Total offers $617 million for UTS Energy

Total E&P Canada Ltd. has offered to pay $617 million (Can.) in cash for UTS Energy Corp. to boost its oil sands portfolio in Canada's Athabasca region.

Jan 28th, 2009

Uchenna Izundu
International Editor

LONDON, Jan. 28 -- Total E&P Canada Ltd. has offered to pay $617 million (Can.) in cash for UTS Energy Corp. to boost its oil sands portfolio in Canada's Athabasca region.

Total's hostile offer for UTS represents a 57% premium over the Jan. 27 closing price for UTS shares.

If successful, Total would acquire a 20% stake in the Fort Hills Project in Athabasca, 100 km northeast of Fort McMurray. It would join Petro-Canada, the operator with a 60% stake, and Teck Cominco Ltd., Vancouver, which has 20%.

An estimated 4 billion bbl of bitumen at Fort Hills will be recovered using mining technologies, but its timetable for development has been delayed due to high costs and economic uncertainty. Petro-Canada estimated it would cost $24 billion.

The consortium plans to develop the resources in two phases of 160,000 bbl of bitumen each, and the first phase has received the main approvals for its launch. "Depending on the results of the technical studies, the final investment decision for phase one should be made by 2010, and production could start in 2013," Total said.

Other projects in the Athabasca region are Joslyn and Northern Lights Project, which are near Fort Hill. Total has 74% and 60% interests, respectively, in these projects. These resources also will developed by mining techniques.

Total warned it is reanalyzing the costs, technology choices, and structure of Joslyn and putting together a new schedule. Its production potential is estimated at 230,000 b/d. Engineering studies for the upgrader project in Edmonton and which is designed to process the bitumen from the various oil sands projects that Total is involved in are continuing as planned.

If this deal goes ahead, it will build upon two similar acquisitions since last July. Total described the Athabasca region as having long term development potential.

The company's proposal is open for 60 days, subject to the acceptance by UTS shareholders representing at least 66.67% of the shares.

Contact Uchenna Izundu at uchennai@pennwell.com.

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