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Private oil sands firm isn’t giving up
Gary Park For Petroleum News
A privately held oil sands development company that had its plans to drill for heavy oil scuttled by the Alberta government last fall is a subscriber to the school that says “never, never, never give up.”
OSUM Oil Sands has cobbled together C$275 million in private equity financing to finance an in-situ project that could lead to commercial production of an initial 35,000 barrels per day, expanding to 150,000 bpd.
It sold 26.2 million shares at C$10.50 per share in a financing led by Warburg Pincus that included a “substantial” investment by private equity powerhouse Blackstone Capital Partners.
Hopes are now pinned on a lease further east of the Marie Lake property in the Cold Lake area where OSUM’s plans to develop oil under the lake were cancelled by the government after local residents and environmentalists objected to the use of a vertical shaft and horizontal tunnels and wells 1,600 feet below the lake to tap an estimated 252 million barrels of recoverable reserves.
Plan called for C$750 million The company had planned to spend C$750 million to eventually produce up to 40,000 bpd.
It reacted bitterly to the loss of its lease, with vice president at the time Andrew Squires saying “this kind of thing happens in South America, not Canada.”
An OSUM spokesman said the government has yet to return the lease and the company is undecided on whether to pursue a lawsuit.
One company spokesman said “we feel ours is not the next move.”
However, Steve Spence, vice president of projects, who joined OSUM in May after 20 years at Shell Canada, said his company has walked away from a lease that has been “rescinded and cancelled. … Marie Lake is in the past.”
But he conceded OSUM will be more sensitive to community concerns in the future and expects to start consultations with Cold lake residents this November.
OSUM Chairman and Chief Executive Officer Richard Todd said the latest financing is a “positive endorsement of our quality asset base and management team. The caliber of private equity firms committed to this financing suggests a solid base of access to capital going forward for our company.”
OSUM’s own Web site said it had raised C$100 million of equity and had about C$47 million in working capital at the end of 2007. Management and directors control 25 percent of the fully diluted shares.
Cold Lake resource It also reported 11 billion barrels of oil in place, with an estimated 1.5 billion barrels recoverable, according to independent engineers.
In the Cold Lake area it has an estimated 1.8 billion barrels of oil in place, of which 305 million barrels are deemed recoverable.
In addition to its Cold Lake lease, OSUM has a positioning an emerging carbonate oil sands play near the oil sands capital at Fort McMurray, where it holds 103 gross sections of Saleski carbonate play, 67 of those jointly with Laricana Energy.
The company expects to file a commercial application for the Cold Lake project — its first priority — by late 2009, with first production scheduled for 2013 at an initial 10,000 bpd.
The Saleski play would involve thermal technology rather than an oil sands mine to extract the resource.
Todd said the Saleski area is “one of the world’s next giant oil plays” could advance to commercial development once it has results from its first pilot plant in early 2010.
OSUM said Jeffrey Harris and David Krieger, both managing directors at Warburg Pincus, will join its board of directors, along with David Foley, a senior managing director at Blackstone.
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