Suncor Energy (TSX: SU) has significantly expanded its portfolio through the acquisition of TotalEnergies’ Canadian operations, in a transaction finalized on Wednesday. This strategic move, including the purchase of TotalEnergies EP Canada’s 31.23% stake in the Fort Hills oil sands mining project in northern Alberta, leads to Suncor gaining full ownership of the Fort Hills project.
“The transaction secures additional long-term bitumen supply to fill our Base Plant upgraders at a competitive supply cost, addressing a key uncertainty for the company and adding long-term shareholder value,” said Suncor CEO Rich Kruger. “With 100% ownership of Fort Hills we will pursue opportunities to create additional value through regional synergies and basin-wide management of our unparalleled, integrated oil sands asset base.
This boosts the firm’s bitumen production by 61,000 barrels per day and expand its proven and probable reserves by a substantial 675 million barrels, further solidifying its presence in the oil sands sector.
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The deal, valued at $1.47 billion, also secures a reliable, long-term bitumen supply from Suncor’s wholly-owned Firebag and MacKay River assets for its Base Plant upgraders post-Base Mine life.
The move becomes particularly relevant as Suncor plans to replace around 200,000 barrels per day of raw bitumen supply from its largest oil sands mine, Base Mine, which is expected to deplete by the mid-2030s. This mine feeds two Base Plant upgraders that produce approximately 350,000 barrels per day of high-value synthetic crude and play a pivotal role in Suncor’s operations.
Simultaneously, on the same day, TotalEnergies concluded the sale of its 50% stake in the Surmont asset to ConocoPhillips for $4 billion, with potential additional payments of $440 million contingent on future conditions.
Notably, this deal follows Suncor’s earlier agreement in April to acquire TotalEnergies’ Canadian operations for $5.5 billion, which included the Fort Hills interest and a 50% stake in the Surmont thermal oil sands facility. However, ConocoPhillips exercised its right of first refusal to purchase TotalEnergies’ stake in Surmont instead of Suncor, leading to a reevaluation of Suncor’s entire deal.
The Fort Hills project, an open-pit mine, has faced operational challenges since its production commencement in early 2018. Last year, Suncor anticipated a 5% reduction in gross production and higher operating costs per barrel at Fort Hills over the next three years due to long-term improvement plans for the project.
Analyst Mark Oberstoetter from Wood Mackenzie noted that Fort Hills is currently in a somewhat uncertain phase of its lifecycle, making it challenging to definitively assess the value of the deal. He added that if one assumes the asset will continue to improve and achieve its intended outcomes, the acquisition could prove to be a strategic move for Suncor.
The Suncor-TotalEnergies deal is expected to close by the end of this year.
Suncor Energy last traded at $43.78 on the TSX.
Information for this briefing was found via Sedar, Investing.com, Reuters, and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
