Calgary-based Suncor Energy has announced a shakeup in Newfoundland and Labrador’s offshore oil industry, saying it is selling off stakes in three oilfields.
In a statement Sunday, the Calgary-based energy company said it had reached a deal with U.K.-based Ithaca Energy to sell its 48 per cent interest in Terra Nova, 40 per cent interest in White Rose and 38.6 per cent interest in West White Rose offshore assets.
The deal is worth $1.2 billion in upfront cash as well as a contingent payment of up to $350 million based on future oil prices, said the company.
“This transaction further focuses our efforts on opportunities that generate the greatest long-term shareholder value,” Suncor CEO Rich Kruger in the statement.
“We are aligning our portfolio around our competitive advantages and the strengths of our unparalleled, physically-integrated business, underpinned by large-scale, long-life oil sands resources.”
According to the statement, Ithaca “will assume investment commitments and all future liabilities associated with the assets, including a $500-million regulatory well compliance program starting in 2027 at Terra Nova and the total estimated abandonment and lease liabilities of $1.4 billion.”
The statement it said the transaction has an effective date of July 1 and is expected to close early in the new year, and is subject to closing conditions, regulatory approvals and partner consents.
Suncor said it is keeping its interest in N.L.’s oilfields Hebron and Hibernia.
In its own statement, Ithaca said the acquisition is aligned with its growth strategy.
“This acquisition marks the next era of growth for Ithaca Energy as we make our inaugural international acquisition in Offshore East Coast Canada,” said Ithaca executive chairman Yaniv Friedman.
“The transaction delivers on our clear stated growth strategy as we seek to diversify and grow our production and resource base and replicate our success in the United Kingdom Continental Shelf … through disciplined international expansion in regions we believe we can create long-term value for our shareholders.”
‘Sends a signal globally’
N.L.’s Energy and Mines Minister Lloyd Parrott said it is an exciting development, adding its been known “for quite some time that Suncor was looking to get back to their bread and butter out west in the oilsands.”
He said Ithaca, with its experience in the North Sea, understands the province’s environment, pointing to the harsh climate and rough terrain.
“I’m excited to have a player like this come to Newfoundland,” Parrott told CBC News, adding it signals a bright future for the province.
“It sends a signal globally, there’s no question. So there’s a new player, a global player, and they’re a huge player in the North Sea. They do not only the same type of work as we’re doing right now but they do different work, in smaller fields. They utilize subsea tiebacks to get the most out of everything.”
Energy Minister Lloyd Parrott says he’s been assured the company will protect N.L. jobs. (CBC)
Parrott says he believes Ithaca is interested in extending the lifespans of the oilfields and working with other companies, as it is not buying them outright.
He added he’s already been assured the company will protect N.L. jobs, adding the workers’ expertise attracted the company to N.L.
“This will not create any job loss. If anything, it will create job expansion,” said Parrott.
OilCo CEO Jim Keating also sees the development as a positive sign of things to come for Newfoundland and Labrador’s oilfields. (CBC)
OilCo CEO Jim Keating, who heads up the Crown corporation that leads oil and gas activities on behalf of the Newfoundland and Labrador government, also sees the announcement as a boon for the province.
“It’s a great day — a vote of confidence for our offshore, for sure,” he said while speaking virtually with CBC News while in Halifax.
Ithaca is one of the North Sea’s largest operators and is a specialist in late-life field development, he said, adding that is the case with Terra Nova and White Rose oilfields. This is the company’s first international investment outside the U.K., and he expects the company to have a growth strategy.
Keating said at the moment, he doesn’t have any reservations because the announcement is a natural development when it comes to oil fields. He added when a new company enters a basin, they can bring new ideas and “a new appetite for risk.”
A company like Ithaca would likely have an interest in Equinor’s proposed Bay du Nord project, said Keating — which the company is expected to make a final decision on sometime in early 2027.
He added across the world, oil and gas companies are reinvesting and many “legacy projects, like the offshore, are coming back into favour.”
‘It’s a huge industry’
Liberal energy critic Fred Hutton said companies selling off stakes isn’t unusual, though he added he was a “little bit of a surprised.”
He told CBC Radio’s The St. John’s Morning Show his party is primarily concerned with the potential impact to jobs, adding the Liberals will raise the subject to Suncor and in the House of Assembly when it reopens in the fall.
Hutton said he hadn’t heard about a deal in advance of Sunday’s announcement but “there’s always talk of movement within this industry. It’s a huge industry.”
Given the percentages announced in the deal, Hutton said Ithaca is “going to be big players here in this, in this province and our oil industry,” and it could be a positive sign a new company is interested in the province.
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