Canadian Oil Sands to buy Canada Southern

By OGJ editors
HOUSTON, June 20 -- Canadian Oil Sands Ltd. (COS), a unit of Canadian Oil Sands Trust, Calgary, has agreed to purchase all outstanding common shares of Canada Southern Petroleum Ltd. (CSP).

The company described the purchase as a long-term hedge against natural gas price increases that could hurt Syncrude oil sands production at Fort McMurray, Alta.

COS manages Canadian Oil Sands Trust, which holds an indirect 35.49% working interest in the Syncrude joint venture.

The acquisition, for $9.75/share—about $165 million (Can.) total—will give COS interests, mostly carried, in about 927 bcf of Arctic Island natural gas. COS said the gas amount is sufficient to sustain production of its share of light, sweet crude oil at capacity rates of later Syncrude stages for 25 years (OGJ, Mar. 10, 2004, Newsletter).

CSP's reserves, along with its $20 million in working capital, represent half of the company's value, resulting in a net cost to COS of 10¢/Mcf. COS intends to sell CSP's conventional gas reserves, which are producing 6 MMcfd in southern Yukon and northern British Columbia.

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