Total E&P Canada Ltd., a subsidiary of French oil major Total SA (NYSE: TOT), plans to acquire UTS Energy Corp., Calgary, (Toronto: UTS) and its 20% interest in the Fort Hills asset in the Athabasca region of Alberta, Canada, for C$1.15 billion.
UTS will transfer its assets, excluding its 20% Fort Hills interest, to a newly formed company and Total E&P Canada will pay a cash amount of C$3.08 per share to acquire UTS. Taking into account the cash held by UTS and acquired by Total (C$355 million, equivalent to C$0.73 per share) the cost of the acquisition for Total amounts to approximately C$1.15 billion (C$2.35 per share).
The Fort Hills project is operated by Calgary-based Suncor Energy Inc. (NYSE, Toronto: SU) with a 60% interest, the remaining 20% held by Teck Resources Ltd. The most recent estimates put Fort Hills’ resources at around 3.4 billion bbl. of bitumen, which will be recovered through open-pit mining. The project will be developed in two phases. The first phase of approximately 160,000 bbl. per day has already obtained the necessary administrative approvals to launch the development in the near future with a target production start-up, as expected by Total, in 2015-2016.
The earn-in costs owed to UTS by its Fort Hills partners (approximately C$704 million) will be transferred to Total. The net acquisition cost to Total for approximately 680 million bbl. of resources is C$0.65/bbl.
Separately, furthering its E&P interests in West Africa, Total SA plans to acquire a 45.9% interest in Block 1 in the Nigeria-Sao Tomé and Principe Joint Development Zone, offshore West Africa, from Chevron Corp., San Ramon, Calif. (NYSE: CVX).
Block I comprises 270 square miles, in roughly 5,249 feet to 5,905 feet of water. In 2006, a discovery, Obo-1, was made on the block. Total will become the block’s operator and will work in partnership with Addax Petroleum JDZ 1 Ltd., Dangote Energy Equity Resources and Sasol Exploration and Production Nigeria Ltd.
As part of its strategy to increase its position offshore Brazil, the French major also announced the acquisition of a 20% stake from Netherlands-based Royal Dutch Shell (NYSE: RDS) in the BM-S-54 license in the Santos Basin pre-salt area. Shell retains an 80% operating interest in the block, which is in approximately 6,562 feet of water.
Shell plans to commence a drilling program on the block in late 2010, subject to approval by the National Agency of Petroleum and the Brazilian Institute of Environment and Renewable Natural Resources.
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