One of the owners of the Fort Hills oil sands project in Alberta appears to be taking exception to a plan by Teck Resources (TSX:TECK.B) to exit the oil sands business by selling its stake in the project to Suncor Energy (TSX,NYSE:SU).
In October, Teck and Suncor announced a $1 billion buyout plan, in which Suncor, which owns 54.1 per cent of the project, would acquire Teck’s 21.3 per cent share. That would bring Suncor’s ownership stake to 75.4 per cent.
The other owner of the Fort Hills project is TotalEnergies (NYSE:TTE), which owns 24.6 per cent.
Last week, The French energy company filed an application in Court of Queen’s Bench in Alberta challenging the right of first refusal offer that Teck made to TotalEnergies in relation to the proposed sale of its share of Fort Hills to Suncor. Under the right of first refusal, Total could elect to acquire Teck’s interest in Fort Hills.
Total is asking that the 90-day period in which Total could exercise its right of first refusal be suspended until the courts have dealt with Total’s application.
It is not clear from public filings and news releases what Total’s issue with the transaction is, although it could have something to do with the fact Total also recently announced plans to exit Alberta’s oil sands by spinning out its share of Fort Hills and another oil sands project it co-owns into a new publicly listed company.
Just one month before Teck announced its planned exit from the Fort Hills project, TotalEnergies likewise announced it too wanted to quit Alberta’s oil sands.
In September, Upstream reported that Total wanted to quit the oil sands, or at least give the appearance of an exit, because it did not fit with its low-carbon investment strategy.
But instead of selling its stakes outright in Fort Hills and the Surmont SAGD project – which it co-owns with ConocoPhillips (NYSE:COP) – Upstream reported that Total planned to create a new spinoff company, to be listed on the TSX, and which would end up owning Total's 50 per cent of Surmont and its 24.6 per cent share of Fort Hills.
Both Teck and Suncor said they don't think Total's legal challenge will be successful.
“Teck believes that Total’s position is entirely without merit and expects the transaction to close in the first quarter as previously announced,” Teck said in a Dec. 23 news release. “It remains open to Total to accept the right of first refusal notice provided by Teck, and Teck intends to vigorously defend the proceedings.”
“Suncor supports Teck’s view on the validity of the ROFR notice and believes the filing by Total to be without merit,” Suncor said in a release.
