Suncor and Petro-Canada Agree to $15 Billion Merger

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Researched by Industrial Info Resources (Sugar Land, Texas)--Suncor Energy Incorporated (NYSE:SU) (Calgary, Alberta) and Petro-Canada (NYSE:PCZ) (Calgary) have agreed to a $15 billion merger that is expected to be completed in the third quarter of 2009. The new company will operate under the Suncor name. "More than just the strategic fit, I also believe there's a lot of common ground in our corporate vision," said Rick George, President and CEO of Suncor. "Both Petro-Canada and Suncor have a history of innovation and pushing the frontiers of oil and gas development in Canada." The deal will help to trim annual operating expenditures by about $300 million, Suncor said.

The oil sands sector has been experiencing a slowdown as a result of plunging crude oil prices, among other reasons, causing companies to defer project development. Among the projects that were delayed was Petro-Canada's Fort Hills project, which the company had delayed because of rising costs. Considering how capital-intensive oil sands projects can be, the merger could allow for better leverage in tackling larger-cost developments as a result of the companies' combined assets. Operating as one company, Suncor and Petro-Canada also have a better chance to withstand competition from companies like Total SA (NYSE:TOT) (Paris), which is currently in a hostile takeover bid for UTS Energy Corporation (TSX:UTS) (Calgary).

As part of our North American Industrial Database, Industrial Info is tracking 22 active Suncor projects worth more than $7.1 billion. If the proposed merger is completed, the new Suncor could inherit 19 active Petro-Canada projects worth nearly $17 billion, along with 21 projects worth $13.5 billion that were either put on hold or suspended. The database includes details on more than $15 billion worth of development activity at the Fort Hills Oil Sands Mine in Alberta.

"The combined portfolio boasts the largest oil sands resource position, a strong Canadian downstream brand, solid conventional exploration and production assets, and low-cost production from Canada's east coast and internationally," Suncor said. The combined company will have a resource base of about 7.5 barrels of oil equivalent of proven and probable reserves, in addition to an estimated contingent resource base of about 19 billion barrels of oil equivalent, the company stated. The new company also will have a refining capacity of 433,000 barrels per day.

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