The Suncor Energy logo is seen at their head office in Calgary, Alberta, Canada, April 17, 2019.
The Suncor Energy logo is seen at their head office in Calgary, Alberta, Canada, April 17, 2019. Reuters / CHRIS WATTIE

Canadian oil and gas producer Suncor Energy, which is under pressure from an activist investor firm, on Tuesday said it is making progress on safety and operational improvements after posting stronger-than-expected first-quarter results.

Elliott Management last month publicly called for new board directors, a management overhaul and a strategic review at Suncor, arguing its shares have lagged oil and gas peers even as crude prices surged to multi-year highs.

On Tuesday's call to discuss the quarterly earnings, Suncor Chief Executive Officer Mark Little said the company looked forward to engaging in constructive discussions with Elliott.

However, he pushed back against the activist firm's suggestion that Suncor explore selling its fuel retail business to provide additional shareholder returns. Suncor is an integrated oil company, meaning it has both upstream production and downstream refining and marketing operations.

"We think it (retail) is key to maximising value across the integrated business chain," Little said. "We think we have the best downstream business in North America and we think it's important that it stay together."

Suncor also held its annual general meeting on Tuesday, and shareholders voted to re-elect all 11 existing board members. One of Elliott's demands was to add five new independent directors, although it has not publicly put forward any names.

Little pointed to new executives in the company's oil sands business as a sign of concrete action to address repeated operational mishaps that have resulted in four fatalities on Suncor sites since late 2020 and raised questions about Little's future as CEO.

Suncor late on Monday reported net income of C$2.95 billion ($2.27 billion) in the first quarter, increased its dividend and said it was exploring the sale of its UK North Sea assets.

"We applaud Suncor for the better-than-expected results; however, we believe the market needs to see consistent meet (or) beats and a lack of operational mishaps," Phil Skolnick, an analyst at Eight Capital, wrote in a note, referring to Suncor meeting or exceeding analyst forecasts.

Suncor shares were last down 4.4% at C$43.28 on the Toronto Stock Exchange amid a broad sell-off in energy stocks.

($1 = 1.3010 Canadian dollars)