Suncor Acquires Teck’s Interest in Fort Hills Oil Sands Project for $1B

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CALGARY — Suncor Energy Inc. will buy out Teck Resources Ltd.’s 21.3 per cent interest. in the Fort Hills oil sands project for about $1 billion, the two companies announced Wednesday night.

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The 194,000 barrel per day oil sands mine north of Fort McMurray, Alta., is currently co-owned by Suncor, Teck and French-based Total Energies EP Canada Ltd.

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Upon closing of the deal, Calgary-based Suncor, which operates Fort Hills, will see its interest in the oil sands project increase to 75.4%. TotalEnergies will hold the remaining 24.6%.

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« The acquisition of an additional stake in Fort Hills meets our return objectives, builds on our strategy of optimizing our portfolio around our core operated assets and underscores Suncor’s confidence in the long-term value of the Fort Hills project, » said Suncor’s interim president and CEO. CEO Kris Smith in a press release.

The Fort Hills oil sands mine began operations in 2018 but has struggled.

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The mine was unable to reach full capacity quickly, in part due to the Alberta government’s decision in 2019 to cut oil production in the province to help cope with the growing decline Canadian oil prices caused by a shortage of pipeline export capacity.

Then in 2020, one of Fort Hills’ two production trains was shut down due to low oil prices due to the COVID-19 pandemic.

The deal announced Wednesday is based on the current market value of Fort Hills, Suncor said, and as a result Suncor will record a non-cash accounting impairment charge on its existing 54.1% stake of approximately $2.6 billion. dollars in its third quarter results. , which will be announced on November 2. The company will also hold an investor presentation on November 29.

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Vancouver-based Teck said it expects to record a $950 million non-cash impairment charge in the third quarter of 2023. Teck is expected to hold its third-quarter earnings call on Thursday morning.

Teck has said for some time that he was interested in selling his stake in Fort Hills. The company is currently building a $5 billion copper mine in Chile. He said he wants to focus on metals and minerals that are essential for a low-carbon world, including copper, zinc and steelmaking coal.

« This transaction advances our strategy of continuing industry-leading copper growth and rebalancing our portfolio of high-quality assets toward low-carbon metals, » Teck’s CEO said Wednesday. , Jonathan Price, in a statement, adding that the company would review the use of proceeds from the sale in early 2023.

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On Wednesday, Suncor said it conducted a thorough review of the Fort Hills project and launched a multi-year « improvement initiative » aimed at increasing mine production and reducing operating costs.

« Although the Fort Hills mine faced challenges in the early years of the mine’s life, including challenges due to government-ordered production shutdowns, I have full confidence in our mine plan. present assembled with new external mining prospects, » Smith said.

Suncor said it will fund the transaction with cash from the asset sale processes currently underway.

The transaction is subject to regulatory approval and is expected to close in the first quarter of 2023.