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UTS Energy clings to Fort Hills hope
Gary Park For Petroleum News
Having preened itself to deliver on its biggest dream, oil sands minnow UTS Energy is not about to give up hope that its operating partner Suncor Energy will go ahead with the stalled Fort Hills project.
Despite the added doubts stemming from Suncor’s takeover of Petro-Canada, which included the Fort Hills leases and Suncor’s reluctance to say if or when the project might go ahead, UTS has its own schedule in mind.
Chief Executive Officer Will Roach told a conference call that a 2016 startup is possible, although that date could be stretched to 2019, the last available target date required to preserve the current leases.
Roach said the Suncor deal with Petro-Canada was “pretty clearly a big” event, but said he is confident the Suncor leaders will see value in monetizing the Fort Hills partnership.
UTS has a 20 percent stake in Fort Hills, while Suncor has 60 percent and Canadian mining giant Teck Resources holds the remaining 20 percent. Teck is also a joint 50-50 partner with UTS in the undeveloped Equinox and Frontier leases, where they are gathering additional data to support a planned regulatory application in early 2011 for Frontier, with Equinox as a satellite, with approvals expected in 2014.
Partnership decision required UTS Vice President Howard Lutley said his company is basing its goal on discussions with Suncor, but stressed: “This is UTS’s schedule. We have shared it with Suncor, but this is our view.”
He said that meeting the startup schedule requires a partnership decision to proceed with a design basis memorandum update by the end of 2010, followed in 2011 by an updated front-end engineering and design, which requires the partners to make commitments and start spending significant dollars.
Lutley said the near-term push is to reconfigure the Fort Hills plans to take advantage of synergies with the existing Suncor facilities.
He noted that Suncor is also expected to complete a review of its oil sands assets this year, which should add to clarity around Fort Hills.
He said Suncor has emphasized that, as much as possible, it wants to preserve the engineering completed under Petro-Canada to “minimize the rework and retain value” from what has been spent.
UTS viewed as takeover target UTS sold a 50 percent working interest in three leases late last year to Imperial Oil and ExxonMobil for C$250 million, giving it an estimated C$440 million in cash and cash equivalents, plus C$704 million in remaining earn-in on Fort Hills.
UTS is also rated as a prime target for takeover by Asian buyers.
National Bank Financial analyst Peter Ogden said UTS’s project slate is at least as good as Athabasca Oil Sands, which is gearing up for an initial public offering, and it has strong partners in Suncor and Teck.
He estimated UTS’s value at C$3.30 a share, or 71 cents per barrel of contingent resources, translating to a takeout price of about C$1.57 billion, compared with its current market value of C$1.18 billion.
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