Suncor Energy is set to boost its carbon-intensive oil sand reserves after agreeing to buy TotalEnergies' Canada unit in a C$5.5-billion all-cash deal.
The acquisition represents a “major step” for Suncor in securing long-term supplies at competitive costs, CEO Rich Kruger said in a statement last week. He said the move will provide Canada’s second-largest oil producer with greater freedom on the timing and scope of its oil sands developments.
The transaction, which is pending regulatory approvals and other conditions, has the potential for an additional C$600-million in payments based on oil prices and certain production targets, according to the statement. The deal, which comes three weeks after Kruger joined as CEO following a 39-year career at Exxon Mobil, is expected to be closed by the third quarter.
Kruger was named after a seven-month search that started after a string of worker deaths and pressure from activist investor Elliott Investment Management drove out the previous leader.
With the purchase, Suncor will take possession of a remaining 31.2% working interest in Fort Hills sands mining project and a 50% stake in the Surmont in situ asset. The deal, which will be funded by debt, adds 135v000 barrels per day of bitumen production capacity and 2.1-billion barrels of reserves.
ConocoPhillips Canada, which operates and owns a 50% working interest in Surmont, has a right of first refusal on the stake being sold to Suncor.