives alongside the Athabasca river in Alberta province.
Elliott known as for 5 new administrators on Suncor’s board, a evaluate of administration, a pointy improve in returns to shareholders and the potential sale of the corporate’s retail enterprise, Petro-Canada, which operates a community of round 1,800 petrol stations.
“Shareholders have seen their funding lag behind almost all large-cap North American oil and fuel corporations, as Suncor’s share worth has remained nearly unchanged since early 2019, whilst oil costs have climbed to their highest degree in nearly a decade,” Elliott wrote.
Suncor’s shares are up about 5 per cent previously decade, in contrast with a 90 per cent rise within the shares of Canadian Pure Sources, one other giant oil sands producer, and a 14 per cent rise within the S&P 500 power index. The Calgary-based firm didn’t instantly reply to a request for remark.
Elliott, with about $51.5bn in belongings underneath administration, mentioned a reboot of Suncor may increase its worth by 50 per cent. Suncor’s market capitalisation was C$60bn ($47bn) on Wednesday, and its shares rose 10 per cent after Elliott’s announcement on Thursday.
The hedge fund’s newest transfer comes amid a world seek for power provides after Russia’s invasion of Ukraine despatched crude oil costs above $100 a barrel.
“These belongings are fairly distinctive in that they’ve a long time of manufacturing life forward of them,” mentioned an individual conversant in Elliott’s transfer. “There’s a vital place for the Canadian oil trade going ahead.”
Suncor produced 743,000 barrels of oil a day final 12 months, about 15 per cent of the 4.7mn b/d produced in Canada, which is by far the US’s greatest supply of international oil.