On Wednesday, Suncor Energy announced that it has agreed to purchase TotalEnergies’ Canadian operations in the Alberta oil sands for $5.5 billion.
TotalEnergies holds a 31.23 per cent working interest in the Fort Hills oil sands mining project and a 50 per cent working interest in the Surmont in situ asset. The purchase means Suncor will own 100 per cent of the Fort Hills operation
“This transaction represents a major step in securing long-term bitumen supply to our Base Plant upgraders at a competitive supply cost,” said Rich Kruger, Suncor’s President and Chief Executive Officer.
Suncor says this 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. With the transaction complete, Suncor will have 100 per cent ownership of Fort Hills, which the company says along with the Firebag and MacKay River in situ assets, it will have sufficient long-life, physically-integrated bitumen supply in the Fort McMurray region. Suncor says it will then fully utilize the Base Plant upgraders post the end of the Base Mine life in the mid 2030s.
“These are valuable oil sands assets that are a strategic fit for us and add long-term shareholder value,” added Kruger. “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.”
Calgary-based Suncor says the sale has a potential for additional payments of up to an aggregate maximum of $600 million. This is conditional upon Western Canadian Select benchmark pricing and certain production targets. The company says the purchase of TotalEnergies interest in Fort Hills will be funded by debt. This will exceed the company’s $12-15 billion target range.
The company says it will maintain the current allocation of funds flow after dividends, capital and non-operational benefits of 50 per cent to debt reduction and 50 per cent to share buybacks in line with the capital allocation framework. Suncor expects to return to within its target net debt range in 2024 based on current expected commodity prices.
Suncor says despite the debt, it intends to increase the quarterly dividends by about 10 per cent following closing.
Subject to closing, the transaction will have an effective date of April 1, 2023.
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