In the annals of oil-patch CEOs, you’d be hard-pressed to find anyone quite like Rich Kruger. Sure, Calgary has always been a place packed with larger-than-life characters. But the Minnesotan has a unique brand of what can only be described as whimsy that’s rare in these parts.
In person, his neat, close-clipped grey hair and rectangular glasses give off a standard executive vibe (though he does tend to eschew ties). But he’s an avid fan of simile and metaphor, and he loves a good sports analogy—analogies in general, actually, which anyone who’s tuned in to one of his analyst calls (“an early-morning serving of meat and potatoes,” he might say) will know well.
“Think back to that old campus bar you went to in university. They served beer and, if it was a high-class joint, maybe some cheap wine out of a box,” he said during a business update in May. “Now I’ll come back to today. While others serve beer, Suncor’s
serving craft cocktails. If our customers want synthetic sour, we got it. Synthetic sweet? Coming right up. Diluent on the rocks? Here it is. PFT neat? Enjoy. You get the point.”
His love of metaphors kinda reminds you of Ted Lasso (one of his favourite TV characters), if Ted Lasso ran one of the largest oil producers in Canada, with $52-billion in revenue and $8.3-billion in profit, 15,000 employees, 1,800 Petro-Canada gas stations and a plethora of oil and gas assets. Kruger’s rationale is straightforward: People connect with stories and analogies, he says with a shrug, so he uses them to help make memorable connections. He listens to plenty of other earnings calls—”Sometimes you want to show up and bring a pillow, because it’s not particularly uplifting”—and he doesn’t want to fall into the trap of using too much jargon and losing sight of who he’s speaking to. “If you say, ‘I don’t want to miss a Suncor earnings call because I can’t wait to hear what Rich has to say’—well, if we create that environment, that’s a good space to be in.”
As he likes to joke with his no-doubt-anxious communications staff, “I can’t wait to hear what I have to say.”
Kruger’s midwestern folksiness belies a hard edge, however. The 65-year-old former CEO of Imperial Oil was lured out of retirement in 2023 to head off a shareholder revolt led by U.S. activist hedge fund Elliott Investment Management. Elliott’s list of grievances was long: Suncor’s oil sands production had declined by approximately 10 per cent in 2020 due to pandemic-related curtailments and operational challenges, and per-barrel operating expenses were rising. Its stock was languishing, and it had the worst safety record in the oil patch.
SUNCOR PRODUCTION AND THROUGHPUT
Thousand barrels of oil equivalent per day
Exploration and production
Oil sands synthetic crude oil
Refinery crude throughput
THE GLOBE AND MAIL, SOURCE: SUNCOR
In the intervening 18 months, Kruger has executed a deft financial turnaround and increased production to record volumes. Suncor’s share price has responded: When Kruger took over in April 2023, the stock was trading around $42. It has since increased by more than 35 per cent. As Morningstar DBRS vice-president of energy and natural resource ratings Andrew O’Conor puts it, “The Suncor team is walking the talk.”
But the company still faces plenty of challenges, including the biggest one of all: running an oil producer in the midst of a climate crisis that most of the world agrees will eventually require a wholesale shift to renewable energy. Not long before Kruger came aboard, Suncor sold off a swath of renewable assets—including wind farms in Alberta and Ontario—to concentrate on its main product: crude oil. The move predictably infuriated climate activists and prompted uncomfortable questions about how Suncor could remain publicly committed to reaching net zero by 2050.
Kevin Thomas, CEO of the Shareholder Association for Research and Education (SHARE)—which advocates for more transparent and accountable corporate sustainability practices—also doesn’t see how doubling down on the oil sands is a winning strategy if Suncor wants to lock in institutional investors looking for safe, long-term bets. “You have a choice between a company that’s got a strategy for transition for a sustainable future and one that’s sticking in its heels,” he says. “Where do you think the smart money is going to go?”
Yet, the doubling down has only sharpened under Kruger and his team. Fossil fuels will continue powering the world’s economy for a while yet. And in a country with the fourth-largest oil reserves in the world, says CFO Kris Smith, “Suncor has not only an opportunity, but an obligation, quite frankly, to responsibly produce this world-scale resource.”
