Suncor Energy to Sell Newfoundland and Labrador Offshore Stakes to Ithaca Energy
Calgary-based Suncor Energy has agreed to sell its interests in three offshore oilfields in Newfoundland and Labrador to U.K.-based Ithaca Energy. The transaction, valued at up to $1.55 billion, marks Ithaca's first international expansion and makes it the fifth-largest operator in Canada's offshore drilling sector.
Calgary-based Suncor Energy announced on Sunday that it has agreed to sell its stakes in three offshore oilfields in Newfoundland and Labrador to United Kingdom-based Ithaca Energy. Under the terms of the deal, Suncor will divest its 48% interest in Terra Nova, its 40% interest in White Rose, and its 38.6% interest in West White Rose.
The transaction is valued at $1.2 billion in upfront cash, with contingent payments of up to $350 million tied to future oil prices, according to CBC News. The Financial Post reported the figures as US$860 million in cash and up to US$250 million in contingent payments. The deal carries an effective date of July 1 and is expected to close early in the new year, subject to closing conditions, regulatory approvals, and partner consents.
As part of the agreement, Ithaca Energy will assume all investment commitments and future liabilities associated with the assets. These include a $500-million regulatory well compliance program scheduled to begin at Terra Nova in 2027, as well as total estimated abandonment and lease liabilities of $1.4 billion.
Suncor CEO Rich Kruger stated that the transaction focuses efforts on opportunities generating long-term shareholder value and aligns the company's portfolio around competitive advantages in oil sands resources. Suncor confirmed it is retaining its interests in the Hebron and Hibernia oilfields in Newfoundland and Labrador.
Ithaca executive chairman Yaniv Friedman described the acquisition as marking the next era of growth for Ithaca Energy and its inaugural international acquisition in Offshore East Coast Canada. The deal positions Ithaca as the fifth-largest operator in Canada’s offshore drilling sector.
Analysts at Panmure Liberum noted that the acquisition should be accretive immediately and gives Ithaca a foothold in North America, where fiscal regimes are more attractive than in the UK. Following the announcement, Ithaca shares rose 3.1% at the open and traded up 2.8%.
In response to the deal, Liberal energy critic Fred Hutton expressed concern about potential impacts to jobs in Newfoundland and Labrador. Hutton noted that while companies selling off stakes is not unusual, he was surprised by this specific transaction.