Murphy Oil Corp. plans to sell its stake in an oil-sands mining venture in Alberta, Canada, for more than $746.8 million, a move the company says will allow it to focus more on its shale oil and natural gas operations.
Murphy Oil said that under the deal with Suncor Energy Inc., it will divest its 5 percent, nonoperating working interest in Syncrude Canada Ltd., a joint venture operation the El Dorado-based company entered into in 1993.
Pending regulatory approval, the sale is expected to close mid-2016.
The Syncrude operation extracts bitumen from oil sands and processes it to light synthetic crude, according to Murphy Oil's website.
The company said the property averaged 15,600 barrels of oil per day during the first quarter.
"We are pleased to announce this transaction with a strategic buyer as we continue with the repositioning of our portfolio," said Roger Jenkins, president and chief executive officer of Murphy Oil, in a prepared statement.
"In recent years we have balanced our offshore business by strategically entering into the onshore unconventional space in North America," he said. "The sale of Syncrude will further place our focus in North America on our unconventional assets while simultaneously strengthening the financial flexibility of our balance sheet."
The deal makes Suncor, Canada's largest oil producer, the largest owner in the Syncrude consortium by increasing the company's share from 48.74 percent to 53.74 percent.
Suncor said that with its increased stake in Syncrude and other projects, the company expects to grow its oil production more than 40 percent from 2015 levels.
"We're pleased to acquire this additional interest in the Syncrude joint venture," said Steve Williams, Suncor's president and chief executive officer, in a prepared statement. "This transaction is a strategic fit for our portfolio given the quality of the resource, our existing interest in Syncrude and the potential for value creation."
Syncrude is the second asset in Canada that Murphy Oil has sold this year.
In January, the company agreed to sell its natural gas processing and sales pipeline in British Columbia to Enbridge G&P Limited Partnership, a subsidiary of Enbridge Inc., for $381.6 million in cash.
"While the extra cash is nice to have, this sale will make Murphy's North American portfolio more gas-weighted than before, while also removing a traditional free cash flow-generating asset," Luana Siegfried, an analyst with Raymond James, said of the Syncrude sale.
"I would say their first motivation in divesting from these assets was for balance sheet protection," she said in an email.
Murphy Oil stock dropped 84 cents, or 2.3 percent, Thursday to finish at $35.40 on the New York Stock Exchange.
Business on 04/29/2016