Stockwatch Energy Today - From November 29th Oil sands giant Suncor Energy Inc. (SU) lost 77 cents to $45.43 on 19.7 million shares. Today brought its long-awaited investor day -- previously postponed from July -- and various operational and guidance updates for investors to chew over. Not everything was to their taste.
Suncor kicked off the day on a defiant note, declaring that "after careful consideration," it has decided to hold on to its Petro-Canada retail business. The decision rebuffs an earlier demand from activist shareholder Elliott Investment. In a scathing open letter about "the confidence that has been lost [in Suncor]," Elliott wrote in April that Suncor "must ... explore opportunities to unlock the value of high-multiple assets ... including a strategic review of retail." It pegged the value of the 1,800-outlet Petro-Canada chain at up to $9-billion. In July, when Suncor and Elliott shook hands on a stand-still agreement, one of the concessions made by Suncor was to launch the demanded "strategic review," with two Elliott-nominated directors sitting on the review committee.
Despite Elliott's influence, it is not altogether surprising that Suncor has now decided to keep Petro-Canada. Shortly after Elliott published its letter, Suncor's chief executive officer at the time, Mark Little, said during a conference call in May that he was not interested in selling the retail division, as it is a "very strong performer" that improves the margins of the overall downstream business. His successor almost certainly shared this view. In July, when Mr. Little abruptly resigned in the wake of a workplace fatality, Suncor gave the job of interim CEO to Kris Smith, who just so happened to have spent the last nine years in charge of Petro-Canada and the wider downstream arm. (The decision to appoint Mr. Smith as interim CEO preceded the stand-still with Elliott. Two Elliott-nominated directors are on the search committee for a permanent CEO, still in progress.)
Without mentioning Elliott by name in today's update, Suncor implied that it had been able to sway the activist, rather than the other way around. It said the board's decision to keep the retail business was "unanimous" (and thus included the Elliott nominees) and reflects Petro-Canada's status as an "iconic" brand. Even icons have room for improvement, of course, and so Suncor will pursue "continued optimization" of the business. Yet the decision is made: Petro-Canada is sticking around.