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Suncor Energy (NYSE:SU) was downgraded to Market Perform from Outperform by Raymond James analyst Michael Shaw in a note Monday.
The analyst, who has a $57 per share price target on the stock, told investors that repeated safety issues and the company’s CEO departing prompted the re-rating.
Suncor announced Friday that Mark Little will be stepping down from his role as President and CEO immediately, and Kris Smith, the current Executive Vice-President of Downstream, will step in as interim CEO.
Shaw said Little’s departure follows another fatality at Suncor’s Base Mine on Thursday Morning.
“We do not expect the market will be surprised by Mr. Little’s resignation. Suncor has been plagued by safety issues in recent years. Safety, along with SU’s operational shortfalls, was a principle issue raised by activist investor Elliott Investment Management in the spring,” wrote the analyst. “We expect an external CEO will be better positioned to reset the culture at Suncor and help right the operational issues that have gone alongside the safety issues.”
The analyst stated Suncor has a number of characteristics that make it attractive in a volatile energy market, including “an unmatched downstream positioning, low decline assets, and natural hedge against wider Canadian heavy differentials being key among them.”
“Nonetheless, until the safety and operational issues are resolved, we recommend that investors look to other Canadian large-cap and integrated producers for energy exposure.”
