Athabasca Oil Corp. (ATHOF, ATH.T) investors are focused this week on a
crucial regulatory decision for the company's Dover oil sands project
that would trigger a sale of its interest and generate C$1.3 billion
($1.26 billion)--proceeds needed to fund other operations.
The company, which has seen its shares pressured by worries
over the fate of the northern Alberta project, reports second-quarter
results on Wednesday, and the ruling by the Alberta Energy Regulator
could come as early as Tuesday. The stock has fallen to a close on
Friday of C$6.87 on the Toronto Stock Exchange from almost C$14 last
fall.
If approved, the Dover project will eventually produce 250,000
barrels of bitumen per day. However, the company and the Fort McKay
First Nation have been unable to resolve a dispute over a project buffer
zone, forcing a full hearing process for the project. The band says
it's not opposed to the project as a whole, but wants to make sure
wildlife, and traditional hunting and trapping grounds already
surrounded by other oil sands projects, are protected.
Uncertainty around the project hearing process and the final
decision--likely to be released by mid-August--has been the main reason
for the oil company's stock price decline over this year, said Athabasca
vice-president Andre De LeeBeeck.
"The fact that we had the hearing surprised the market," Mr. De LeeBeeck said. "The market doesn't like surprises."
The approval of the steam-assisted gravity drainage project is
crucial to Athabasca being able to sell its share of the project to
PetroChina Co. Ltd. (PTR), which already owns 60%.
In 2010, PetroChina bought 60% of both the Dover and MacKay
River projects for C$1.9 billion. The agreement had a put/call option,
allowing either side to trigger the sale of the remaining 40% to
PetroChina, following regulatory approvals.
Athabasca has had to borrow money in the interim, and needs
the cash from the sale to develop its other assets. While the company
will not commit to any new capital expenditures until it has "line of
sight" on the proceeds from Dover, Mr. De LeeBeeck emphasized the
hearing is just a part of the business process.
"It's just what you have to go to if two parties cannot come to agreement."
Recent months have seen a number of changes at Athabasca. In
early May, share prices dropped when Athabasca announced the abrupt
departure of president Bryan Gould. The name of the joint venture
operating company between Athabasca Oil and PetroChina--originally
called Dover Operating Corp.--was changed in late May to Brion Energy
Corp.
Mr. De LeeBeeck noted the company has other plans in the
works, including a search for joint venture partners for its holdings in
the Duvernay formation. "The growth strategy of the company is through
joint venture."
But analyst Michael Dunn of FirstEnergy Capital Corp. said a quick decision on Dover is key for Athabasca.
"When that money didn't come in the door earlier this year,
they had to borrow money at relatively high interest rates," Mr. Dunn
said. "That's the concern--the longer they have to wait for that money,
the more they'll have to spend borrowed money."