Phase II of the Surmont oil sands project in Alberta, Canada. Credit: ConocoPhillips Company.

ConocoPhillips has agreed to acquire 50% stake in the producing Surmont oil sands project in Canada from TotalEnergies for up to $3.32bn (C$4.44bn).

The deal consideration includes $3bn (C$4bn) in cash payment upon closing of the transaction as well as additional payments of up to $325m (C$440m) under certain conditions for the non-operated stake in the asset and related logistics commitments.

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Currently, ConocoPhillips operates the Surmont project with 50% stake.

The deal is a result of ConocoPhillips exercising its preemption right to acquire the remaining stake in the Surmont project.

The move comes on heels of signing of the $4.05bn (C$5.5bn) deal between Suncor Energy and TotalEnergies in April 2023, whereby the former agreed to acquire TotalEnergies EP Canada (TEPCA).

TEPCA holds 31.23% stake in the Fort Hills oil sands mining project and a 50% stake in the Surmont in situ asset.

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TotalEnergies stated: “As previously announced, the transaction with Suncor is subject to the waiver of its partner ConocoPhillips pre-emptive right.

“As ConocoPhillips has exercised its preemption right, TotalEnergies will be open to complete a transaction with Suncor regarding the sale of TEPCA’s shares, comprising the Fort Hills working interest, as per the agreed value in the initial SPA.”

Subject to receipt of regulatory approvals and other customary conditions, the latest transaction is planned to be closed in the latter half of this year.

ConocoPhillips chairman and CEO Ryan Lance said: “Today’s announcement reflects our ongoing commitment to enhance our returns-focused value proposition, improving our ROCE, lowering our free cash flow breakeven and further supporting our $11bn planned return of capital in 2023.

“Long-life, low sustaining capital assets like Surmont play an important role in our deep, durable and diverse low cost of supply portfolio.”