Oil and gas producer TotalEnergies SE TTE-N moved closer to launching the largest Canadian initial public offering in two years, as it detailed plans to spin out its Alberta oil sands business.
In Paris-based Total’s financial results, which it reported on Wednesday, the company disclosed that it is aiming to hand out 70 per cent of its oil-sands operation to its shareholders later this year through a special dividend, and list the subsidiary, known as TotalEnergies EP Canada, on the Toronto Stock Exchange. Total will initially retain a 30-per-cent stake in its Calgary-based offspring. It is exiting the oil sands as part of a shift to low-carbon energy sources.
The new public company will own interests in two oil sands projects near Fort McMurray, Alta., a 31-per-cent stake in Fort Hills, a project run by Suncor Energy Inc., and a 50-per-cent stake in Surmont, operated by ConocoPhillips. TotalEnergies shareholders are scheduled to vote on the spin-out at the company’s annual meeting in May.
The Canadian subsidiary has about 160 employees and is expected to have an equity valuation of between $2-billion and $3-billion. At that size, Total’s Canadian debut could be worth more than all the IPOs done on the TSX last year, when 88 businesses raised a total of $2.02-billion.
Canadian IPO activity fell dramatically in 2022 as equity markets declined. In 2021, a banner year for stock sales, companies raised $10.5-billion through IPOs on the TSX. There were 157 offerings, including a $1.4-billion stock sale from property and casualty insurer Definity Financial Corp.
Total announced plans to spin out its oil sands projects last year. “We are not the best shareholder of these assets because, as we have a climate strategy, we don’t want to invest in these assets,” chief executive Patrick Pouyanné said at the time.
Total decided to spin out – rather than sell – its Alberta projects because doing so means it won’t have to find a buyer for the assets, Mr. Pouyanné said. Analysts have said Total could decide to abandon the TSX listing and instead sell its holdings to a partner – such as Suncor, ConocoPhillips or another energy company – if one of them made a compelling offer.
Last month, Total spent $312-million to buy an additional 6.65-per-cent interest in Fort Hills from Teck Resources Ltd., which is also exiting the oil sands. “By seizing this opportunity to grow its business under attractive conditions, TotalEnergies EP Canada will deliver value to the future shareholders of the spinoff entity,” Total chief financial officer Jean-Pierre Sbraire said at the time.
Total announced on Wednesday that it expects to invest US$14-billion to US$16-billion in energy projects this year, including US$5-billion earmarked for low-carbon initiatives, such as natural gas exploration and solar power. The company also plans to buy back US$2-billion of its own shares.
Total is the latest in a series of foreign companies to exit the oil sands after sinking billions of dollars into developing projects. Last year, BP PLC sold its Alberta holdings to Cenovus Energy Inc. In 2017, Royal Dutch Shell PLC and Marathon Oil Corp. cut ties with the oil sands by selling properties to Canadian Natural Resources Ltd. for US$8.5-billion. In 2016, Norway’s Statoil ASA also cashed out.
In a bid to lower greenhouse-gas emissions from oil sands projects, six energy companies operating in Alberta have teamed up to form the Pathways Alliance, a partnership launched in 2021 and designed to drive collective investment in initiatives such as carbon capture and storage. The alliance’s backers are Canadian Natural, Cenovus, ConocoPhillips, Imperial Oil Ltd., MEG Energy Corp. and Suncor.