Suncor Energy Inc. said it is buying another stake in the Syncrude Canada Ltd. project, deepening its exposure for the second time in as many months to one of the industry’s most unreliable operations.
Suncor said late on Wednesday it would buy Murphy Oil Corp.’s 5 per cent interest in the project for $937-million, adding another 17,500 barrels per day of capacity.
The move comes as Suncor reported a first-quarter operating loss of $500-million, compared to a year-earlier profit of $175-million, as weak prices crimped returns.
Suncor is boosting its stake in Syncrude only weeks after it finalized its $4.2-billion deal for Canadian Oil Sands Ltd., previously the project’s largest owner. It would give Suncor a majority stake in the oil sands mining venture at about 54 per cent, up from roughly 49 per cent currently.
The deal, which is effective as of April 1, is expected to close in the second quarter, subject to approval under the Competition Act.
“This transaction is a strategic fit for our portfolio given the quality of the resource, our existing interest in Syncrude and the potential for value creation,” Suncor chief executive officer Steve Williams said in a statement.
“This growth gives us even more leverage to oil prices as they recover,” he added.
U.S. crude prices have surged from multiyear lows under $30 (U.S.) a barrel in recent weeks, edging above $45 on Wednesday for the first time in nearly six months.
Still, few executives in Canada’s energy sector are willing to declare an end to the price rout that has bludgeoned finances and led to tens of thousands of layoffs across the industry.
Earlier on Wednesday, rival Cenovus Energy Inc. said it would cut another $300-million (Canadian) from its budget to weather the slump.
Suncor has said a larger stake in Syncrude would enable it to devote more resources to the joint venture, whose other big partner is Imperial Oil Ltd. with a 25-per-cent stake.
The mine has suffered repeated outages in recent years, with production rates lagging well under its 350,000 barrel-per-day capacity.
In the quarter, Suncor said its net earnings were $257-million, or 17 cents per share, compared to a year-earlier loss of $341-million, or 24 cents. Suncor attributed the swing mainly to a foreign exchange gain on the revaluation of its U.S. dollar-denominated debt of $885-million.
Production rose to 691,400 barrels of oil equivalent per day, from 602,400 barrels in the same period last year following the company’s purchase of Canadian Oil Sands. Suncor maintained its quarterly dividend at 29 cents per share.Report Typo/Error