Company's picks up an additional 10 per cent of project at 'discounted price'
CALGARY—Suncor Energy has purchased an additional 10 per cent working interest in the Fort Hills oil sands project from Total E&P Canada Ltd. for $310 million.
Upon the closing of the deal, Suncor’s share in the $15 billion project will increase to 50.8 per cent, with Total E&P holding 29.2 per cent and Teck Resources Ltd. owning the additional 20 per cent. Fort Hills is located in the Athabasca region of Alberta, about 90 kilometres north of Fort McMurray.
“This opportunity to acquire an additional interest at a discounted price underscores Suncor’s confidence in its position within the oil sands. We consider this project to be one of the best opportunities for long-term sustainable growth in the industry today, thanks to the exceptional quality of the resource and our disciplined project execution,” Steve Williams, president and CEO of Suncor said.
The company added its incremental capital increase to Fort Hills is estimated at just over $1 billion, approximately $700 million of which is remaining project spend.
As part of the transaction, Suncor will acquire a further proportionate interest in Fort Hills related logistics, including pipelines, storage terminals and third-party pipeline capacity agreements. The company said the additional interest also presents an opportunity for Suncor to lower its capital cost per barrel.
“With engineering over 90 per cent complete and construction surpassing 40 per cent, Fort Hills is on track, with first oil expected in the fourth quarter of 2017. For 2015, this further investment in Fort Hills can be absorbed within our current capital spending guidance.”
The transaction is subject to closing conditions, but Suncor noted Teck has agreed to waive its right of first refusal to purchase a pro-rata share of the offering. The transaction is expected to close by the end of the year.