France-based energy major TotalEnergies has announced it has accepted an offer from Suncor Energy to purchase its Canadian oil sands operations.
The company had initially expected to spin off the operations into a separate business. However, it said Suncor’s offer was similar to its own estimated value for the proposed spinoff, while being simpler to execute.
TotalEnergies’ exploration and production activities in Canada include a 50% stake in the in situ Surmont asset and a 31% interest in the oil sands mining project at Fort Hills. Suncor, which used to own the Petro-Canada lubricant business, will own the entirety of the Fort Hills project after the acquisition. When combined with other assets, this will provide sufficient bitumen to make full use of the Base Plant upgraders for at least a decade.
The chief executive of Suncor, Rich Kruger, said about the acquisition:
“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 deal will be worth $5.5 billion, plus up to $600 million in further payments if certain conditions are met. TotalEnergies intends to distribute 40% or more of its generated cash flow this year to shareholders through share buybacks or special dividends. It also expects to invest between $16 billion and $18 billion this year, with about $5 billion being earmarked for low-carbon projects.