By Chester Dawson

CALGARY, Alberta -- Norway's state-owned oil giant. Statoil ASA. said Wednesday it is exiting its business in the Canadian oil sands, selling off its assets to Athabasca Oil Corp. and taking a loss of at least $500 million.

The move ends Statoil's nearly decadelong foray into oil sands production and comes two years after the company canceled plans to develop a major oil sands project, citing concerns about profitability. It signals the challenges faced by Canada's oil sands, which are some of the world's highest-cost and most greenhouse gas intensive sourcesof crude oil.

"This transaction corresponds with Statoil's strategy of portfolio optimization to enhance financial flexibility and focus capital on core activities globally," Lars Christian Bacher, the company's executive vice president for international development & production, said in a statement.

The deal includes Statoil's 100% ownership of two key oil sands leases, a 24,000 barrel a day test project called Leismer and an undeveloped project known as Corner. Statoil indefinitely postponed plans in September of 2014 to develop Corner, which was expected to produce 40,000 barrels of oil a day.

The 832 million Canadian dollars ($626 million) deal is structured to give Statoil a nearly 20% stake in Athabasca.

That Calgary-based company said the Leismer project can break-even on an operating income basis with West Texas Intermediate crude prices as low as $44 a barrel. "Athabasca has the financial strength to drive oil-weighted growth at competitive metrics in the current environment," CEO Robert Broen said in a statement.

Statoil entered the oil sands in 2007 when it bought North American Oil Sands Corp. in a deal then valued at $C2.2 billion. It then sold a 40% stake to Thailand's state-run PTT Exploration and Production Public Co., or PTTEP, which spun off those assets into a separate entity in 2014.

The sale of its remaining operations to Athabasca will trigger a balance sheet impairment of $500 million to $550 million, Statoil said.

The Norwegian oil giant said its offshore operations in Canada wouldn't be affected by the sale of its oil sands assets. Statoil has minority stakes in two producing assets off the coast of Newfoundland and two developmental projects.

Write to Chester Dawson at chester.dawson@wsj.com

(END) Dow Jones Newswires

December 14, 2016 19:13 ET (00:13 GMT)

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