Suncor wants to cut out oil ‘middlemen’ and sell direct to customers

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Suncor Energy Inc. is planning a range of measures to cut out the middleman, including selling straight to customers as it keeps its focus on boosting profits under new boss Rich Kruger.

The oil giant is also leasing its own oil tankers to operate in the Pacific, which will slash its shipping costs, the company said Wednesday as it announced its first-quarter results.

Suncor SU-T, like most other oil companies that own and operate production and refining facilities, emphasizes the value of owning integrated assets because they allow the company greater control over its business.

Beyond the refining stage, third-party oil traders act as the conduit from producers to customers, handling tasks including the commodity’s transport, storage and financing from producers to customers around the world.

But Dave Oldreive, Suncor’s vice-president of downstream operations, said the company is reducing its reliance on those third parties, instead expanding its own trading capabilities to make as much as it can from each barrel.

“We’re well-positioned to deliver volumes to our customers, remove that middleman and capture the full value for Suncor,” Mr. Oldreive said.

Suncor’s logistics network across Canada and on both coasts allows it to get diesel and other products to the most profitable markets, and Mr. Oldreive said the company’s trading arm has been able to find numerous niche markets to help garner the best value for each barrel.

In the first quarter of 2024, for example, Suncor delivered diesel from the East Coast to Scandinavia, where customers are prepared to pay a premium to avoid the complexities arising from conflicts that are being felt in nearer markets in Eastern Europe and the Middle East.

“There are some really interesting things we’ve been able to do to capture the diesel market,” he said. “We can’t control where the market goes, but what we can do is make sure we find the homes and the best customers, and capture the full value along the value chain.”

Latin American markets are also prepared to pay more, Mr. Oldreive said, and the company is eyeing that region to increase its direct sales.

Crude coming off the newly expanded Trans Mountain pipeline will head primarily to California and Asian markets, he said, with Suncor’s trading offices in Calgary, Houston and in London working to strengthen relationships along the West Coast and in Asia.

Thursday will mark the one-year anniversary of Mr. Kruger’s first earnings call as chief executive officer of Suncor. He said Wednesday that much has changed at the company under his watch, including a new executive team, and strategies and priorities he says are clearer and simpler.

“We’ve made significant progress in a year. But make no mistake, we’re not done,” Mr. Kruger told analysts during the company’s first-quarter earnings call.

Suncor on Wednesday reported a production record in the first quarter of 2024, of 835,300 barrels per day, as well as its highest-ever refining volumes.

The Calgary-based company booked $1.6-billion, or $1.25 a share, in net earnings in the quarter ended March 31, down from $2.05-billion in the same period a year ago.

Mr. Kruger said Suncor is further ahead at his one-year anniversary than he anticipated, and he expects the company’s strong financial and operating performance to continue through the year.

“There’s a level of focus and energy and urgency of results that’s contagious,” he said. “What’s next is continuing to capitalize on that, and go from playing checkers extremely well to playing chess extremely well.”

Suncor is also looking to add automated haul trucks at various oil sands mines to help boost its bottom line.

Six months ago, it had about 30 of the driverless vehicles at its Base Plant site in Northern Alberta. Now it has 56, and is on-track to get to 91 by the end of the year. The company plans to roll out more autonomous trucks at its Millenium oil sands mine at Base Plant starting next week.

Suncor pegs the impact of each truck at around $1-million per year in cost savings and additional productivity.