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Aerial view of rock containing oil deposits on the banks of the Athabasca River near the town of Fort McMurray in Alberta.


Athabasca Oil Sands Corp. begins trading on the Toronto Stock Exchange today after completing the largest initial public offering in Canada in more than a decade.

The issue priced near the top of estimates at $18 a share, giving the 31/2-year-old explorer a valuation of $7-billion, even though it is still years away from production.

Expectations on the Street are for strong interest in the listing after orders topped available shares by the tune of several hundred million dollars.

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With a sizable market capitalization, Athabasca Oil stands to pull in some institutional investors, especially index funds. It's also likely to attract further Chinese money, following PetroChina Co. Ltd.'s recent $1.9-billion investment in the company in return for a 60-per-cent stake in two of Athabasca Oil Sands' northern Alberta projects.

PetroChina has also provided Athabasca Oil with a loan of $430-million as well as a commitment for two additional loans of up to $100-million and up to $560-million. In doing so, the Chinese energy giant has restoked interest in oil sands assets after a pullback by investors in 2008 and 2009.

Athabasca Oil Sands estimates that its Alberta holdings contain 114 million barrels of probable oil reserves, 26 million barrels of possible reserves and 7.1 billion barrels of contingent resources. It says it will spend about $2.4-billion over the next four years developing projects.

The Calgary-based company raised $1.35-billion from the share offering, the largest haul since Manulife Financial Corp. raised $2.5-billion in 1999. Initially, Athabasca Oil Sands was seeking about $750-million. It says it will use the windfall to fund development of its various properties, to pay interest on its PetroChina loans and to fund potential future acquisitions of oil sands leases and permits.

The money from PetroChina and the IPO, combined with its working capital, are sufficient to fund spending through at least 2011, the company said in its prospectus filing.

Athabasca Oil sold 75 million shares in the public offering, which will trade under the stock symbol ATH. There are more than 300,000 shares in the hands of private investors. The Ziff family, descendants of publishing magnate William Ziff Jr., own more than 56 million of the shares. Directors and officers of the company own nearly 45 million shares, with the chairman, Bill Gallacher, owning 23.9 million through his private equity firm Avenir Capital.

The expectation is that some private investors will use the IPO to cash out some or all of their investment. The effect could be a push-and-pull on the stock in the early days of trading.

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Some analysts have speculated that a successful IPO by Athabasca Oil will help lift other junior oil sands stocks, including UTS Energy Corp.

Even before Athabasca Oil shares hit the public market, however, private investors have already racked up a juicy profit in the form of a $4.25-per-share dividend paid out last month, costing more than $1.3-billion. The largesse was orchestrated in part to take advantage of various tax laws, even though the company recorded revenue of just $2.4-million in the first nine months of 2009.

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