Calgary-based Suncor Energy will acquire French TotalEnergies’ Canadian operations in a US$4.1-billion deal for the oilsands patch.
For US$4.1 billion in cash and another potential $450 million under a conditional arrangement, Suncor will acquire TotalEnergies EP Canada’s 31.23% interest in Canada’s Fort Hills oilsands project and a 50% working interest in Surmont, which is operated by ConocoPhillips.
Fort Hills is an open-pit mine containing raw oil sands bitumen.
Suncor says the deal will boost its per day production capacity by 135,000 barrels, adding over 2 billion barrels of proven and probable reserves to its portfolio.
Despite the rising costs and operational challenges of the Fort Hill project, along with oil prices that have dropped 20% from last year, Suncor’s stock was trading up 2.42% at $29.99 per share on Thursday at 11:06 a.m. EST. Year-to-date, Suncor is down a slight 0.73%.
“This transaction represents a major step in securing long-term bitumen supply to our base plant upgraders at a competitive supply cost,” Suncor CEO Rich Kruger said in a press release. “These are valuable oilsands assets that are a strategic fit for us and add long-term shareholder value."
For TotalEnergies, the sale comes as the oil giant reports a decline in first-quarter earnings, with net income down 27% to $6.5 billion. While down for the quarter, the earnings met analyst expectations, Reuters reports.
The sale is expected to close in the third-quarter of this year.
Overall, the deal announcement is an interesting turn of events prompted by falling oil prices.
In late January, TotalEnergies scooped up an additional stake in the Fort Hills project, aggressively squeezing out Suncor, to which it is now selling its entire interest.
By Charles Kennedy for Oilprice.com
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