From a money-making perspective, Kruger’s strategy of continuing to pull fossil fuels out of the ground as efficiently as possible is sound. Investors certainly seem to be on board, at least while the party lasts. But there’s no denying that the hydrocarbon era will end, though the timeline is hotly debated. And new Canadian financial reporting requirements that could come into effect in 2027 may force oil producers like Suncor to account for Scope 3 emissions—those released when users actually burn the stuff and which comprise roughly 85 per cent of its carbon output.
Morningstar DBRS noted recently that the strength of Suncor’s balance sheet and ongoing emissions-reduction initiatives “provide it with the financial flexibility to navigate the energy transition path.” But the agency was abundantly clear that it considers the cost of carbon and greenhouse gas emissions as relevant factors in its annual rating of Suncor—which now sits at A (low)—since ever-increasing regulations “will likely limit the growth potential and add costs for all oil and gas companies in Canada.” That’s particularly true for Suncor because of its exposure to more carbon-intensive oil sands developments.
Meanwhile, Kruger is fond of telling analysts that Suncor is now a company that focuses on its core assets. “What’s core for us?” he said to investors in May. “What’s core are assets that make money.”
In other words, synthetic sweet or sour, diluent on the rocks, PFT neat—pick your poison.
To understand how Kruger has transformed Suncor from lacklustre performer with a dismal safety record to one that just hit a new production high and celebrated its safest year on record, we have to go back to 2020.
Russia and Saudi Arabia were in the midst of an oil-price war, which erupted in March of that year after the two countries failed to reach a consensus on production levels. At the same time, the global economy had practically ground to a halt due to COVID-19 lockdowns, sending the price of West Texas Intermediate crude, a North American benchmark, into negative territory for the first time since trading began in 1983.
On top of all that, Suncor had some operational stumbles, including a fire at its Base Plant mine in Fort McMurray in August 2020 that shut down production for almost a month. Even as oil prices recovered, the company ended 2020 with an operating loss of $2.2-billion and a net loss of $4.3-billion. Never before had its upstream and downstream operations been so strained at the same time. The management proxy circular in February 2021 bluntly stated: “Absolute returns in the industry have been untenable and operational issues have compounded the loss for our shareholders.” In response, Suncor reduced its dividend by 55 per cent and paused share buybacks.
In December 2021, another setback: A deep freeze blanketed northern Alberta, bedevilling the company’s circa-1970s Syncrude mine and its Firebag operation. Production tumbled by close to 200,000 barrels a day, and Suncor’s overall annual production for the year came in about 1 per cent below its target. Nonetheless, by spring of the following year, Suncor’s stock price had nearly doubled, buoyed largely by a surge in oil and gas prices prompted by Russia’s war in Ukraine, and it paid out what was then the highest quarterly dividend in its history. But it still lagged well behind the more than 300 per cent share-price gain enjoyed by sector leader Canadian Natural Resources Ltd. And with just a handful of sizable Canadian oil sands companies left, its underperformance stuck out in an industry swimming in cash amid global energy shortages.
Then there was Suncor’s woeful safety record. The company reported 12 deaths at its sites between 2014 and 2022—more than all of its rivals combined. Those fatalities, along with the company’s uninspiring performance, caught the attention of Elliott, a fund known for using bare-knuckle tactics to shake up leadership and force operational changes.
In early 2022, Elliott acquired a 3.4 per cent stake in Suncor, worth more than $2-billion. That April, it released a letter to Suncor’s directors containing a ream of proposals it reckoned would add $30-billion to the market capitalization—including selling off the Petro-Canada stations, which Suncor acquired when it paid nearly $20-billion for the company back in 2009. It also wanted an executive leadership review, an overhaul of Suncor’s operational and safety culture, and to replace several directors with five independent ones.
According to sources close to Elliott, who aren’t authorized to speak publicly, it didn’t see Suncor’s leadership team, led by then-CEO Mark Little, as a good fit to resolve the company’s myriad problems. Elliott believed the investment community had shied away from Suncor because of the company’s underperformance, leaving its stock price drastically undervalued. But Elliott also believed Suncor had a strong core business, with valuable oil sands and refinery assets. There was plenty of upside if someone could fix the safety issues and make its operations more reliable.
