Canadian energy company Suncor Energy has signed an agreement with TotalEnergies to purchase the latter’s affiliate TotalEnergies EP Canada, for a total cash consideration of C$5.5bn (about $4.1bn).
TotalEnergies EP Canada owns a 31.23% stake in the Fort Hills oil sands mining project and a 50% interest in the Surmont in situ asset.
The acquisition will add 135,000 barrels per day of net bitumen production capacity and 2.1 billion barrels of proved and probable reserves to Suncor’s oil sands portfolio.
In addition to the cash consideration of C$5.5bn, Suncor will make additional payments of up to C$600m, conditional upon benchmark pricing and certain production targets.
The transaction is expected to be completed by Q3 2023, subject to the waiver of TotalEnergies EP Canada’s partners pre-emption rights and customary closing conditions.
Suncor Energy president and chief executive officer Rich Kruger said: “This transaction represents a major step in securing long-term bitumen supply to our Base Plant upgraders at a competitive supply cost.
“These are valuable oil sands assets that are a strategic fit for us and add long-term shareholder value.
“The acquisition also introduces flexibility and optionality into our long-range capital plan, providing us with further discretion in respect of the timing and scope of future oil sands developments.”
Upon closing of the transaction, Suncor will have complete ownership of the Fort Hills project, and 50% of the Surmont in situ project, while ConocoPhillips Canada holds the remaining 50%.
Together with the Firebag and MacKay River assets, the Fort Hills property will provide the company with long-term bitumen supply in the Fort McMurray region.
Surmont is a high-quality, producing asset that adds long-life production to Suncor’s oil sands portfolio, and has the potential for growth through cost-competitive expansion.
When the Base Mine life ends in the mid-2030s the combined bitumen production from the Fort Hills and Surmont would replace half of the current Base Mine bitumen production.
Furthermore, TotalEnergies will allocate at least 40% of the cash flow generated this year to its shareholders, either through share buybacks or a special dividend distribution.
