TORONTO/CALGARY — Suncor Energy Inc plans to make acquisitions in the North Sea and Eastern Canada to bolster its offshore upstream oil business as assets become available due to the slump in global oil prices, three sources familiar with the process said.
The size of deals could range from several hundred million dollars to a few billion dollars, the sources said, adding that Canada’s biggest energy producer does plan a single transformational acquisition.
With a market capitalization of about $55 billion, the company is likely to use its equity as currency for deals, as it did with its $3.31 billion acquisition of Canadian Oil Sands earlier this year, one of the sources said.
Suncor is also looking at downstream targets such as refineries in the United States, said the sources, who did not want to be identified as the matter is private.
Oil sands producers have been struggling with tumbling global crude oil prices, which have slid to their lowest levels since 2003 over worries of a global supply glut.
The shift in mergers and acquisitions strategy would, if successful, expand Calgary, Alberta-based Suncor’s reach further beyond the oil sands region, which makes up the majority of its business.
The company reassessed its growth strategy after a massive Alberta wildfire in May that closed much of the Canadian oil sands, the sources said.
While remaining active in the region, it is expected to aggressively pursue deals in the North Sea and Eastern Canada, where it could acquire licenses, the sources said. Rivals Husky Energy, Statoil ASA and Shell Canada already own major Eastern Canadian assets.
Suncor declined to comment.
The company’s recent acquisitions during the oil price downturn have been focused on oil sands. In addition to the Canadian Oil Sands move, it agreed to pay about $937 million to buy an additional 5 per cent of its Syncrude oil sands joint venture from Murphy Oil Corp.
Suncor has described the oil sands as its “bread and butter.” In the first quarter, oil sands production, including its share of Syncrude, made up about 80 per cent of its output of 691,000 barrels of oil equivalent per day.
Earlier this month, Suncor said it would raise $2.5 billion in a share sale to help fund, among other things, its larger Syncrude stake and for “opportunistic growth transactions.”
The company had $3.1 billion in cash and $6.8 billion in lines of credit, according to an April investor presentation.
However, executives have told Suncor employees the Alberta wildfire would cost it nearly $1 billion.
At the height of the fires, more than 500,000 barrels per day of Suncor oil sands production, including its Syncrude share, was shut in.
North Sea for sale
Stung by the oil price crash, Royal Dutch Shell, BP , France’s Total and others have put dozens of assets up for sale in the North Sea, which has been on the wane since the late 1990s.
With many companies keen to sell assets in the region, Suncor could find compelling deals, the sources said, adding it could buy in both the U.K. North Sea and Norwegian North Sea.
Suncor currently owns 30 percent of the high-producing Buzzard field in the North Sea, and holds 17 licenses in its Norwegian portfolio.
Its desire to become a more integrated player is behind the interest in U.S. refineries, the sources said.
Suncor bid on Total’s stake in its Port Arthur, Texas, refinery, but the parties did not reach a deal, sources told Reuters last week.
Shell Canada’s Corunna refinery, located close to Sarnia, Ontario, may also fit with Suncor’s plans, one of the sources said.
Shell and Statoil did not respond to requests for comment. Husky declined comment.
Global oil majors Chevron Corp and Shell are also putting small refineries on the block.
Chevron has said it is soliciting interest in its Burnaby, British Columbia, refinery and gasoline stations. Meanwhile, Shell is looking for buyers for its Martinez, California, refinery, Reuters reported last week.
© Thomson Reuters 2016