Suncor tweaks worker pay, CEO to keep focus on 'elimination of work' in 2024

Suncor Energy (SU.TO)(SU) CEO Rich Kruger says he’s not done whipping the integrated oil and gas giant into shape. After what he calls “disruptive and potentially distracting” organizational changes in 2023, Suncor is tweaking workers' pay, while continuing to tighten up operations at mines and refineries.

Kruger, a long-tenured industry veteran, has run Suncor since April 2023. Since then, he has led a company-wide efficiency push that’s slashed more than a thousand jobs. He's also deploying a growing fleet of 400-ton autonomous mining trucks capable of displacing nearly two human-driven third-party vehicles.

Kruger was also tasked with repairing Suncor’s safety record when he took the top job, which was tarnished by a dozen worker fatalities at its oilsands operations since 2014.

The poor safety record, along with lacklustre financial performance against Canadian oil and gas peers, made Suncor a target for U.S. activist investor Elliott Investment Management in 2022. The firm appointed independent directors to Suncor’s board as part of a settlement.

If that weren't enough, Suncor also experienced a significant cybersecurity incident last summer impacting its Petro Canada gas stations.

“If I look at it, I would say in 2023 there was just a large amount of change,” Kruger said on the company’s post earnings conference call on Thursday morning. “I would describe a lot of that change as disruptive and potentially distracting, a lot of things that could distract people from performing.”

However, he says 2023 was the safest year in Suncor's history, adding there were no life-altering or life-threatening injuries for the first time since 2015.

Suncor reported fourth-quarter financial results after the closing bell on Wednesday, earning $2.82 billion compared to $2.74 billion in the same period in 2022. Toronto-listed shares traded virtually flat in Thursday's session.

Suncor says it booked its best-ever oilsands production numbers during the three months that ended on Dec. 31. That’s despite a smaller workforce. Kruger says Suncor reduced its headcount by 20 per cent between June and November last year.

“We did this through the elimination of work that was judged to be low priority or simply unaffordable,” he said on Thursday. “We spent $275 million in severance cost to achieve a $450 million annual savings starting this year, $50 million above our target.”

At the same time, the company says 45 autonomous ultra class trucks are now working at its Base Plant mine. It is aiming to deploy 91 by the end of the year.

“The cost of moving ore from a mine to a crusher, that's the single-highest cost component in bitumen production. . . We know exactly what our unit cost competitive gap is relative to best in class,” Kruger said.

Still, he believes Suncor “left some on the table” in 2023 when it comes to improving its operating performance and creating better coordination across multiple job sites.

“All of our sites now, upstream and downstream . . . can collaborate on sharing ideas and bringing about in a faster way to execution company-wide,” Kruger added. “You might say, ‘Well, why weren’t you organized like that before?’ Well, that’s a different question.”

Suncor management did not discuss further job cuts on Thursday. However, Kruger described a new “employee performance evaluation system” implemented in the second half of last year.

“[It’s] designed to evaluate an individual’s performance based on their impact, versus their effort, or the activity behind their work,” he said, noting this will be linked to base salary increases and annual bonus.

Kruger also says Suncor plans to simplify its annual incentive program for all employees in 2024.

"We win and lose as a team," he said.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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