Post by
Clemxb7 on May 27, 2023 11:40am
46% Fort Hills stake may end up costing Suncor near nothing
I expected it though I was still disappointed to see Total picked up its option for the 50% of Surmont. It was just too good a deal to pass up. However I should think most of the $6 billion in tax pools that Suncor was to get under the recent deal would come from the project with the higher and most recent cost overruns which would be Fort Hills.
The bummer about Surmont is the loss of reserves though remember anywhere you dig for 100’s of square kilometers in North East Alberta you hit the Oil Sands. Lack of oil sands should not be a problem in the far future.
As it now stands Suncor ends buying just short of the remaining 46% of Fort Hills for a reasonable $2.7 billion (CAD) via the two deals will Teck and Total.
Fort Hills cost $18 billion CAD to build of which 46% is $8.28 billion. Suncor paid $.32 cents on the dollar and likely got most of the associated tax pools. The deal could end up being for near free over time depending on what tax breaks Suncor gets.
The Fort Hills nameplate is 194k per day which they were very close to prior to covid. Current production is 131k per day and Suncor states it is confident nameplate can be achieved over time. At 131 k production Suncor has purchased 60 k a day. If nameplate is achieved then they bought 90k a day extra production.
The Fort Hills deal will allow the upgrader to run at 100% post 2035. Fort Hills adds 1 billion barrels of reserves lasting 40 years.
The Teck portion of the $2.6 total cost may already be paid off since that deal went down last year. Suncor will be receiving a fair chuck of change for it's recent divestments this year so the cost of the deal can be paid out of cashflow over a couple/few quarters at most.
That will hasten the 75% buyback trigger which is not a negative. As for the 10% dividend increase they should still do it based on Fort Hills.
Comment by
mrbb on May 29, 2023 4:09pm
without the surmont piece now, SU retains the right to back out the original deal (Fort Hills + Surmont) and could re-start negotiation for the lone piece Fort Hills with Total.