Total and Suncor in Tactical Deal - Analyst Blog

Integrated oil and gas company, TOTAL S.A. (TOT) announced that its subsidiary Total E&P Canada Ltd. has formed a strategic alliance with Suncor Energy Inc. (SU) for oil sands assets in Alberta, Canada. This alliance includes the Fort Hills mining project and Voyageur upgrader project operated by Suncor and Joslyn mining project operated by TOTAL.

As part of the arrangement, TOTAL will acquire a 19.2% interest in Suncor's Fort Hills project. This will increase TOTAL's stake in this project to 39.2%, while Suncor retains 40.8% and the balance 20% will be retained by Teck Resources Ltd.(TCK)

TOTAL will also acquire a 49% interest in Suncor operated Voyager project. The project includes plans for a facility that should be able to process 200,000 barrels per day (b/d) of bitumen.

Suncor on its part will acquire a 36.75% interest in TOTAL's Joslyn mining project, while  Occidental Petroleum (OXY) will hold 15%, Inpex 10% and the balance will be held by TOTAL..

Under this deal both the companies have decided to combine their resources to develop the oil sand assets. TOTAL has decided to pay C$1.75 billion to Suncor.

Both the companies have settled upon bringing the Fort Hill and Voyageur projects online by 2016, while the Joslyn project is expected to produce 100,000 b/d from 2017–2018 onward.

TOTAL has been working in the Alberta region, having interest in other projects here. The company previously entered into a joint venture with ConocoPhillips (COP) for the Surmont project, which is expected to produce 110,000 b/d of bitumen. In July 2010, through the acquisition of UTS Corporation, TOTAL gained a 20% interest in the Fort Hills project operated by Suncor.

Based in Canada, the integrated energy company Suncor Energy has a balanced portfolio of high quality assets, a strong balance sheet and a significant growth prospect.

TOTAL S.A. currently retains a Zacks #3 Rank (short-term Hold rating). We maintain our long-tern Neutral rating on the stock.

France-based TOTAL is one of the largest publicly traded, globally integrated oil and gas companies based on production volumes, proved reserves and market capitalization. The company has exploration and production operations across five continents.

 
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