A few months after Elliott’s public letter, and after yet another worker death at Suncor’s Base Mine, Little resigned. Smith, then executive vice-president of downstream operations, took the reins as interim CEO, and the search began for a permanent replacement.
Open this photo in gallery: Kruger had spent nearly seven years as CEO of Imperial Oil before stepping down in December 2019. Four years later he was lured out of retirement to head off a shareholder revolt led by U.S. activist hedge fund Elliott Investment Management
Kruger wasn’t an obvious choice. He’d been idling in retirement in Houston for a couple of years, his kids grown and starting families of their own.
Kruger had spent nearly seven years as CEO of Imperial Oil before stepping down in December 2019. Before that, he’d worked for Texas-based Exxon Mobil—Imperial’s majority owner—which he joined in 1981, holding various roles in upstream and downstream operations all over the world, from the U.S. to the former Soviet Union, the Middle East, Africa and Southeast Asia.
During his time at Imperial, he’d “studied the heck out of Suncor,” it being one of his major rivals. That didn’t stop during his brief flirtation with retirement. With more time on his hands than he knew what to do with, the oil veteran got a “pretty good sense” of the problems dogging Suncor.
Then he got a call from the Suncor board asking whether he’d be willing to come on as CEO.
Pretty much everyone was surprised by the appointment—Kruger’s name wasn’t one that had been bandied about in conversations with investors. But they reacted positively, given his wealth of experience and the fact that he’d been held in high regard by the investment community during his time at Imperial.
When we first spoke with Kruger a month into his new role—in May 2023—he said he’d accepted the offer because he had “a level of empathy” for some of Suncor’s challenges. “I’ve had a long career. It wasn’t the money. It wasn’t the ego,” he said at the time. “But right now, I spring out of bed, and I come in here because I think I can make a difference.”
Fast forward 18 months, and Kruger says settling into the role wasn’t a big transition. “I needed to learn people, I needed to learn assets, but my fundamental beliefs on how I think a business like ours should be well run—that’s not something I had to learn on the fly. It’s just something I had to come in and start applying in this particular situation.”
Elliott, it seems, approves. Sources close to the hedge fund say the team there appreciates Kruger’s strong vision and ability to motivate his team. Likewise, it’s impressed by the improvements to Suncor’s safety and reliability records, and its overall newfound confidence.
At the end of the day, individually and collectively, trust and credibility are always based on delivering on commitments.
— Rich Kruger
Kruger’s oft-repeated refrain has been “focus on the fundamentals”—safety, reliability, operational integrity and, ultimately, profitability. And Smith says Kruger has indeed brought a tremendous amount of clarity and focus to the company, along with a push for simplicity. “Our employees have really gravitated to that,” he says. “Rich has come in and really focused on what drives value in the company.”
And all this has happened at a rapid clip—even Kruger says Suncor is further along than he expected it to be at this point. Sitting in a boardroom high up in Suncor tower in Calgary, he says he trusted his own instincts and his senior leadership team to just get on with it. “It wasn’t one of these, ‘I’ll come in and then study it for six or nine or 12 months, and then we’ll figure out what to do,’” he says. “It didn’t take long to identify areas where we could do better, and so we got after it in a hurry.”
Kruger’s first step was a long, hard look at the company’s past performance versus its potential. His mission: to pinpoint the biggest opportunities and figure out which low-profit activities could be eliminated.
What he found were scads of ways to make more money; after all, even small spending cuts and revenue bumps eventually add up. Kruger was convinced that Suncor could increase production, make its oil sands mining more cost-efficient, and better integrate those assets with its refineries. And it could make those refineries work more efficiently, too, by improving maintenance schedules.
The company spends about $1.2-billion on turnarounds—when site production is shut off to upgrade equipment and conduct maintenance. Kruger wants to save up to $250-million each year by 2026 by making turnarounds shorter and more effective, and extending intervals between planned maintenance. In the second quarter of this year, it shortened them by 10 per cent, which equates to about 12 days of additional upstream production.
Kruger also scrutinized IT spending to make sure everything directly supported Suncor’s overall strategy, which resulted in savings of $280-million.
