Calgary-based Suncor Energy took a bold step to consolidating its position as the country’s — and indeed, the world’s — largest oil sands producer after buying out French oil major TotalEnergie’s Canadian assets in a blockbuster deal worth up to $6 billion..Suncor said it would pay an initial $5.5 billion to acquire Total’s remaining 31% of the Fort Hills oil sands mine and its 50% stake in the Surmont in situ bitumen project. Additional payments — depending on the forward price of benchmark Western Canadian Select (WCS) and certain production targets — could push that figure to a maximum of $6 billion, the company said in a release..The deal adds 130,000 barrels per day (bpd) of production and 2.1 billion barrels of reserves. Although it's expected to close in the third quarter, it will have an effective closing date of April 1, making it immediately accretive to cash flow per share. Consequently, Suncor said its board intends to approve a 10% increase to its dividend..Further, the deal ensures a steady supply to the company’s main upgrader at Fort McMurray which converts raw bitumen into synthetic crude that fetches a premium to world oil prices.. Suncor Fort HillsSuncor Fort Hills .Post closing, Suncor will be producing about 800,000 bpd of bitumen and upgraded synthetic crude — nearly a fifth of Canada’s entire oil production..“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,” said Suncor CEO Rich Kruger.. Suncor CEO Rich KrugerSuncor CEO Rich Kruger fired 1,500 employees Thursday in an e-mail. .With the transaction Suncor will have 100% ownership of Fort Hills, which along with the Firebag and MacKay River in situ assets, provides the company with sufficient long-life, physically-integrated bitumen supply in the Fort McMurray region to fully utilize its upgraders to the expected end of its base mine life in the mid 2030s..Suncor said the deal will be funded with debt, which is expected to exceed its $12-15 billion target range. However, it expects to return to its comfort zone in 2024 based on current commodity pricing..Suncor added the addition of the assets would be subject to its pledge to reach net zero emissions by 2050..It caps off a long and rocky Canadian journey for French super-major TotalEnergies which has been under pressure from its European shareholders to dump its oil sands holdings. Following a legal dispute with Suncor over its Fort Hills stake last fall, the company said it originally intended to spin them off into a separate company and milk it for cash..However, it had a change of heart after receiving what it described as “several unsolicited offers” for the assets. In a statement of its own, it said Suncor’s bid is “comparable” to the $5-6 billion any stand alone company would have been worth in an IPO..“TotalEnergies’ board of directors has therefore considered this transaction 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 and has decided to follow it up on the basis of the offer.”.The transaction is subject to the waiver of TotalEnergies’ Canadian partners — ConocoPhillips at Surmont — right of first refusal and customary closing conditions, notably the required approvals from Canadian public authorities..Markets more than welcomed the deal, pushing Suncor’s shares (SU:TSX) up 3% in both Toronto and New York Thursday, to $41.03 on the Toronto bourse.
