Big oilsands players gobble up smaller stakes

CALGARY — Northern Alberta is a patchwork of motley oilsands properties, with some chunks controlled by energy heavyweights and others in the hands of smaller companies.

CALGARY — Northern Alberta is a patchwork of motley oilsands properties, with some chunks controlled by energy heavyweights and others in the hands of smaller companies.

With virtually all of the premium morsels already spoken for, the map is expected change significantly as the bigger players consolidate their positions by gobbling up smaller holdings.

“There’s lots of checker-boarding. There’s lots of little pieces,” said Bob Schulz, professor with the University of Calgary’s Haskayne School of Business.

Potential acquirers want to snap bits of land that are adjacent to properties they already have, since it’s more efficient to develop them that way.

“I’d expect to see some swapping some assets and also some outright purchases,” Schulz said.

Oilsands junior Opti Canada Inc. (TSX:OPC) said last week it was exploring strategic alternatives, including the sale of the whole company or some of its assets.

Opti is best known for its 35 per cent stake in the Long Lake project, which is controlled by Nexen Inc. (TSX:NXY). The project used to be an evenly-split joint venture, but Nexen increased its stake nearly a year ago.

Both companies are often cited as potential takeover targets. Opti in particular sees its share price spike every time a large international firm makes is rumoured to be on the hunt for oilsands assets.

Another relatively small oilsands name, UTS Energy Corp. (TSX:UTS), recently sold its half-interest in its Lease 421 properties to Imperial Oil Ltd. (TSX:IMO) and its parent Exxon Mobil Corp. (NYSE:XOM), the world’s largest publicly traded energy company.

The sale, which garnered the firm $200 million after tax, was the culmination of a strategic review UTS undertook in response to a hostile takeover bid from French energy giant Total S.A.’s Canadian arm.

UTS’s main asset remains its 20 per cent stake in the stalled Fort Hills oilsands project, the future of which has not yet been determined by its operator, Suncor Energy Inc. (TSX:SU).

Suncor took on its 60 per cent stake in Fort Hills through its merger with Petro-Canada in August, and is set to lay out its 2010 spending plans to investors on Friday.

Consolidation will likely also take place within the Syncrude Canada Ltd. partnership, the world’s largest oilsands development, now that ConocoPhillips (NYSE:COP) is putting its nine per cent stake on the block as part of a US$10-billion divestiture package.

“I think the oilsands is where people should be concentrated. It’s sort of a surprising move from Conoco’s standpoint,” said John Stephenson, portfolio manager with First Asset Investment Management in Toronto.

Fellow Syncrude partners Canadian Oil Sands Trust (TSX:COS), the biggest stakeholder, and Imperial Oil Ltd., the next largest, are thought to be the most likely candidates to snap up Conoco’s interest.

But it’s possible a buyer could come from outside the consortium — potentially from abroad.

China made its first major foray into the oilsands through China National Petroleum Corp.’s $1.9-billion investment in two of privately held Athabasca Oil Sands Corp.’s properties.

“It wouldn’t surprise me to see CNPC take a bigger bite out of some of the bigger projects Athabasca Oil Sands has,” the University of Calgary’s Schulz said.

“It wouldn’t surprise me if CNPC then takes a look at some other companies.”

Korea’s state-owed energy firm Korea National Oil Corp. acquired a smattering of small oilsands leases through its $4.1-billion acquisition of Harvest Energy Trust (TSX:HTE), which is better known for conventional production in western Canada and a refinery in Come by Chance, N.L.

India’s state-owned company hasn’t made a move in the oilsands yet, but it may eventually in an effort to secure more energy for its burgeoning population.

The Netherlands’ Royal Dutch Shell PLC (NYSE:RDS), France’s Total, and Norway’s Statoil Hydro are already oilsands players and may look to bulk up their positions there in the years ahead.

One of the biggest problems major energy firms in the United States and abroad face is how to ensure they have enough crude reserves to power their businesses decades into the future.

Since developing the oilsands doesn’t require exploration — huge swaths of earth in northern Alberta is literally soaked with 175 billion barrels of crude reserves — Canada will be a key part of those companies’ growth strategies.

“One thing the oilsands gives you is this 50 or 100 year reserve life. That’s extremely attractive to a company that is looking to extend their reserve life,” said Stephenson.

“I think ultimately there’ll be more interest from these offshore foreign buyers, who see this as not just strictly an economic transaction. They also see it as a strategic imperative.

“The history of oil is one where countries have gone to war to have access to it because if you don’t have available oil, industry really grinds to a halt.”

Just Posted

More than 100 people participate in the Light the Night Walk in Red Deer

Red Deer’s Michael Wark was 27 when he was diagnosed with cancer.… Continue reading

‘Big bang’ precedes Red Deer house fire, says neighbour

A Red Deer home was heavily damaged by a fire early Friday… Continue reading

PHOTOS: Grilling meat at Shelter Ribfest in Red Deer

The first-ever Shelter Ribfest is on this weekend at Gary W. Harris… Continue reading

Red Deer man arrested, charged for drug-related offences

A Red Deer man is facing a number of charges, including possession… Continue reading

Respect in hockey rinks is often missing

The men and women in stripes have long been scrutinized on the… Continue reading

Fashion Fridays: 10 effortlessly stylish items for fall

Kim XO, helps to keep you looking good on Fashion Fridays on the Black Press Media Network

Your community calendar

Wednesday Central Alberta Historical Society annual general meeting is 6 p.m. at… Continue reading

Trump front and centre as talk of trade, jobs emerges on campaign trail

OTTAWA — A familiar U.S. face finally showed up front and centre… Continue reading

RDC Kings and Queens cross country dominate on home turf

There was a lot of pride floating around amongst the host team… Continue reading

Hunting Hills Lightning cruise past Foothills Falcons in high school football action

The Hunting Hills Lightning showed their Football Alberta ranking was no fluke… Continue reading

Two students dead, several seriously injured in Vancouver Island bus rollover

Two University of Victoria students died and several people were injured after… Continue reading

‘It’s time:’ Paralyzed Bronco returning to Humboldt for first time since crash

For the first time in 526 days, former Broncos hockey player Ryan… Continue reading

No winning ticket for Friday night’s $27 million Lotto Max jackpot

TORONTO — There was no winning ticket for the $27 million jackpot… Continue reading

White House says bin Laden son killed in US operation

WASHINGTON — The White House announced Saturday that Hamza bin Laden ,… Continue reading

Most Read