Suncor to Acquire Rest of Fort Hills Oil Sands from TotalEnergies for $1B

Suncor Energy Inc. has agreed to purchase TotalEnergies EP Canada Ltd., which holds a 31.23 percent working interest in the Fort Hills oil sands mining project, for $1.07 billion (CAD 1.468 billion).

The acquisition adds 61,000 barrels per day (bpd) of net bitumen production capacity and 675 million barrels of proved and probable reserves to Suncor’s existing oil sands portfolio, Suncor said in a news release Wednesday. Regulatory approvals have been received and, subject to closing, the transaction will have an effective date of April 1, the company said.

Fort Hills, which Suncor operates, is an open-pit truck and shovel mine located in Alberta’s Athabasca region, 56 miles (90 kilometers) north of Fort McMurray, according to the company website. Fort Hills began producing paraffinic froth-treated bitumen from secondary extraction in early 2018 and has a nameplate capacity of 194,000 bpd of bitumen. Its life expectancy is approximately 50 years based on current mine plans.

Upon closing of the transaction, Suncor will own 100 percent of Fort Hills. Along with its 100 percent ownership of Firebag and MacKay River in-situ assets, the acquisition 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. Suncor’s Base Plant operation includes two mines and extraction operations north of Fort McMurray, in the Regional Municipality of Wood Buffalo.

“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”, Suncor President and CEO Rich Kruger said. “With 100 percent 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”.

Suncor noted that the additional interest acquired in the asset will be subject to its objective of achieving net-zero greenhouse gas emissions from operations by 2050.

In August, Suncor posted net earnings of $1.4 billion (CAD 1.879 billion) for the second quarter, compared to $2.97 billion (CAD 3.996 billion) in the prior-year quarter. According to an earlier earnings release, Suncor’s adjusted operating earnings were $0.93 billion (CAD 1.253 billion) in the second quarter, compared to $2.83 billion (CAD 3.814 billion) in the prior-year quarter, primarily due to “decreased crude oil and refined product realizations reflecting a weaker business environment in the current quarter, and a first-in, first-out inventory valuation loss in the current quarter compared to a gain in the prior-year quarter, partially offset by lower royalties and income taxes”.

The Calgary-based company’s total oil sands bitumen production increased to 814,300 bpd in the second quarter compared to 811,300 bpd in the prior-year quarter, due to lower maintenance activities in the current period, excluding Syncrude, which was impacted by planned turnaround activities, and the company’s increased working interest in Fort Hills, according to the release.

Suncor said it delivered total upstream production of 741,900 barrels of oil equivalent per day, with strong upgrader utilization outside of planned maintenance activities and continued strong performance from in-situ assets. Suncor also completed all major annual planned maintenance across all refineries, resulting in a refinery crude throughput of 394,400 bpd.

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