North Sea oil company Petro-Canada is being bought for more than £10billion by fellow Canadian firm Suncor Energy.
The all-share deal announced yesterday will create Canada’s largest oil group, operating under the Suncor name.
Suncor is focused at the moment on developing Canada’s Athabasca oil sands, with no presence in the North Sea.
Petro-Canada has operations in its home country and abroad. Its international interests take in the US, UK, Netherlands, Norway, Trinidad and Tobago, Syria and Libya.
The firm’s North Sea stakes include a near-30% holding in the large Buzzard field in the outer Moray Firth.
John Scrimgeour, Petro-Canada’s regional manager for north-west Europe, said following yesterday’s news: “It’s very much a case of business as usual for us here in the UK. We employ up to 450 people across the UK – 80 of which are based here in Aberdeen – and there will be no changes to our current staffing plans.”
The two Canadian companies are seeking to tackle tough conditions in the oilsand industry by slashing costs.
The deal comes after a period of missed earnings targets and a project delay at Petro-Canada and is expected to be completed in the third quarter of this year.
The offer represents a premium of about 28% to the closing price of Petro-Canada shares on Friday.
On completion of the deal, Suncor’s shareholders will own about 60% of the merged company.
The companies expect to achieve annual operating expenditure reductions of about £167million and annual capital efficiencies of about £558million.
One analyst said: “They need to cut costs.”
Petro-Canada delayed its Fort Hills oilsand project in Alberta last year because of rising costs. Many other oil companies are also delaying oilsand projects on concerns about the industry’s profitability.
Royal Dutch Shell, considered one of the oilsand industry’s lower-cost operators, said operating costs ran at about $38 a barrel last year.
Taxes and capital investment costs push total costs much higher.
Petro-Canada’s shares had dropped 31% over the past 12 months, while Suncor’s stock had fallen by 35%.
Shares in Petro-Canada moved up 20.4% on the Toronto Stock Exchange, but Suncor’s slid by 0.5%.