TotalEnergies Exit of Canadian Oil Sands Business Complete
French supermajor sells its pair of oil sands assets to focus capital on its oil and gas assets with low breakeven.
Paris-based TotalEnergies announced on 4 October that it has agreed to sell off the majority of its stakes in two Canadian oil sands projects in cash and stock deals valued at a combined $4.1 billion.
US-independent ConocoPhillips completed the purchase it announced in May of TotalEnergies’ entire 50% interest in the Surmont oil sands asset and associated midstream commitments for a base amount of about $2.7 billion cash, plus up to $330 million in contingent payments. The transaction’s effective date was 1 April 2023.
TotalEnergies received a cash payment at closing of $2.75 billion, and at current Western Canadian Select crude prices and production levels, the French operator would receive the entirety of the contingent payments within a year.
According to ConocoPhillips, it now owns 100% of Surmont and will continue as its operator.
“Long-life, low-sustaining capital assets like Surmont play an important role in our deep, durable, and diverse low-cost-of-supply portfolio," said Ryan Lance, ConocoPhillips chairman and chief executive officer.
“This transaction enhances our returns-focused value proposition, improves our return on capital employed, lowers our free cash flow breakeven, and is expected to deliver significant free cash flow for decades to come. We know this asset very well and plan to further optimize it while remaining on track to achieve our GHG emission-intensity reduction goals,” he added.
In a second deal, TotalEnergies and Calgary-based Suncor Energy signed an agreement to sell Suncor the entirety of TotalEnergies EP Canada's shares, comprising its Fort Hills oil sands asset and associated midstream commitments for $1.1 billion. The closing of this transaction is expected before the end of 2023, TotalEnergies said in a statement.
“The disposal of our Canadian oil sands assets fits our strategy to focus our allocation of capital to oil and gas assets with low breakeven. As announced during our Investor Day on 27 September, proceeds from these divestments will be shared with our shareholders through $1.5 billion of buybacks in 2023, yielding an expected shareholder distribution of around 44% of our cash flow this year”, said Jean-Pierre Sbraire, chief financial officer of TotalEnergies.
For Suncor, the acquisition adds 61,000 B/D of net bitumen production capacity and 675 million bbl of 2P reserves to its existing oil sands portfolio. Regulatory approvals have been received, and subject to closing, the transaction will be effective 1 1 April 2023, according to Suncor.
"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 Rich Kruger, Suncor’s president and chief executive.
"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 transaction is aligned with our strategy to wholly own and operate long-life strategic assets,” he added.
Upon closing of the transaction, Suncor will own 100% of Fort Hills, which, along with its 100% ownership of Firebag and MacKay River in-situ assets, provides the company with additional long-life, physically integrated bitumen supply to maximize the utilization of its wholly owned Base plant upgraders post the end of the Base Mine life.