CALGARY — Suncor Energy Inc. will buy out Teck Resources Ltd.’s 21.3 per cent stake in the Fort Hills oilsands project for approximately $1 billion, the two companies announced late Wednesday.
The 194,000 barrel-per-day capacity oilsands mine north of Fort McMurray, Alta., is currently co-owned by Suncor, Teck, and French company Total Energies EP Canada Ltd.
Upon closure of the deal, Calgary-based Suncor, which is the operator of Fort Hills, will see its stake in the oilsands project increase to 75.4 per cent. TotalEnergies will own the remaining 24.6 per cent.
“The acquisition of an additional interest in Fort Hills meets our return objectives, builds upon our strategy to optimize our portfolio around our core operated assets and underscores Suncor’s confidence in the long-term value of the Fort Hills project,” said Suncor interim president and CEO Kris Smith in a news release.
The deal is based on a current market value for Fort Hills and as a result, Suncor will recognize a non-cash accounting impairment charge on its existing 54.1 per cent interest of approximately $2.6 billion in its third-quarter results, which will be announced Nov. 2. The company will also hold an investor presentation on Nov. 29.
Suncor said it has conducted an in-depth review of the Fort Hills project, which began producing oil in 2018, and has begun a multi-year “improvement initiative” aimed at boosting the mine’s production and lowering operating costs.
“While the Fort Hills mine has faced challenges in the early years of the mine life, including challenges due to government-directed production shut-ins, I have full confidence in our current mine plan assembled with fresh external mining perspectives,” Smith said.
Vancouver-based Teck is slated to hold its own third-quarter earnings call Thursday morning.
“This transaction advances our strategy of pursuing industry-leading copper growth and rebalancing our portfolio of high-quality assets to low-carbon metals,” said Teck CEO Jonathan Price in a release Wednesday, adding the company will review the use of the proceeds from the sale early in 2023.
Suncor said it will finance the transaction with cash from asset sale processes currently underway.
The transaction is subject to regulatory approval and is expected to close in the first quarter of 2023.
This report by The Canadian Press was first published Oct. 26, 2022
Companies in this story: (TSX:SU)
Amanda Stephenson, The Canadian Press
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