Suncor Takes Majority Syncrude Stake After Murphy Oil Deal

Updated on
  • Suncor acquisition will help boost production this year
  • Additionanal Syncrude stake will provide 17,500 barrels

Suncor Energy Inc. will own a majority of the Syncrude Canada oil sands mine after the Canada’s largest petroleum producer by market value bought an additional stake from Murphy Oil Corp.

Suncor will own 53.74 percent of the Syncrude operation after the transaction worth almost C$1 billion ($794 million), the company said Wednesday. The purchase follows Suncor’s takeover of Canadian Oil Sands Ltd., previously the largest shareholder of Syncrude.

“This growth gives us even more leverage to oil prices as they recover,” Chief Executive Officer Steve Williams said in a statement.

Suncor is making a bet that oil sands production will be profitable in coming years as demand for energy rises. The company is pressing ahead with the C$15.1 billion Fort Hills project, with plans to spend C$4.5 billion this year, along with its partners, to begin production at the end of 2017. 

The 5 percent stake in Syncrude acquired from Murphy Oil will provide Suncor with an additional 17,500 barrels a day of production, according to the statement. The sale will allow Murphy Oil to focus on its drilling operations in North America, the U.S. producer said in a separate statement.

Taking Control

The company last year began its efforts to boost control over Syncrude, which produces light synthetic crude oil. It succeeded in winning over resistant Canadian Oil Sands management and shareholders after sweetening its offer earlier this year. Suncor made two offers before a hostile bid in October and finally secured Canadian Oil Sands management’s green light for the takeover in January.

Suncor’s Williams expects a period of oil prices being “lower for longer,” he has said. The price of West Texas Intermediate crude, the U.S. benchmark, has gained 22 percent this year and recently traded at about $45 a barrel. Prices averaged $33.63 during the first quarter.

Suncor has taken advantage of the oil industry downturn to expand through deals including the C$4.2 billion takeover of Canadian Oil Sands and the purchase of a bigger stake in a venture with France’s Total SA.

At the same time, Suncor has cut spending by 10 percent this year after posting a surprise fourth-quarter loss. The 2016 spending reductions come after the company eliminated about 1,700 jobs and slashed its budget last year.

First-quarter net earnings were C$257 million, or 17 cents a share, compared with a loss of C$341 million, or 24 cents a share, in the year-earlier period, the company said in a separate statement. The oil sands division lost C$524 million in the quarter, compared with a loss of C$146 million a year earlier, the company said.

Cash operating costs at the oil sands division were C$24.25 a barrel, a 15 percent reduction compared to the year-earlier period.

Suncor fell 0.3 percent to C$36.25 on Wednesday at the close in Toronto.

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