Bloomberg News

Athabasca Oil Signs Letter of Intent for Oil-Sands Venture

August 31, 2012

Athabasca Oil Corp. (ATH), a Canadian crude producer, has signed a letter of intent to pursue a joint venture for its Hangingstone and Birch properties as the company seeks to develop its oil-sands assets and boost output.

Athabasca didn’t comment on the size of the potential transaction or its partner in a statement today. Athabasca’s shares were halted in Toronto earlier today following a report in The Globe and Mail that Kuwait Petroleum Corp. may invest as much as C$4 billion ($4.05 billion) for a joint venture to develop Athabasca Oil’s assets in Alberta.

The Calgary-based oil producer, which already cooperates with PetroChina Co. (857), has been looking for partners to accelerate its plans to boost output to 220,000 barrels a day by 2020. Chief Executive Officer Sveinung Svarte said on a July 26 conference call that he expected a joint-venture deal to be announced in the third quarter.

“Athabasca does not intend to make any further announcements or communications regarding this potential transaction until either a definitive agreement has been reached or it determines that disclosure of developments is appropriate,” the Calgary-based company said in the statement.

Kuwait Petroleum denied reports that one of its units signed a contract to invest in Canada, state-run Kuwait News Agency reported today, citing a statement sent to the agency by the company. Such an investment would require various company and government approvals, “and this has not taken place so far,” the agency quoted Kuwait Petroleum as saying in the statement.

Houston Representative

Abdulaziz Al-Attar, Kuwait Petroleum’s Houston-based representative, declined to comment on the reported agreement between his company and Athabasca Oil when reached by phone today.

The shares rose 8.6 percent to C$13.58 at the close in Toronto after gaining as much as 12 percent following the trading halt. That’s the biggest intraday gain since Oct. 27, 2011.

“If the joint venture is finalized, then Athabasca’s future capital commitments on these properties will be greatly reduced,” said Geoff Ready, an analyst at Haywood Securities in Calgary, in a note to investors.

In March, Athabasca Oil completed the sale of its remaining 40 percent interest in the Mackay River oil-sands project to partner PetroChina for C$680 million. It has more than 1.5 million net acres of leases for oil-sands projects in northern Alberta and 359 million barrels of proved and probable reserves, according to a July 26 statement.

Daily Production

Athabasca Oil said last month it expects year-end production will be as much as 11,000 barrels of oil-equivalent a day. The Canadian oil producer has lost money in five of the last six quarters and said last month it “does not expect to start receiving significant revenues until late 2012.”

“We highly caution any investor against believing” that Athabasca would be paid C$4 billion in cash, as that would represent about 80 percent of its market value, Phil Skolnick, a New York-based analyst for Canaccord Genuity, said in a note to clients before the statement was published. He rates the shares a buy.

To contact the reporters on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net; Rebecca Penty in Calgary at rpenty@bloomberg.net

To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net


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