Athabasca Oil could face a potential cash shortfall if it does not land either the joint venture or the PetroChina deal.
Sveinung Svarte is still scratching his head.
In just one day last week, shares of Athabasca Oil Corp., the company he leads, plummeted 17 per cent. At first he was shocked because nothing new was announced, but then he realized there were a flurry of news stories about the regulatory review of his asset sale to PetroChina Co. Ltd.
What perplexed him is that Athabasca had already announced that it would take part in a public hearing run by the Energy Resources Conservation Board (ERCB), after Fort McKay First Nation members argued that one of the remaining bits of relative wilderness in the area could be affected by the project.
But to the casual observer who wasn't aware of the disclosure, it seemed like something new had cropped up and the stock was sent tumbling.
Athabasca didn't say much at the time, but the hearings have now ended and Mr. Svarte didn't hold back while speaking on his quarterly conference call Tuesday. Addressing his stock's performance, he started out by saying that he knows it's sagging because he hasn't finalized a major joint venture, but he then ventured into a restrained rant about the recent confusion, noting that "public hearings are often part of the regulatory process in Alberta."
Ultimately he remained composed and even took some of the blame. "In hindsight, we probably could have done a better job explaining that approvals are normally granted as a result of this process," he said. But it's still hard for him to see what's happened to his stock. Even though the shares have bounced back a bit, they're still down 20 per cent in April alone.
However, there's more to the story. The ERCB has up to 90 days to release its decision, and Athabasca needs the $1.32-billion that will come from the PetroChina transaction as soon as possible. As Matthew Taylor at National Bank Financial said on the call, "timing to secure financing is pretty critical" for Athabasca because it's running out of cash to develop both its Hangingstone oil sands project and its light oil assets.
To calm investors' nerves, Athabasca stressed that it already has a suite of backup plans in case the review is held up, or somehow they don't get the approval they expect.
Joint ventures remain "a core part of our growth strategy," said chief financial officer Brent Heagy, but he also noted that Athabasca has the option of leaning on its credit facility or tapping public debt markets again – something it resorted to for a high-yield issue last fall.
He also noted that the put option underlying the asset sale to PetroChina could potentially be used as an anchor in some sort of secured financing, if need be. That perked up someone's ears at Marret Asset Management, who piped in with questions about such an arrangement. Not much was said publicly, but Mr. Svarte suggested the two groups continue talking after the call because he'd like to hear Marret's thoughts on the idea.
Should the sale go through without any hiccups and Athabasca get the cash it needs, the company will continue to develop its Hangingstone project, with production expected in early 2015, as well as its light oil assets in the Kaybob region.
(Tim Kiladze is a Globe and Mail Reporter.)
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Tim Kiladze