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ConocoPhillips is boosting its stake in a Canadian oil sands project for around CA$4 billion (US$3 billion).

Houston-based ConocoPhillips is exercising its preemption right to purchase the remaining 50% interest in the Surmont in situ oil sands asset from TotalEnergies EP Canada Ltd., the company announced May 26.

The deal trips up Canadian producer Suncor Energy, which in April announced it would acquire TotalEnergies EP Canada Ltd., including its interest in the Surmont assets, for US$4.1 billion.

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ConocoPhillips currently holds a 50% interest as operator of Surmont. The company will own a 100% interest when the transaction closes, which is expected to occur in the second half of 2023.

“Today's announcement reflects our ongoing commitment to enhance our returns-focused value proposition, improving our ROCE [return on capital employed], lowering our free cash flow breakeven and further supporting our $11 billion planned return of capital in 2023,” said ConocoPhillips Chairman and CEO Ryan Lance in the press release. “Long-life, low sustaining capital assets like Surmont play an important role in our deep, durable and diverse low cost of supply portfolio.”

ConocoPhillips has operated the Surmont oil sands project in Alberta, Canada, since its launch in 1997. The company had a first right of refusal on TotalEnergies’ 50% interest in the project.

ConocoPhillips said it plans to finance the transaction with either cash, short- and medium-term financing, or a combination of both.

The deal is also subject to contingent payments of up to CA$440 million (US$325 million) over a five-year term.

The transaction is expected to add about $600 million in annual free cash flow in 2024, based on WTI prices of $60 per barrel.