TotalEnergies has agreed to sell its Canadian oil sands operations to Suncor Energy for more than $4bn after previously announcing plans to spin off the business.
The unsolicited offer for Total’s Canadian oil exploration and production business includes the company’s stakes in two main oil sands projects with a combined production share of 135,000 barrels of bitumen a day.
The offer from Suncor, Canada’s second-largest oil company, is a cash payment of $4.1bn and additional payments of up to $450mn if specific conditions are met, the French energy major said on Thursday.
Canadian companies have taken a growing share of oil sands investments as western energy majors have turned their backs on a region often associated with higher levels of pollution than conventional oil production.
UK-listed BP quit Canada’s oil sands industry last year, selling its sole producing stake in the region to Calgary-based Cenovus Energy.
Total had announced plans to spin off the operations in February through a Toronto listing and retain a 30 per cent stake in the company while returning proceeds from the sale to shareholders.
Total said its board of directors considered selling the business to Suncor “more straightforward in its execution than the planned spin-off”, adding that it expected the deal to close by the third quarter of the year.
Biraj Borkhataria, associate director of European research at RBC Capital Markets, said the announcement of the intention to list might have been a way to flush out buyers. “Either way, the end result is a clean exit for Total.”
Total announced the deal as it reported adjusted net income of $6.5bn for the first quarter of 2023, meeting analyst estimates but down from the exceptional $9bn it reported in the first three months of 2022 when upheaval in global energy markets sent oil and gas prices soaring.
“A decent set of numbers, with the surprise being the oil sands sale,” Borkhataria added.
Total shares traded steadily at €57.60, down 1 per cent on Thursday morning in London.
The company increased its first interim dividend for the year by 7.25 per cent and said it would repurchase another $2bn in shares in the second quarter, as it did in the first three months of the year.
Given the expected proceeds from the divestment, Total expects to return at least 40 per cent of cash flow from operations in 2023 to shareholders, at the high end of the previous guidance of 35 per cent to 40 per cent, either through more share buybacks or a special dividend.
It left its capital spending guidance unchanged at $16bn-18bn in 2023, including $5bn to be spent on low-carbon energies.