Exxon Mobil Corp. (XOM) and Imperial Oil Ltd. (IMO) agreed to buy ConocoPhillips’ Clyden lease for about C$751 million ($723 million), expanding their holdings in the booming Alberta oil-sands region.
The sale includes 226,000 net acres of undeveloped land near the southern edge of the Athabasca oil sands, Houston-based ConocoPhillips said in a statement today. Under the agreement, Exxon will hold 72.5 percent of the leasehold and Calgary-based Imperial, which Exxon controls, will have 27.5 percent, the companies said.
It’s the second Canadian purchase in 10 months for Irving, Texas-based Exxon, which agreed to pay C$2.86 billion for Celtic Exploration Ltd. in October, gaining access to shale regions in Alberta and British Columbia. Canada has the world’s third-largest oil reserves, after Venezuela and Saudi Arabia, and its output is expected to more than double by 2030, according to the Canadian Association of Petroleum Producers.
Oil-sands projects offer “the same predictable production” for years, as companies like Exxon face declining output from conventional oil fields, said Fadel Gheit, an analyst with Oppenheimer & Co. in New York who has the equivalent of a hold rating on Exxon and a buy on ConocoPhillips. (COP) Exxon said in March its combined oil and gas production will fall for a second straight year as it builds platforms and pipelines to bring recent discoveries online.
The sale is expected to close in the third quarter and requires approval from Canada’s Competition Bureau, ConocoPhillips said. Exxon is the largest shareholder in Imperial Oil, with a 70 percent stake as of Feb. 13, according to data compiled by Bloomberg.
ConocoPhillips gained 0.9 percent to $67.09 at the close in New York, while Exxon climbed 0.5 percent to $91.78. Imperial increased 3 cents to C$42.03 in Toronto.
Exxon plans to bring in a partner, reducing its stake to 27.5 percent while it keeps majority control of the project with Imperial, the companies said.
Imperial has been expanding output from its oil-sands holding, including the C$12.9 billion Kearl project in Alberta which began production in April. Kearl is on schedule to produce 110,000 barrels a day by the end of the year, the company said Aug. 1.
For Imperial Oil “this seems like a logical bolt-on acquisition that’s easy to integrate,” Pavel Molchanov, an analyst with Raymond James & Associates Inc. in Houston, said in a phone interview today. He has the equivalent of a buy on Exxon and a sell on ConocoPhillips and doesn’t own either shares.
ConocoPhillips has been selling assets for more than three years to focus on more profitable areas. Chief Financial Officer Jeff Sheets said earlier this month ConocoPhillips might reduce its oil-sands holdings. The company expects about $13.5 billion from its 2012-2013 asset sales program, including $3.8 billion received through the end of June.
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