Another huge reduction came from laying off roughly 1,500 workers, which will save the company around $450-million each year. Those jobs came from across the organization, including contractors. Kruger rejigged his executive team, too, moving Smith to finance and hiring former Exxoner Dave Oldreive to run downstream operations. Chief sustainability officer Arlene Strom retired, and he rolled that role into a new one: senior VP of strategy, sustainability and corporate development, tapping Kent Ferguson away from RBC Capital Markets to take it on.
As Smith put it, “We took a bit of a chainsaw to our above-the-field costs last year to effect the major reset that we needed.” And the company still sees another $150-million in possible efficiencies. “But instead of a chainsaw, we’re now being more surgical.”
Even amid a complete overhaul, last year was the company’s safest on record, and it has delivered record volumes both up- and downstream. Comparing the first half of 2024 with that of 2023, daily upstream production was 61,000 barrels higher. It refined 62,000 more barrels a day and boosted refined product sales by 57,000 barrels. And so far, production levels are on track for another record year.
Open this photo in gallery: Kruger’s oft-repeated refrain has been “focus on the fundamentals”—safety, reliability, operational integrity and, ultimately, profitability.
At first, Kruger worried that the pace of change would be too much, too fast; that workers might lose focus. But he encountered the opposite. “Now that those more disruptive changes are behind us, it gives me incredible optimism going forward. We’ve done the tough things. Now we can just focus on adding value.”
Laura Lau, chief investment officer at Toronto-based Brompton Funds, has been particularly happy with not only the pace of change but with the clarity of Kruger’s plan, with specific actions on getting from A to B. “It’s much more credible when you break it down, rather than just saying, ‘Trust me—I’ll save you $5 or $10 a barrel,’” she says. “Giving details always gives people a lot more confidence.”
It’s a tenet Kruger holds dear. “At the end of the day, individually and collectively, trust and credibility are always based on delivering on commitments.”
The size of special dividends and share buybacks help, too—in the first half of 2024, they amounted to $2.5-billion.
As for Kruger himself, Lau says he reminds her of oil’s “good old days,” when bosses spoke their minds. “He is a character, because most of them have become very corporate,” she says. “He’s an American, as well—a good old boy from Texas. I find it fun.”
O’Conor at Morningstar DBRS says Suncor’s fiscal fundamentals have improved significantly over the past 18 months or so. And while some metrics aren’t quite as robust as its oil sands peers, they are improving. “In a nutshell, Suncor has left no stone unturned in its quest for cost reduction and continuous improvement,” he says. “The company’s entire cost structure, all operating costs and capital costs, have been scrutinized, and cost reductions have been made across the board since Kruger’s appointment.”
O’Conor says the company is also making strides in improving its turnarounds. “You shut down production for a period of time, it can be very detrimental to the bottom line,” he says. By shortening those shutdowns, Suncor is enhancing the output of the company overall and helping to reduce its cost structure.
Amid the change, though, Suncor hasn’t compromised safety, O’Conor says, “and for somebody who actually worked in similar operations as a younger guy, I think that’s impressive.”
Morningstar DBRS will be watching Suncor’s progress with interest in terms of cash flow, whether it beats production expectations and if it can reduce its debt load from where it sits at just under $9.1-billion to its $8-billion target. And, more to the point, whether all of this is sustainable considering the looming energy transition.
While the changes have been good for Suncor’s bottom line, Kruger faced something of a political stumbling block early on in his tenure.
Not even five months into the new job, in August 2023, he said on an earnings call that the Suncor of old had been neglecting “the business drivers of today” in pursuit of future-focused, clean and low-carbon energy pursuits. The company, he said, had been putting a “disproportionate emphasis on the longer-term energy transition.”
A month later, he followed that up with a highly unusual op-ed inspired by a first-season episode of Ted Lasso that quoted American poet Walt Whitman and encouraged people to “be curious, not judgmental” about where Suncor was heading.
Kruger’s comments didn’t sit well with lots of people, including federal Environment Minister Steven Guilbeault, who said at the time that they represented Suncor’s disengagement from climate change and sustainability in favour of short-term profit—particularly with Suncor having ditched its solar and wind assets in 2022. “If I was convinced before that we needed to do regulation,” Guilbeault declared, “I am even more convinced now.”
