Asset/portfolio management

Suncor Snaps Up TotalEnergies’ Canadian Oil Sands Assets for $4.1 Billion in All-Cash Deal

The French supermajor calls deal "more straightforward" than spin-off of business.

Source: Getty Images

TotalEnergies said today that it is selling its Canadian oil sands assets to Suncor Energy in an all-cash transaction.

According to the French supermajor, the deal is valued at around $4.1 billion (CAD 5.5 billion) and could include additional payments totaling about $450 million (CAD 600 million) under specific conditions.

The offer from Calgary-based Suncor, Canada’s second-largest producer, includes the stakes in two main oil sand projects with a combined production of 135,000 B/D of bitumen.

TotalEnergies had previously announced plans to spin off its Canadian assets in February and, from this announcement, received several unsolicited offers, including one from Suncor.

“The amount is comparable to the CAD 5 to 6 billion valuations at the initial listing of the spin-off company had the spin-off project concluded, as estimated by TotalEnergies’ financial advisors,” the company said in a statement.

TotalEnergies said its board of directors considered selling the business to Suncor as being “more straightforward in its execution than the planned spin-off, competitive enough to represent an alternative for the benefit of the company and its shareholders.”

After decades of oil sands investment by energy majors such as ExxonMobil, Shell, and ConocoPhillips, Canadian companies are taking over these ventures as the high costs of investment and environmental concerns make foreign companies less competitive.

UK-listed BP exited Canada’s oil sands in 2022, selling its 50% nonoperated interest in the Sunrise oil sand project to partner Cenovus Energy, leaving BP with no holdings in the Canadian oil sands. Shell made a similar move in 2017by selling its 60% stake in the Athabasca oil sands to Canadian Natural Resources for $8.5 billion.

Suncor Energy is one of Canada’s largest oil sands producers, operating five facilities that produce about 600,000 BOED. The acquisition includes TotalEnergies’ working interest in the Fort Hills project, making Suncor the sole owner, and in the Surmont in-situ asset.

“This transaction represents a major step in securing long-term bitumen supply to our Base Plant upgraders at a competitive supply cost,” said Suncor president and chief executive Rich Kruger, in a statement.

“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.”

Suncor said the transaction secures additional bitumen production capacity with high-quality assets while adding 2.1 billion bbl of proved and probable reserves to its oil sands portfolio. Both interests included in the transaction will be subject to Suncor’s net-zero by 2050 emissions reduction objective.

The Surmont site, located 55 km south of Fort McMurray, is operated by ConocoPhillips Canada, and upon closing, Suncor and ConocoPhillips Canada each will hold a 50% working interest.

The deal is expected to close by the third quarter of 2023.