Spare a thought for the Athabasca Oil Corp. shareholder, an optimistic sort with the patience of Job.
There has never been any question about the potential of the energy projects that Athabasca has on its plate or the oil reserves that underpin them. It just seems like such a struggle for the company to get over hurdles so that investors can start realizing the promise.
Even when there is a positive development, there's often a new wrinkle to temper the enthusiasm. That was the case following the Alberta cabinet's recent approval of the Dover oil sands venture, when Athabasca disclosed that the fat stack of cash it expects to pocket when it sells its interest in the project to its Chinese partner will be lighter than expected.
The revelation helped snuff out a rally in the shares that began just before the start of the year, and keeps them at less than half the 2010 initial public offering price of $18. In fact, the stock has only briefly been above the issue price, and that was more than three years ago.
To get back there, Athabasca chief executive Sveinung Svarte has to make good on several fronts, including getting its Hangingstone steam-driven bitumen project going, striking a decent joint-venture deal for its Duvernay light oil prospects, and getting proceeds in hand from the sale of its Dover interest – all within the next year. That would be a lot of moving parts for an established senior producer, let alone a development-stage company whose expenses are still almost 2 1/2 times its revenue.
It's the last item on the list that's been the focus this past year, and it's not resolved yet. In fact, last week, investors were surprised to hear that the proceeds will be $85-million less than the long advertised $1.32-billion, after "adjustments."
Let's review: PetroChina Co. Ltd. bought 60 per cent stakes in two of Athabasca's oil sands projects, MacKay River and Dover, in 2009 for $1.9-billion. The deal included put/call options that allowed PetroChina to acquire Athabasca's interests for set prices up to 30 days after the developments won regulatory approvals. It did so with MacKay River in early 2012, netting Athabasca about $212-million after it paid back loans from its partner.
It looked like similarly smooth sailing last year when the partners, under their operating entity Brion Energy, sought the regulatory nod for Dover. However, the Fort McKay First Nation, whose northern Alberta lands are adjacent to the oil sands lease, pushed for a 20 kilometre buffer zone, saying its people were feeling boxed in by fast-expanding oil sands activity. The Alberta Energy Regulator approved the project in the summer over the aboriginal community's objections.
Fort McKay sought, and won, leave to appeal the decision, throwing the project's timetable out the window and forcing Athabasca to seek other financing as well as cut capital spending. In February, the two sides struck a deal and that led to the Alberta cabinet green light. Specifics of the deal with Fort McKay were not disclosed. The project still requires Alberta Environment's okay. No snags are expected there, and Athabasca has said it should sell its interest by mid-year, giving PetroChina its second wholly owned oil-sands project.
That brings us to last week's conference call to discuss forth-quarter results. Analysts were taken aback by the lower estimate of proceeds, and were left to guess as to what exactly went into the adjustment. Some wondered if there is a large provision related to the Fort McKay agreement, though Athabasca executives steered clear of mentioning that. Instead they referenced closing costs, fees and a "true-up" of the company's portion of capital costs.
For Athabasca, the money's important, partly because financial wherewithal will make it a more attractive partner in a joint venture for the Duvernay holdings, which require expensive operations. It hopes to wrap up the process to develop the Duvernay by July.
Early this month, Athabasca appointed Tom Buchanan, a veteran Calgary oil man who is CEO of Spyglass Resources Corp., as its chairman. Mr. Buchanan, the former head of Provident Energy, is no stranger to deals and tough negotiations, having brought together three junior companies to form Spyglass. The timing is probably good, considering the various pieces that still have to fall into place for Athabasca.
If history is any guide, it's doubtful all will go according to plan.
Jeffrey Jones