Varcoe: ‘Hit the ground running’ — Rich Kruger back in Canadian oilsands, this time leading Suncor Energy

Experience running a large petroleum producer — check.

Ability to manage a massive, complicated oilsands mine — check.

Intricate knowledge of Canada’s oil refining and marketing business — check.

I’m not precisely sure what was on the list of qualifications for Suncor Energy during its seven-month search for a new chief executive, but this seems like a good start.

And incoming CEO Rich Kruger seems like a pretty good fit.

“He checks all the boxes,” Laura Lau, chief investment officer with Brompton Group, said Tuesday.

“He’s somebody who’s held in high regard by the investment community — that was another box that needed to be checked off,” added analyst Phil Skolnick of Eight Capital.

“He is the perfect fit, it seems to me … because it’s a big organization and there is a lot that needs to be changed.”

On Tuesday, the former Exxon Mobil executive who ran Imperial Oil for six years until 2019 was named Suncor’s new CEO. (Exxon Mobil owns almost 70 per cent of Calgary-based Imperial.)

Kruger, 63, will take over the helm of Suncor on April 3. He replaces Mark Little, who left in July as the company was under growing scrutiny from an activist U.S. investor, Elliott Investment Management.

Interim CEO Kris Smith, who has been in the post since last summer, will become the company’s chief financial officer.

“I am very excited and energized about the opportunity to lead Suncor into the next chapter,” Kruger said in a statement.

For Suncor, it’s the latest turn in a story that’s become more complicated in recent years as the company fell short of market expectations and underperformed some of its oilsands peers.

The company, with a $61-billion market capitalization, has also faced growing questions about its safety record after several workplace fatalities since 2014.

That prompted Elliott Investment Management last April to call for changes at the leadership level, an overhaul of Suncor’s operational and safety culture, and for a review to consider selling off its Petro-Canada retail chain — something the board later rejected.

Little left the organization in July, one day after the death of a contractor at Suncor’s base plant mine, and the search for a new CEO began.

Enter Kruger, who retired at the end of 2019 as Imperial Oil’s leader.

“It’s a surprise. When he retired, I thought he retired for good,” said Skolnick.

“With Rich, it’s positive. He ran Imperial Oil, and Imperial is pretty much a look-alike of Suncor.”

Kruger, who was born in Minneapolis and started with Exxon Mobil in 1981, ran Imperial through much of the past decade.

During that period, Imperial increased its production from 295,000 barrels of oil equivalent (boe) per day to more than 405,000, including boosting output from its new Kearl oilsands mine.

Under his tenure, Imperial dealt with the collapse of global oil prices in 2014 and sold off the company-owned Esso retail stations for $2.8 billion in 2016.

It also approved, and later postponed, the proposed $2.6-billion Aspen oilsands development in the midst of ongoing pipeline constraints in Canada and provincial production quotas — a policy Kruger opposed.

Kruger was also a fierce defender of the oilsands industry.

He’s not the only one-time Exxon executive to make such a high-profile shift and take over a major Canadian integrated producer.

Former Imperial and Exxon executive Ron Brenneman became CEO of Petro-Canada in 2000, prior to its takeover by Suncor Energy nine years later in an $18.4-billion deal.

Former Imperial vice-president Brian Livingston said Kruger understands the complexities of Canada’s oilsands business and the U.S. energy market, and has extensive experience interacting with a board of directors.

“He will try to reach out to people. He won’t sit in his office and hand out missives and expect people to do it. He will actually go and talk to people,” said Livingston.

“He will hit the ground running.”

Kruger also understands Suncor’s stake in the Syncrude oilsands operations; Imperial and Suncor are part-owners of the Syncrude joint venture, which is now operated by Suncor.

With Smith shifting into Suncor’s CFO role, it also lays out “a clear CEO succession path in our minds,” RBC Capital Markets analyst Greg Pardy said in a research note.

Investors seemed to welcome Tuesday’s announcement, with Suncor Energy stock climbing by almost two per cent on the Toronto Stock Exchange.

Elliott, which came to an agreement on the appointment of three new independent directors last year, also appeared to back Kruger’s appointment.

The fund “is pleased the board went with an external CEO candidate, which is what they believe the company needs,” according to a person close to Elliott.

For Kruger, the job ahead will be to accelerate efforts to reshape Suncor’s culture and bring a sharper focus on safety.

He will also have to deal with ongoing operational challenges at its Fort Hills oilsands mine. Suncor recently acquired a larger share in the project from Teck Resources.

Lau, whose company previously held Suncor stock, said she would reconsider investing in the integrated producer, given Kruger’s track record and experience doing things the “Exxon way,” with an emphasis on process, safety and efficiency.

“Oilsands is a whole different ball game. … It’s a different skill set and they’re having operational issues, so you want someone with that operational expertise,” she added.

“The guy obviously knows what he’s doing.”

Chris Varcoe is a Calgary Herald columnist.

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