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Canada oil sands start-ups fired up Newcomers on the move with projects; UTS Energy unveils modified plan to revive Fort Hills venture Gary Park Petroleum News Calgary Correspondent
The pace is quickening for two start-ups in the Alberta oil sands as they press ahead with plans for commercial operations this decade.
UTS Energy, which plans to take 100 percent control of the Fort Hills project, has raised its initial production target but scaled back its overall objective as part of a new strategy for reviving a venture that was shelved early last year.
Meanwhile, Deer Creek Energy, a closely held Calgary-based company, aims to raise as much as C$200 million from an initial public offering to increase its oil sands output in northern Alberta.
UTS said June 25 that it now hopes to produce 50,000 barrels per day of bitumen by mid-2009, up from the earlier first phase plan of 30,000 bpd to come on stream in 2005.
It is also on track to acquire for C$125 million the 78 percent interest it does not already own from TrueNorth Energy, an affiliate of Koch Industries.
UTS has a “high degree of confidence” that it will complete a secondary offering of C$100 million to C$125 million to complete that deal. Regulators have approved production target The new production target has been approved by the Alberta Energy Department, subject to UTS completing its purchase of the TrueNorth stake. Other regulatory approvals are already in hand.
Until the TrueNorth deal is concluded, UTS will not release details of how it intends to finance initial construction and subsequent expansion plans.
Beyond arranging the financing, UTS faces the challenge of searching for partners to spread the financial risk and introduce expert staff over the next two years.
The first-phase cost of Fort Hills is now in the C$1.6 billion to C$2 billion range, compared with the original price tag of C$3.3 billion.
UTS estimates that taking over TrueNorth will cost about 8 cents per barrel of reserves for a lease that covers 46,000 acres and has 4.9 billion barrels of bitumen in place, of which 2.8 billion barrels are recoverable over 40 years. Lease close to other mines The lease has the added advantage of being alongside the bitumen mines operated by Syncrude Canada and Shell Canada.
The October 2002 regulatory approvals from the Alberta Energy and Utilities Board allow Fort Hills to produce up to 235,000 bpd.
If Deer Creek is successful with its initial public offering which closes in late July, it will aim to produce 10,000 bpd, starting at 600 bpd in 2005, according to the prospectus.
The small company said it will use the IPO’s proceeds for facilities that burn natural gas to turn water into steam and inject the steam underground to make it easier to pump the molasses-like oil to the surface.
Deer Creek owns 84 percent of the Joslyn project, with the balance held by Enerplus Resources Fund, a Calgary-based income trust.
Hopes of a strong response to the IPO have been raised by another start-up, OPTI Canada, which generated C$1.8 billion in equity and debt for its share of a joint-venture with Nexen.
When OPTI attracted C$301 million in April, it was the biggest non-income trust IPO in Canada since 1993, according to the Investment Dealers Association of Canada.
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