Suncor reducing contractor workforce by 20% to improve safety, efficiency

Suncor Energy Inc. is reducing the size of its contractor work force by 20 per cent as part of its effort to improve safety and performance at its oilsands operations.

Interim CEO Kris Smith told analysts on a conference call Thursday that more than half of the workforce reductions have already been completed, with the remainder on track to be completed by the first half of 2023.

He said the decision to reduce the number of contractors working on Suncor sites was the result of "a thorough review of the makeup of our front-line workforce" and aimed at reducing the number of exposure hours that put the company at risk for workplace injuries or fatalities, as well as improving efficiency and competitiveness.

"My priority has been to remove distraction from the organization and to focus our employees on safe, reliable operations in our biggest opportunities," Smith said on the call.

Suncor's safety record has been under the microscope in 2022, ever since U.S.-based activist investor Elliot Investment Management publicly called for change at the Calgary-based energy company.

Since 2014, there have been at least 12 fatalities at Suncor's oilsands facilities in northern Alberta, including five since 2021. That's more than all of its industry peers combined.

Smith stepped into the CEO role in July to replace Mark Little, who stepped down from the top job one day after a 26-year-old contract worker was struck by equipment and killed at Suncor's Base Mine.

He said Suncor is also enhancing its contractor management processes, and partnering with experts to ensure managers in all departments and operations have the latest safety training and education.

The company is also installing collision prevention technology on over 1,000 pieces of mobile mine equipment to eliminate what it calls a "key risk" within its operations. Fatigue management systems will also be completed across all of Suncor's mines by early 2023, Smith said.

On Wednesday evening, Suncor reported a net loss of $609 million in the third quarter, the result of taking a $3.4-billion writedown against its share of the Fort Hills oilsands mine.

The net loss, which works out to 45 cents per common share, is in contrast to an $877-million profit, or 59 cents per common share, in the prior year's quarter.

Suncor buying Teck's stake in Fort Hills

Suncor announced last week it will buy out Teck Resources Ltd.'s 21.3 per cent stake in the Fort Hills oilsands project for approximately $1 billion. The agreed-upon sales price reflects a lower market value for the mine, resulting in a non-cash impairment charge.

On an adjusted basis, however, Suncor said it earned $2.6 billion for the three months ended Sept. 30, or $1.88 per share, more than double the $1 billion or 71 cents per common share it earned on an adjusted basis in the same three months of 2021, thanks to significantly higher crude oil prices and upstream production.

Suncor's total upstream production increased to 724,100 barrels of oil equivalent per day (boe/d) in the third quarter of 2022, compared to 698,600 boe/d in the prior year's quarter. Refinery crude throughput was 466,600 barrels per day and refinery utilization was 100 per cent in the third quarter of 2022, compared to 460,300 barrels per day and 99 per cent in the third quarter of 2021.

Suncor has said it will hold an investor presentation on Nov. 29 to provide additional information about its plans to improve safety and performance, as well as the results of its review looking into the possible sale of its retail division.

Suncor, which recently sold its wind and solar assets as well as its exploration and production assets in Norway, is trying to streamline its portfolio to focus on its "core business."

Eight Capital analyst Phil Skolnick said that could mean Suncor is about to embark on an oilsands "buying spree." He said in the aftermath of the deal to acquire Teck's share in Fort Hills, he wouldn't be surprised if Suncor is also in negotiations with French company TotalEnergies SE for its remaining 24.6 per cent stake in the Fort Hills project.

"We could also see (Suncor) looking to acquire CNOOC and Sinopec's combined 16.2 per cent interest in Syncrude (China has been reported to be looking to exit Canada)," Skolnick said in a research note.