Kruger, for his part, says his words were misinterpreted. The vast majority of Suncor’s workers drive trucks, operate shovels and run refineries—those were the people he was talking to, he says. “If I have 15,000 people confused, and all I talk to them about is the energy transition and years in the future, I think that can create confusion within an organization about what’s important. Are those topics not important? No, they’re very important. But there’s a smaller subset of people who decide when we move into a new business line on an alternate energy supply, for example, or when we progress major decarbonization investments.”
Nonetheless, Kruger was hauled in front of two parliamentary committees in Ottawa to explain himself, where he told MPs that he supports a price on carbon, since it would drive innovation. But he called a proposed federal emissions cap “unnecessary regulation.”
Kruger says he welcomes any opportunity to participate in discussions about energy and the environment. “Business and government owe it to Canadians to have real, material conversations on those topics, and I’m willing to do that as much and as often as it takes,” he says. “The way I see it, the best way we can ensure a long, sustainable, healthy future is to get today right, and to have it be profitable and high performing. Then we will be better positioned to participate in whatever the future holds.”
SHARE’s Thomas says one of the big problems institutional investors see with companies like Suncor is the disconnect between a 2050 net zero promise and a 2024 reality. He says there’s simply no credible near-term plan that gets them anywhere close to that.
So far, the Pathways Alliance—an industry group comprised of the oil sands’ six largest operators, including Suncor—have for years touted big plans to invest in carbon capture and storage (CCS) and other technologies that they claim will render their operations net zero by 2050. But their efforts at CCS do nothing to harness the carbon created when oil is burned—otherwise known as Scope 3 emissions. It’s a point driven home in the wake of Bill C-59, better known as the federal anti-greenwashing bill. After it was passed in June, Suncor and its peers removed their sustainability reports, and the Pathways Alliance scrubbed its entire website. “We’re going to keep charging ahead on all those things that we think are good for business and good for the environment,” says Kruger, “while we hope that some of the needed clarity of Bill C-59 gets resolved.”
All the ambiguity around net zero has to end, says Thomas. “Oddly enough, we wouldn’t accept this if it was a financial target—we’d expect them to have some actual numbers and plans around it. But when it comes to climate targets, it tends to be a little more lenient.”
Open this photo in gallery: Kruger's thinking is largely focused around increasing production volumes, making Suncor’s oil sands mines more efficient and further improving turnaround times.
Not for long, however. Securities regulators are currently wrestling with the parameters of new reporting rules around Scope 3. Predictably, the industry is pushing back hard. But Thomas argues that the new reporting regs are crucial to understanding how a company and its assets affect—and are affected by—climate change. “For an investor that has a portfolio that includes assets threatened by floods and wildfires, or insurance assets that are threatened by those same effects, they have to be thinking about Scope 3.”
Those effects are very real, even for operators in the oil sands. In 2016, wildfires delivered a $735-million net loss for the company. And this past July, Suncor evacuated non-essential workers and temporarily curtailed production at its Firebag site in response to a wildfire burning out of control in northern Alberta. And it wasn’t the only producer affected: MEG Energy, Cenovus and Imperial all reduced their staffing to essential workers.
Despite all this, clean-energy think tank the Pembina Institute notes that Suncor and other members of the Pathways Alliance continue to shovel profits back to shareholders, money that could’ve been invested in projects to reduce emissions. In 2023, Suncor alone distributed $5-billion to shareholders—over half in dividends and the rest in share buybacks.
Kruger knows there’s more work to be done—but his thinking is largely focused around increasing production volumes, making Suncor’s oil sands mines more efficient and further improving turnaround times. Selling Petro-Canada doesn’t seem to have much traction; after all, as Smith has said, it offers Suncor a ready-made outlet for its gasoline products, which helps underpin its own domestic refineries for the long term.
Asked how long he’ll stick around, Kruger unsurprisingly offers a sports analogy. “I’m only as good as my last game,” he says. “I look at leadership as: There’s no entitlements to it. We don’t get anointed or appointed. We have to keep delivering value.”
Three things are important to his decision to stay on: Is he having fun? Is he making a difference? And does the board feel he’s adding value for shareholders?
“I don’t know if we know what the ceiling is yet, because I think when you start to restore and rebuild your confidence and performance, suddenly your own expectations start to climb,” he says.
“Every morning, I still jump out of bed. I can’t wait to get here. I’m having a ball.”