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Athabasca Oil could face a potential cash shortfall if it does not land either the joint venture or the PetroChina deal.

Athabasca Oil Corp. faces new obstacles in completing a long-promised multibillion-dollar joint venture with partners from Kuwait and Spain, months after it said such a deal was imminent.

The company has said it is merely awaiting government approval to allow one of its buyers to sign the transaction, which markets expect to be worth roughly $2-billion. In August, Ali al-Sammak, Kuwait's ambassador to Canada, confirmed that senior Kuwait Petroleum Corp. officials had signed a memorandum of understanding, with a final agreement expected in October, toward buying an interest in two Athabasca properties in Alberta.

However, that agreement has yet to be finalized, and people close to the deal say part of the delay stems from difficulties with one of the buyers. Kuwait is not the only acquirer: Spanish company Repsol YPF SA is also involved.

The trouble landing a major foreign joint venture comes during a moment of broader uncertainty for a Canadian energy sector increasingly reliant on overseas capital. Two major transactions – deals to buy Progress Energy Resources Corp. and Nexen Inc., worth over $20-billion in aggregate – remain in limbo as Ottawa scrambles to compile new foreign investment guidelines.

Now, the Athabasca deal also appears to be in a tenuous state, although the Kuwaiti ambassador did not return calls and the company itself remains outwardly confident.

Repsol has kept a low profile for several weeks and those working on the deal now assume the company, burned by the nationalization of its assets in Argentina, is no longer a player, a source said.

Instead, Kuwait has been in discussions with other potential investors about forming a syndicate to buy Athabasca, with bidders that could include private equity buyers.

That is not necessarily a sign that the joint venture talks have fallen apart – but rather that they have cooled. "Everything is on pause now," one source said. The Kuwaiti group has also been reluctant to act before new foreign investment guidelines are released by the federal government, a source said.

The joint venture would see Athabasca sell a minority interest in its Hangingstone and Birch properties. The company says it does not see Investment Canada concerns, since it's not an outright takeover.

In an interview, Athabasca chief executive officer Sveinung Svarte confirmed that two buyers are involved in the transaction. Athabasca is "signing up with one party, but that party consists of two through another partnership," he said.

He denied that either Kuwait or Repsol – names he would not confirm – had pulled back. "They are both still there. They are all motivated to go forward and we keep regular contact," he said. He acknowledged, however, that the timeline for the deal is uncertain.

"It's just waiting for government approval in one of the countries in question, and sometimes they take longer than you expect, and it's very hard to predict," he said.

On Wednesday, Andrew Potter, an analyst with CIBC World Markets Inc., cautioned that the joint venture is unlikely to happen quickly.

"One factor likely impacting the [joint venture] process is escalating political unrest in Kuwait and that the country is in the midst of an election (early December), which would likely have put an oil sands JV on the back burner," he wrote in a research note.

Athabasca stock rose to nearly $14 when the Kuwait memorandum of understanding was first reported. It has now settled at just above $12, although analysts and investors say that still includes $1 based on expectations of a joint venture.

Meanwhile, Athabasca also said it could see a delay until early 2013 of regulatory approval for its Dover property. That approval, initially expected to come later this year, is financially important, because it will allow Athabasca to sell its remaining 40-per-cent ownership of Dover to PetroChina for $1.3-billion.

Markets don't expect the approval to be turned down. But FirstEnergy Capital analyst Michael Dunn said Athabasca faces a potential cash shortfall next year in the unlikely event it doesn't land either the joint venture or the PetroChina deal. The company has roughly $600-million in cash and short-term investments available. Mr. Dunn expects $900-million in spending next year, and while Mr. Svarte said it's likely to be "a little bit less than that," the math suggests potential issues.

Still, Mr. Dunn said the company could easily pull back on spending if it had to, since "most of the capital requirements would be discretionary."

Athabasca, meanwhile, is in the midst of an important few months. After reporting a third-quarter loss of $11.8-million, it will spend the fourth quarter turning the taps on a series of wells intended to effectively mark its debut as a producing oil company. After averaging 865 barrels of oil equivalent production in the first nine months of 2012, Athabasca expects to be pumping 10,000 to 12,000 barrels a day by the end of the year.

"This is where we will show people that we can execute, which is something people have questioned," Mr. Svarte said.

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