Canada’s biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. SU, announced that it has entered into an agreement with partner, Total E&P Canada Ltd. – the Canadian arm of TOTAL S.A. TOT – to buy additional 10% stake in the Fort Hills oil sands project from the latter.

Suncor has acquired the additional working interest in the project for C$310 million. The deal is expected to close in the fourth quarter of this year. The transaction also includes the sale of 10% interest in associated logistics like pipelines, storage terminals and third-party pipeline capacity agreements.

Upon closure of the deal, which is subject to regulatory approvals, Suncor’s stake in the $15 billion project will be 50.8%. Suncor is the developer and operator of the project. Total will hold 29.2% stake in the Fort Hills project, whereas the remaining 20% will be held by Teck Resources Limited TCK.

The purchase of additional interest will increase Suncor’s capital spending in the project by about C$1 billion, which is inclusive of about C$700 million in future spending.

Acquiring additional stake at a discounted price bodes well for Suncor as it expects the project to be a long-term growth opportunity. The company believes that buying additional stake will lower its per barrel cost and improve return from the project.

While more than 90% of the  project’s engineering work is over, above 40% construction work has been completed. The project is anticipated to commence oil production from the fourth quarter of 2017.

Total’s sale of the stake is due its capital spending reduction plans as a result of the low crude prices.

Both Suncor Energy and Total currently carry a Zacks Rank #3 (Hold).

A better-ranked stock from the broader energy space is Tesoro Corporation TSO, which sports a Zacks Rank #1 (Strong Buy).

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