Canadian Oil Sands becomes largest stakeholder in Syncrude project

By OGJ editors

HOUSTON, Feb. 4 -- Canadian Oil Sands Trust, through its wholly owned subsidiary Canadian Oil Sands Ltd., reported Monday it will acquire an additional 10% interest in the Syncrude oil project from Calgary-based EnCana Corp. for $1.07 billion (Can.). The Syncrude project—a joint venture operated by Syncrude Canada Ltd. near Fort McMurray, Alta.—is the world's largest producer of light, sweet crude from oil sands and the largest single source of oil in Canada.

In addition, EnCana granted Candian Oil Sands an option to purchase—on similar terms and before yearend—EnCana's remaining 3.75% share in the project and an overriding royalty. If exercised, the option would generate additional proceeds of about $417 million, EnCana said.

The Syncrude transaction is expected to close by the end of the month, with an effective date of Feb. 1. EnCana's 13.75% interest in Syncrude is held by two subsidiaries: AEC Oil Sands LP (10%) and AEC Oil Sands Ltd. Partnership (3.75%).

EnCana's refocused strategy
For EnCana, the sale will be a "strategic realignment" that will focus the company on its "operated, high-working interest conventional oil and gas properties," said Gwyn Morgan, president and CEO. "A minority ownership in Syncrude does not fit these criteria but is ideal for a royalty trust investment."

Instead, Morgan said, EnCana will concentrate its oil sands strategy "on developing its high quality resources, recovered through steam-assisted gravity drainage (SAGD), on 100% owned and operated lands at Foster Creek and Christina Lake." The company estimates that there is more than 30 billion bbl of heavy oil in place on its properties in northeast Alberta. "With the implementation of SAGD, a new generation of oil sands technology, it is anticipated that these lands are capable of the lowest unit production cost in the industry," EnCana said.

At Foster Creek—the world's first large-scale commercial SAGD project—EnCana is producing 20,000 b/d of oil. Construction on Foster Creek's first expansion, which will expand production by 10,000 b/d, is under way and is expected to come on stream in the first quarter of 2004. The company's second project, a demonstration scale SAGD facility at Christina Lake, is producing about 3,500 b/d of oil.

Reaction
Following Canadian Oil Sands's announcement to acquire the stake in Syncrude, Moody's Investors Service confirmed the firm's Baa2 senior unsecured debt rating with its ratings outlook remaining negative.

The negative outlook, Moody's said, was related partially to Canadian Oil Sands's "increasing financial leverage due to capital spending requirements needed to fund Syncrude's Stage 3 expansion project that are expected to result in (the company) being in a significant net cash shortfall position in 2003 and 2004. . .(and) a distribution policy that could result in a larger percentage of operating cash flow being distributed to the trust unitholders than was distributed historically. . . ."

Moody's also stated that the company's negative outlook hinged on ". . .the possibility of additional cost overruns or delays, and. . .the possible negative price impact of significant incremental barrels coming into the market from other large oil sands projects expected to commence production during 2003 and 2004."

Related Articles

WAFWA: Aerial survey finds lesser prairie chicken population grew

07/06/2015 A recent range-wide aerial survey found the lesser prairie chicken population rose 25% from 2014 to 2015, the Western Association of Fish & Wil...

Production ramps up from Sunrise oil sands project

07/06/2015 Husky Energy Inc., Calgary, reported that 25 well pairs are now on production at its Sunrise oil sands project in northeastern Alberta. Steaming is...

Buru awarded onshore Canning licenses

07/06/2015 Buru Energy Ltd., Perth, and Mitsubish Corp. have been granted two production licenses for Ungani oil field in the onshore Canning basin of Western...

Cenovus sells royalty business for $3.3 billion

07/06/2015 Cenovus Energy Inc., Calgary, inked an agreement to sell its wholly owned subsidiary Heritage Royalty LP to Ontario Teachers’ Pension Plan for gros...

CERI: Energy, operational efficiencies possible in Canadian oil, gas

07/06/2015 Measures can be taken by operators in the expanding resource-intensive Canadian oil and gas sector to improve both energy efficiency and operationa...

AGL Energy to scale back upstream gas operations

07/06/2015

Gas retailer AGL Energy Ltd., Sydney, says it will exit the oil business and massively scaling back its upstream gas operations.

Macondo settlement seen ‘positive’ for BP

07/06/2015 BP Exploration & Production Inc.’s recent agreement to settle federal and state claims related to the 2010 Macondo blowout and spill improves t...

Emerging producers offered guidelines for governance

07/06/2015 Like most worthy endeavors, governing oil and gas activity at the national level is easier said than done-especially where oil and gas never before...

Nelson-Farrar Quarterly Costimating Indexes for selected equipment items

07/06/2015 The Nelson-Farrar refinery construction index rose to 2,475.6 by December 2012 from 2,467.4 in January of the same year. The index continued to ris...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts

On Demand

OGJ's Midyear Forecast 2015

Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected