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Bitumen flowlines from a well pad at Nexen's Long Lake project in northern Alberta.

Dave Olecko

Analysts are guarded in their assessments of Sunshine Oilsands Ltd.'s announcements of a joint-venture partner for two of its northern Alberta projects and a decision to slow down spending on development at another.

Sunshine, whose shares are down by nearly half from an early January peak, said this week it signed a framework agreement for a potential joint venture, with an unnamed international company, to develop its Muskwa and Godin oil sands leases in Alberta.

Under a 50-50 venture, the partner will spend $250-million on the leases and contribute thermal enhanced recovery technology to achieve production of 5,000 barrels a day. Once that level is achieved the partners will split costs. A binding agreement still has to be signed.

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At the same time, the company said it was slowing development of its West Ells project, which has already faced delays and a cost overrun, while it seeks new funding commitments. Sunshine said earlier this year that the $468-million development would be about $30-million over budget.

The moves, both aimed at bolstering the company's financial position, came a couple of weeks after Sunshine launched a strategic review of its development alternatives, which it said could include joint ventures, debt and equity financing and other "strategic transactions."

RBC Capital Markets pointed out that the joint venture agreement for Muskwa and Godin could prove positive, but more details are needed. "The impact of the slowdown has also not been discussed. Recent updates put total project spending at West Ells at $525-million, which is a 12-per-cent increase over initial estimates," RBC analyst Mark Friesen wrote in a note to clients.

RBC said investor sentiment around Sunshine was negative. Mr. Friesen has a 50-cent target price with a "sector perform, speculative risk" rating.

Sunshine shares rose half a cent to close at 23.5 cents on the Toronto Stock Exchange on Tuesday, down from a high of 41.5 cents on Jan. 7. The stock was listed on the TSX in November.

TD Securities analyst Michael Dembicki said the JV potential was "directionally positive, but it is difficult to attribute value to this deal with the current information provided." He had a mixed view of the slowdown at West Ells, because of the lack of details and the fact that Sunshine had already warned of a one- to two-month delay.

Mr. Dembicki has a 35-cent price target with a "speculative buy" rating.

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The funding issues are a bit of a surprise, given the high percentage of share ownership by major Chinese entities. According to Sunshine's most recent corporate presentation, China Life Insurance, Bank of China, China Investment Corp., Sinopec and Orient International Resources collectively own 40.6 per cent of the stock. At least three of those companies have directors on Sunshine's board.

Chris Cox, analyst at AltaCorp Capital, said Ottawa's new rules that essentially bar bids for control over oil sands assets by state-owned enterprises are likely one concern deterring investors from making a straight-cash injection. He believes a high-yield debt offering is more likely. Mr. Cox has a 40-cent target with an "outperform" rating.

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