Hangingstone and McKay River projects to proceed
December 07, 2012
Two multi-billion dollar oil sands projects are moving forward by companies that are not listed among the top 50 energy companies in Canada.
The Globe and Mail published a list of the largest oil and natural gas producers in Canada, showing how much they produce of each commodity and whether the companies are domestically or foreign owned.
Strangely, two of the largest oilsands projects are being proposed by companies that are not on the list.
- Athabasca Oil Corp.‘s Hangingstone oil sands project 20 kilometres southwest of Fort McMurray is a SAGD project expected to produce 12,000 barrels a day starting in early 2015. The CAPEX budget is $536 M. The company plans to follow up the initial project with two expansions to bring daily production up to 80,000 barrels/day. Athabasca’s Hangingstone acreage has 911 million barrels of contingent resources (best estimate) plus 118 million barrels of probable reserves.
- Petro-China acquired the McKay River oil sands project from Athabasca Oil Corp. in two transactions for $2.6 B. The first phase of the MacKay River project is expected to produce 35,000 barrels per day, eventually expanding to 150,000 barrels. Construction of the project will begin next month with start-up targeted for 2014.
Each of these companies is interesting in its own right:
- Athabasca Oil Corp, (ticker ATH) has a market cap of $4 B. It has nearly $1 B in liquid assets and a balance sheet of $4B. It has little in the way of producing assets now, but some large attractive oil sands properties.
- Petro-China (ticker PTR) is a Chinese state-owed enterprise, a behemoth with a market cap of $250 B. The purchase of the McKay River property continues a trend that has seen Chinese companies acquire miners, energy producers and other resources companies in Canada.
Today the Harper government OK-ed the proposed $15 B take-over of Nexen by CNOOC and the $ 5 B take-over of Progress Energy by Petronas. So $20 B will flow to mostly Canadian investors as part of these transactions. These proceeds will be in turn invested in the economy. Foreign companies making these take-overs expect to earn a return and will spends billions of dollars to do so.
The Petro-China acquisition of the McKay River property provided Athabasca Oil Corp with the $2.6 B proceeds with which it is using to develop Hangingstone and Dover West. Petro-China itself will be investing several billions of dollars in the McKay River project.
It is significant that large capital inflows are coming from Chinese state-owed enterprises that are funding oil sands projects. It is also significant that these investment dollars are coming from companies that were here-to-for not even on the radar.
- a)Nathan Vanderkippe, "Foreign vs.Domestic", Globe and Mail, 4-Dec-2012, p.B4.
- b)"Athabasca to proceed with project in oil sands", Globe and Mail, 29-Nov-2012, p.B7.