Suncor Energy Inc. SU, one of Canada's leading energy companies, has recently revised its agreement with Elliott Investment Management. The amendment grants the activist investor an extended timeline until Mar 31 to add a new director to Suncor's board.
In April 2022, Elliott Investment Management publicized its acquisition of a 3.4% stake in Suncor, and has since been advocating for the company to implement organizational modifications and undergo a strategy review.
Before delving into the details of the agreement, it is essential to understand what the company does. Suncor Energy is a Canadian integrated energy company that primarily focuses on the development of oil sands, crude oil, natural gas and renewable energy projects. With headquarters in Calgary, Alberta, Suncor Energy operates in various regions, including the Athabasca oil sands, offshore Newfoundland and the North Sea.
Elliott Investment Management is an activist investment firm based in New York, with offices worldwide. The company specializes in distressed investing, and focuses on restructuring and turning around underperforming businesses. It has been actively involved in pushing for changes at various companies, including eBay, Samsung and Marathon Petroleum.
Elliott's Push for Organizational Changes and Strategy Review at Suncor
After announcing a 3.4% stake in Suncor Energy in April 2022, Elliott Investment Management has pushed for organizational changes and a strategy review in the company. It firmly believes that SU has the potential to significantly enhance its performance by implementing better cost management practices, improving capital allocation decisions and increasing focus on driving profitable growth.
Suncor Energy's Agreement with Elliott Investment Management
In July 2022, Suncor Energy entered into an agreement with Elliott Investment Management, which led to the appointment of three independent directors to the company's board. As part of the agreement, Elliott was granted the right to appoint an additional director to the board by Jan 31, 2023.
However, in January 2023, the companies amended the agreement to extend the deadline for appointing another director by Mar 17, 2023. The most recent amendment has granted Elliott more time until Mar 31, 2023, to appoint an additional director to the board.
Suncor Energy's New Chief Executive Officer
In February 2023, Suncor Energy appointed Rich Kruger, a former Exxon Mobil Corp executive, as its chief executive officer, replacing interim CEO, Kris Smith. Kruger has extensive experience in the oil and gas industry, and is expected to play a crucial role in addressing some of the challenges faced by Suncor Energy.
The revised agreement between Suncor Energy and Elliott Investment Management could have a significant impact on the former’s future. With Elliott having greater influence over decision making, the possibility of organizational changes and a strategy review becomes more likely. However, the appointment of Rich Kruger as Suncor’s CEO brings hope for addressing the challenges faced by the company. Overall, this revised agreement could result in a stronger and more competitive Suncor Energy in the long run.
Zacks Rank and Key Picks
Currently, Suncor Energy carries a Zacks Rank #3 (Hold). Investors interested in the energy sector might look at some better-ranked stocks like NGL Energy Partners NGL, sporting a Zacks Rank #1 (Strong Buy), and Energy Transfer ET and Helix Energy Solutions Group HLX, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NGL Energy Partners: The company is worth approximately $367.70 million. Its shares have increased 19.5% in the past year.
NGL is a limited partnership company that operates a vertically-integrated propane business with three segments — retail propane, wholesale supply and marketing, and midstream.
Energy Transfer LP: The company is valued at around $37.10 billion. It delivered an average earnings surprise of 11.43% for the last four quarters and its current dividend yield is 10.18%.
ET currently has a forward P/E ratio of 8.41. In comparison, its industry has an average forward P/E of 9.20, which means the company is trading at a discount to the group.
Helix Energy Solutions Group: The company is valued at around $1.10 billion. In the past year, its stock has increased 52.7%.
HLX currently has a forward P/E ratio of 11.01. In comparison, its industry has an average forward P/E of 11.20, which means the company is trading at a discount to the group.
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