Suncor to buy TotalEnergies' Canadian business for up to $6.1B

Deal's final value will hinge on the price of Western Canadian Select crude and certain production targets

A pedestrian is reflected in a Suncor Energy sign in Calgary, Alberta, Monday, Feb. 1, 2010. The future was bubbling with uncertainty Monday for a major Canadian oil company with a big stake in Libya. And anyone looking for reassurance about the fate of Suncor's $3.5-billion investment in Libya’s oil fields won’t find it in the recent past. (AP Photo/ THE CANADIAN PRESS/Jeff McIntosh)
Suncor says the acquisition is expected to add 135,000 barrels a day of net bitumen production capacity and 2.1 billion barrels of reserves to its oilsands portfolio. (AP Photo/ THE CANADIAN PRESS/Jeff McIntosh)

Suncor Energy (SU.TO)(SU) has agreed to buy the Canadian operations of French oil and gas giant TotalEnergies (TTE) in a deal worth up to $6.1 billion, both companies announced late Wednesday.

Calgary-based Suncor and TotalEnergies say the deal's final value will hinge on the price of Western Canadian Select crude, Canada's main oil benchmark, and certain production targets. Under the terms, Suncor will pay $5.5 billion in cash, plus up to an additional $600 million, depending on those details.

"These are valuable oil sands assets that are a strategic fit for us and add long-term shareholder value," Suncor CEO Rich Kruger stated in a news release. "The acquisition also introduces flexibility and optionality into our long-range capital plan, providing us with further discretion in respect of the timing and scope of future oil sands developments."

If approved, the deal gives Suncor full ownership of the Fort Hills oilsands mine north of Fort McMurray, Alta. TotalEnergies EP Canada holds a 31.23 per cent working interest in the project. Suncor would also gain a 50 per cent working interest in the Surmont in situ asset in the same region. ConocoPhillips (COP) owns the other half.

For TotalEnergies, the deal continues its exit from Canada's energy patch. In 2020, the company wrote off $9.3 billion worth of oilsands assets, and cancelled its membership in the Canadian Association of Petroleum Producers.

Suncor says the acquisition is expected to add 135,000 barrels a day of net bitumen production capacity and 2.1 billion barrels of reserves to its oilsands portfolio.

Subject to closing, the transaction will have an effective date of April 1.

RBC Capital Markets analyst Greg Pardy calls the deal "pricey" but positive on the whole, in a note to clients Thursday morning.

"From where we sit, this transaction looks strategically sound for Suncor, and while it appears pricey, it also removes the company's longer-term risk as it relates to bitumen supply into its upgrading operations," he wrote.

In its news release, TotalEnergies said it received "several unsolicited offers" for its Canadian assets, adding that the deal with Suncor materialized "over the last month."

Toronto-listed Suncor shares climbed 1.13 per cent to $40.39 as at 9:39 a.m. ET. The stock has fallen about seven per cent year-to-date.

More to follow.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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