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Suncor Energy (SU) to Acquire TotalEnergies' Canadian Stake
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Suncor Energy (SU - Free Report) , Canada's largest oil producer, announced its acquisition of French energy company TotalEnergies' (TTE - Free Report) Canadian operations for a staggering C$1.47 billion ($1.07 billion). The deal includes TTE's 31.23% stake in the Fort Hills oil sands mining project, which will give SU full ownership of the asset. This strategic move is expected to boost Suncor Energy's bitumen production capacity and solidify its position as a key player in the sector.
A Strategic Power Play
Under the terms of the agreement, SU will acquire TTE' 31.23% stake in the Fort Hills oil sands mining project, situated in the pristine northern Alberta region. This acquisition will skyrocket Suncor Energy's ownership in the project to a commanding 100%, marking a pivotal moment in the company's history.
SU’s CEO Rich Kruger expressed his enthusiasm for the acquisition, emphasizing its importance in securing a stable and long-term bitumen supply. "The transaction secures additional long-term bitumen supply to fill our Base Plant upgraders at a competitive supply cost, addressing a key uncertainty for the company," he stated confidently.
The Base Mine Challenge
Suncor Energy has been diligently exploring options to replace approximately 200,000 barrels per day of raw bitumen supply from Base Mine, its largest oil sands mine, which is projected to run out by the mid-2030s. This mine serves as the lifeblood of the company’s operations, feeding two Base Plant upgraders responsible for producing approximately 350,000 barrels per day of high-value synthetic crude.
Unlocking New Potential
This acquisition comes as a game-changer for Suncor Energy, causing a significant increase in bitumen production capacity. It will add a substantial 61,000 barrels per day to the company’s production capability and introduce a remarkable 675 million barrels of proven and probable reserves to its already impressive oil sands portfolio.
The Twists and Turns
The path to this acquisition wasn't without twists and turns. Initially, SU had announced its intention to purchase TotalEnergies' Canadian operations for a whopping C$5.5 billion, encompassing not only the Fort Hills interest but also a 50% stake in the Surmont thermal oil sands facility.
However, ConocoPhillips, the operator of Surmont, exercised its right of first refusal, opting to acquire TotalEnergies' stake in place of Suncor Energy. This unforeseen development triggered a comprehensive review of SU's entire deal.
Fort Hills, classified as an open-pit mine, has faced operational challenges since commencing production in early 2018. Last year, Suncor Energy predicted a 5% decrease in gross production and an increase in operating cost per barrel at Fort Hills over the next three years, attributable to extensive improvement plans for the project.
Closing the Deal
Suncor Energy's acquisition of TotalEnergies' Canadian operations is anticipated to be concluded by the end of this year, marking a milestone for the company and the broader Canadian oil sands industry.
In conclusion, this acquisition underlines SU’s commitment to securing a stable and prosperous future in the competitive world of oil sands. With this bold move, the company is poised to strengthen its position, increase its bitumen production capacity and ensure the longevity of its vital operations. As the industry continues to evolve, Suncor Energy's strategic foresight is bound to shape the trajectory of the Canadian oil sands sector for years to come.
Zacks Rank and Key Picks
Currently, both SU and TTE carry a Zacks Rank #3 (Hold).
CVR Energy is valued at $3.25 billion. In the past year, its shares have fallen 7.6%.
CVI currently pays a dividend of $2 per share or 6.18% on an annual basis. Its payout ratio currently sits at 30% of earnings.
USA Compression Partners is valued at around $2.34 billion. USAC currently pays a dividend of $2.10 per unit, or 8.82% on an annual basis.
USAC provides natural gas compression services. The company offers compression services to oil companies and independent producers, processors, gatherers, and transporters of natural gas and crude oil. It also operates stations.
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Suncor Energy (SU) to Acquire TotalEnergies' Canadian Stake
Suncor Energy (SU - Free Report) , Canada's largest oil producer, announced its acquisition of French energy company TotalEnergies' (TTE - Free Report) Canadian operations for a staggering C$1.47 billion ($1.07 billion). The deal includes TTE's 31.23% stake in the Fort Hills oil sands mining project, which will give SU full ownership of the asset. This strategic move is expected to boost Suncor Energy's bitumen production capacity and solidify its position as a key player in the sector.
A Strategic Power Play
Under the terms of the agreement, SU will acquire TTE' 31.23% stake in the Fort Hills oil sands mining project, situated in the pristine northern Alberta region. This acquisition will skyrocket Suncor Energy's ownership in the project to a commanding 100%, marking a pivotal moment in the company's history.
SU’s CEO Rich Kruger expressed his enthusiasm for the acquisition, emphasizing its importance in securing a stable and long-term bitumen supply. "The transaction secures additional long-term bitumen supply to fill our Base Plant upgraders at a competitive supply cost, addressing a key uncertainty for the company," he stated confidently.
The Base Mine Challenge
Suncor Energy has been diligently exploring options to replace approximately 200,000 barrels per day of raw bitumen supply from Base Mine, its largest oil sands mine, which is projected to run out by the mid-2030s. This mine serves as the lifeblood of the company’s operations, feeding two Base Plant upgraders responsible for producing approximately 350,000 barrels per day of high-value synthetic crude.
Unlocking New Potential
This acquisition comes as a game-changer for Suncor Energy, causing a significant increase in bitumen production capacity. It will add a substantial 61,000 barrels per day to the company’s production capability and introduce a remarkable 675 million barrels of proven and probable reserves to its already impressive oil sands portfolio.
The Twists and Turns
The path to this acquisition wasn't without twists and turns. Initially, SU had announced its intention to purchase TotalEnergies' Canadian operations for a whopping C$5.5 billion, encompassing not only the Fort Hills interest but also a 50% stake in the Surmont thermal oil sands facility.
However, ConocoPhillips, the operator of Surmont, exercised its right of first refusal, opting to acquire TotalEnergies' stake in place of Suncor Energy. This unforeseen development triggered a comprehensive review of SU's entire deal.
Fort Hills, classified as an open-pit mine, has faced operational challenges since commencing production in early 2018. Last year, Suncor Energy predicted a 5% decrease in gross production and an increase in operating cost per barrel at Fort Hills over the next three years, attributable to extensive improvement plans for the project.
Closing the Deal
Suncor Energy's acquisition of TotalEnergies' Canadian operations is anticipated to be concluded by the end of this year, marking a milestone for the company and the broader Canadian oil sands industry.
In conclusion, this acquisition underlines SU’s commitment to securing a stable and prosperous future in the competitive world of oil sands. With this bold move, the company is poised to strengthen its position, increase its bitumen production capacity and ensure the longevity of its vital operations. As the industry continues to evolve, Suncor Energy's strategic foresight is bound to shape the trajectory of the Canadian oil sands sector for years to come.
Zacks Rank and Key Picks
Currently, both SU and TTE carry a Zacks Rank #3 (Hold).
A couple of better-ranked stocks for investors interested in the energy sector are CVR Energy (CVI - Free Report) and USA Compression Partners (USAC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVR Energy is valued at $3.25 billion. In the past year, its shares have fallen 7.6%.
CVI currently pays a dividend of $2 per share or 6.18% on an annual basis. Its payout ratio currently sits at 30% of earnings.
USA Compression Partners is valued at around $2.34 billion. USAC currently pays a dividend of $2.10 per unit, or 8.82% on an annual basis.
USAC provides natural gas compression services. The company offers compression services to oil companies and independent producers, processors, gatherers, and transporters of natural gas and crude oil. It also operates stations.