By Ernest Scheyder
Aug 8 (Reuters) – ConocoPhillips is selling its
stake in a Canadian oil sands project to Exxon Mobil Corp
and Imperial Oil Ltd for about $720 million as
it focuses on its U.S. shale oil and natural gas operations.
The all-cash deal involves the sale of 226,000 acres of
undeveloped land, roughly 93 miles (150 kilometers) south of
Fort McMurray, Alberta, to Exxon Mobil’s Canadian unit and
Imperial, which is 70 percent controlled by Exxon.
After the deal closes, Exxon Canada will own a 72.5 percent
interest in the land, known as the Clyden oil sands leasehold,
with Imperial controlling the rest.
The deal is a natural fit for Exxon, which has invested $11
billion in its Kearl oil sands project in northwest Alberta, and
gives it access to even more oil to boost its global daily
production, which has slid in recent quarters.
Calgary-based Imperial already operates four oil sands
projects in Canada and said the stake it is buying from Conoco
is a “high-quality addition” to its portfolio.
Conoco, which has been trying to sell the Clyden stake for
months, expects to record a after-tax gain of about $450 million
from the sale.
The deal, worth about $3,186 per acre, is a “fair price” for
Conoco, said Simmons & Co analyst Jeff Dietert, considering the
Clyden land is largely undeveloped and similar deals since 2005
have sold for an average price of $2,550 per acre,
“We think this is a positive deal for (Conoco) and marks the
first of potentially more deals in their oil sands rebalancing
efforts as they reduce their oil sands footprint through the
remainder of this year and into next,” he said.
Exploration and production companies such as Conoco and
Marathon Oil Corp have placed billions of dollars of oil
and gas properties up for sale in the past year to focus capital
on projects that generate higher returns.
Since the beginning of 2012, Conoco has sold stakes in
projects in Montana, North Dakota, Australia, Nigeria and
Algeria for a total of about $13.5 billion.
On a conference call last week with investors, Conoco Chief
Executive Ryan Lance said the company would continue to sell
“non-strategic assets,” such as oil sands properties, and use
the cash to invest in growth areas like the Texas Eagle Ford
“These are great assets, but one where we believe we’re a
bit overweighted in our portfolio today,” Lance said on the
call, speaking of Canadian oil sands and other assets he may
Last year Conoco spun off its refining operations into
Investors mostly shrugged off the deal. Shares in Conoco
rose 0.6 percent to $66.91. Exxon added 0.4 percent to $91.66,
while Imperial dipped 0.1 percent to $41.94.