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Flurry of junior oil sands financings Alberta’s planned royalty increases haven’t put crimp on oil sands developments by juniors, three do deals worth combined C$1.2B Gary Park For Petroleum News
If the Alberta government’s planned royalty increases are supposed to put a crimp on oil sands developments, somebody has forgotten to get word to the juniors.
In the space of three days, two companies with projects under way in Alberta — Connacher Oil and Gas and OPTI Canada — announced financing deals worth a combined C$1.2 billion.
Connacher, 100 percent owner of the Great Divide project, sold US$600 million in senior secured notes to institutional investors and negotiated a new revolving credit facility of C$150 million and US$50 million with a syndicate of banks and financial institutions.
The proceeds will be used to pay off certain debts and provide funding for its 10,000-barrel-per-day Algar project, its second step in building a network of oil sands operations towards its objective of 50,000 bpd within the next five to seven years.
The Great Divide property, covering about 100,000 acres, is designed to recover 83 million barrels of bitumen over 25 years.
The initial phase is scheduled to attain target production levels of 10,000 bpd by the third quarter of 2008 and the second phase is expected to deliver diluted bitumen to United States and Canadian markets in 2009.
Connacher Chief Executive Officer Richard Gusella said the financing deal will allow the company to finance all of its new projects and planned 2008 growth, as well as complete the C$326 million Algar project, without needing additional capital. The Great Divide commissioning was achieved this year at a cost of C$290 million, only C$30 million over budget.
By taking a modular approach to construction, and assembling large portions of its plants offsite, Connacher believes it can take its place among larger companies in the oil sands. OPTI locks up deal OPTI, a 50-50 partner with Nexen in the Long Lake project, locked up a C$412.2 million bought-deal financing with a syndicate of 12 underwriters, with TD Securities as lead manager.
It includes 18.5 million common shares at C$19 per unit and 2.4 million flow-through common shares at C$24.70 per unit.
OPTI said about C$60 million will be utilized for its 2008 delineation and exploration program on existing leases, C$150 million will go to second-phase engineering and first-phase capital costs and C$202 million will be spent on general corporate purposes, including working capital.
In July, OPTI announced the placement of US$750 million debt financing. In addition, Oilsands Quest announced a C$71 million financing, with the bulk going to reservoir testing and other aspects of its Axe Lake discovery in Saskatchewan, which could be that province’s first commercial oil sands operation.
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