CALGARY, Alberta (Reuters) - Suncor Energy, Canada’s largest oil and gas producer, said on Thursday it will focus on improving efficiency but not seek operatorship at Syncrude oil sands project in northern Alberta, in which it is acquiring a majority stake.
Calgary-based Suncor said on Wednesday it has struck a deal to buy Murphy Oil Corp’s 5 percent stake in Syncrude for C$937 million ($747.33 million).
The deal follows Suncor’s acquisition of Canadian Oil Sands Ltd and its 37 percent stake in February, making Suncor the majority shareholder in the mining and upgrading project, Canada’s largest single source of crude production, with 53.74 percent.
The Syncrude project, operated by joint venture partner Imperial Oil Ltd, has capacity to produce around 350,000 barrels per day (bpd) of light synthetic crude, but has been dogged for years by operating issues and frequently undershot production targets.
In the first quarter, however, Syncrude had its best production rates for five years with 91 percent utilization for the upgrader and Suncor chief executive Steve Williams said he was aiming to replicate that performance more frequently.
“We expect it will take both time and effort to reach a point where the operations can be sustained at this level of performance, but have no doubt we are definitely up for the challenge,” he said on a first quarter earnings call.
Williams said having a majority stake would give Suncor some governance benefits but the company had no plans to seek operatorship of the Syncrude project.
“Our primary objective is to get the reliability of that asset up by working with Imperial and Syncrude and I’m greatly encouraged by the progress that has been made,” he said.
Suncor reported a C$500 million operating loss after the market close on Wednesday as weak global crude prices outweighed record production.
TD Securities analyst Menno Hulshof said Suncor had a very good quarter operationally despite low oil prices, with reduced operating costs and improved upgrader reliability.
“Suncor is clearly making a relatively big bet on both Syncrude, and the mining business more generally,” Hulshof said in a note, adding that the company’s Fort Hills project, currently under construction, will add another 91,000 bpd of mining capacity in late 2017.
Suncor shares were last up 2.3 percent on the Toronto Stock Exchange at C$37.07.
Editing by G Crosse