Alberta oil sands leases change hands

Gary Park

For Petroleum News

Oil sands startup UTS Energy has sold a 50 percent working interest in three leases to Imperial Oil and ExxonMobil for C$250 million to keep alive its hopes of retaining a 20 percent stake in the Fort Hills project if new operator Suncor Energy revives the stalled development.

In making the announcement, UTS said it has terminated a “value maximization” process that could have seen the company sold after the failed takeover by France’s Total earlier this year.

Once the lease transaction is concluded, UTS said it will have enough cash to meet its commitment in the proposed Fort Hills mine, which Suncor acquired after its takeover of previous operator Petro-Canada.

Canadian mining giant Teck Resources also holds 20 percent of Fort Hills and holds the other 50 percent of the three leases.

UTS Chairman Dennis Sharp said the lease disposition “confirms the value of the UTS asset base.”

“With Suncor operating the Fort Hills project and the macro environment substantially improved we continue to be quite encouraged and optimistic about the prospects for Fort Hills,” said UTS Chief Executive officer Will Roach.

Imperial says leases complimentary

He said Imperial and ExxonMobil (which owns 69.6 percent of Imperial) will each own 25 percent of the leases.

At this stage Imperial is not prepared to discuss development plans for the land.

Suncor Chief Executive Officer Rick George said in early October that the Petro-Canada merger has resulted in larger than expected cost savings which could accelerate the pace of developing new oil sands projects, including the C$20 billion Fort Hills mine, which was put on hold last year.

Roach has suggested Fort Hills could be scaled back to a single-train 80,000-barrel-per-day mine from the originally planned 160,000 bpd.

He said that if UTS is faced with a capital commitment of C$5 billion to C$6 billion it need only raise C$300 million to get into production at that level.