ConocoPhillips Preempts TotalEnergies' Sale of Surmont

ConocoPhillips has exercised its preemption right in a transaction by TotalEnergies SE that would have divested the French partner’s entire stake in their 50-50 Surmont venture to Suncor Energy Inc.

The development comes a month after TotalEnergies announced its acceptance of Suncor’s offer to acquire the former’s exploration and production unit in Canada. TotalEnergies EP Canada Ltd. owns 50 percent of the Surmont oil sands in the oil province of Alberta.

The subsidiary’s transfer to Suncor hinged on whether ConocoPhillips would waive its interest in Surmont. The three companies separately said Friday ConocoPhillips has exerted its right of first refusal.

ConocoPhillips is now acquiring TotalEnergies’ Surmont stake for 100 percent ownership, saying the asset is low-cost and would help the company accelerate the reduction of planet-warming gas emissions.

The partners expect the transaction of about $3 billion, subject to adjustments, to close in the second half of 2023.

“Today’s announcement reflects our ongoing commitment to enhance our returns-focused value proposition, improving our ROCE [return on capital employed], lowering our free cash flow breakeven and further supporting our $11 billion planned return of capital in 2023”, ConocoPhillips chair and chief executive Ryan Lance said in a press release. The company projected an addition of $600 million in its annual available cash in 2024 based on a West Texas Intermediate benchmark price of $60.

“Long-life, low sustaining capital assets like Surmont play an important role in our deep, durable and diverse low cost of supply portfolio. Upon close, we look forward to leveraging our position as 100% owner and operator of Surmont to further optimize the asset while progressing toward our overall interim and long-term emissions intensity objectives”, Lance added.

“We will remain on track to achieve our previously announced accelerated GHG [greenhouse gas] intensity reduction target of 50-60% by 2030, using a 2016 baseline.”

Suncor said in a separate media statement: “As a result, each of the parties has the right to terminate the agreement under which Suncor would acquire TotalEnergies’ Canadian operations and Suncor will be assessing the transaction in light of this change”.

TotalEnergies said in its statement about ConocoPhillips’ exercise of preemptive right it remains open to completing another agreement with Suncor that would divest 100 percent of the Fort Hills oil sands mining project to Suncor. TotalEnergies currently owns 31.23 percent of the project, which like Surmont sits in the Athabasca region of northeastern Alberta, after acquiring all of Teck Resources Ltd.’s 6.65 percent stake in a $229-million (CAD312 million) deal that has left TotalEnergies and Suncor the remaining co-venturers, as announced by TotalEnergies January 27.

Suncor said in an announcement April 26 its acquisition of TotalEnergies’ Canadian operations through the two oil sands projects “would add 135,000 barrels per day of net bitumen production capacity and 2.1 billion barrels of proved and probable reserves to Suncor’s oil sands portfolio”.

To contact the author, email jov.onsat@rigzone.com