Canada's Suncor cements comeback from oil sands laggard to sector outperformer

By Nia Williams

Nov 13 (Reuters) - Suncor Energy's SU.TO much better-than-expected third-quarter results cement the revival of Canada's second-largest oil producer, two years after its previous CEO resigned following a string of worker fatalities and operational mishaps.

The Calgary-based producer beat analysts' estimates for cash flow, upstream production and refining throughput and hit its C$8 billion ($5.72 billion) net debt target ahead of schedule, triggering a move to return 100% of free cash flow to shareholders.

Suncor also said it is on track to exceed its 2024 production and refining guidance, helped by record third-quarter output from its oil sands upgraders in northern Alberta.

The latest results, reported late Tuesday, follow a steady improvement in operations and safety since former Exxon Mobil XOM.N executive Rich Kruger took over as CEO in April 2023 and underline Suncor's transformation from oil sands sector laggard to outperformer.

"Today's Suncor is a new Suncor," Kruger told analysts on an earnings call on Wednesday, attributing the success to incremental gains in efficiency and a change in company culture.

"A year ago, 15 months ago, it was 'What the hell can you guys do to get off your knees and back on your feet' and now folks are asking how high can we take this."

Kruger said Suncor had focused on boosting production, giving the example of the Firebag thermal oil sands plant, which on paper has capacity to produce 215,000 barrels per day (bpd), but in September reached 247,000 bpd.

The company's shares were last up 3.9% at C$55.22 on the Toronto Stock Exchange and have climbed 29% year-to-date, outstripping the performance of oil sands peers Canadian Natural Resources CNQ.TO and Cenovus Energy CVE.TO.

Suncor's performance has improved markedly since 2022 when activist U.S. investment firm Elliott Management built a stake in the firm to demand changes, following years of share price underperformance and major operational issues at the Fort Hills mine. Less than three months after Elliott took aim at Suncor, former CEO Mark Little resigned following the death of a fifth worker in three years.

The company embarked on an overhaul of operations that included cutting 1,500 jobs and reducing oil sands mining operating costs. Last month Elliott said it has nearly doubled its investment, because it is convinced ongoing improvements will yield a higher share price.

It typically takes much longer to turn a company around and Kruger's achievements to date have been amazing, said Laura Lau, chief investment officer of the Brompton Group, which holds Suncor shares.

"I think Suncor can keep this up, because momentum breeds momentum," she said.

Suncor had a great quarter, said Scotiabank analyst Jason Bouvier, but warned it would be much harder to beat year-on-year comparisons in 2025 and the company still has to deal with end-of-life implications at its oldest oil sands assets in the coming decade.

The company also faces a gloomier outlook for global oil prices, which have been trending lower this year amid concerns about demand.

($1 = 1.3985 Canadian dollars)

(Reporting by Nia Williams in British Columbia; Editing by Diane Craft)

((nia.williams@thomsonreuters.com; +1 403 531 1624; Reuters Messaging: nia.williams.thomsonreuters.com@reuters.net))