Total to Buy UTS to Expand in Canadian Oil Sands
July 07, 2010
By Kari Lundgren and Stephen Cunningham
July 7 (Bloomberg) -- Total SA, Europe’s second-biggest oil producer, will buy UTS Energy Corp. for C$1.5 billion ($1.4 billion) in cash and shares in a new company to boost its output from Canadian oil sands.
UTS, a Calgary-based oil company, said in a statement today that the deal is valued at C$3.08 a share, a 46 percent premium over the closing price yesterday. UTS shareholders will also receive shares in SilverBirch Energy Corp., whose assets will include 50 percent interest in both the Frontier and Equinox projects, interest in oil-sand exploration leases, as well as undeveloped land.
Royal Dutch Shell Plc, Exxon Mobil Corp. and Total are investing in shale-gas deposits, oil sands and other alternative resources in a trend that may accelerate following BP Plc’s oil spill in the Gulf of Mexico, according to Jean-Baptiste Bruny, an analyst at Banco de Sabadell SA in Madrid.
“Since the problem of BP in the Gulf of Mexico, the interest in this kind of project is increasing again,” said Bruny. “There are a lot of unknowns after BP. What is good with Alberta is you know what’s needed for the project. It’s all priced in, which is not the case with deep water.”
The purchase gives Total a 20 percent stake in the Fort Hills mining project in the Athabasca region in Alberta. The open-pit mine contains about 3.4 billion barrels of bitumen and is estimated to produce about 160,000 barrels a day by 2016. The project is 60 percent-owned by operator Suncor Energy Inc., and the remaining 20 percent is held by Teck Resources Inc.
‘High Quality Asset’
UTS surged as much as 66 percent to C$3.51, the highest since Sept. 5, 2008. The shares rose C$1.33 to C$3.44 at 4:10 p.m. on the Toronto Stock Market. UBS AG raised its price target for the stock to C$3.40 from C$2.90 after the acquisition was announced. Total gained 1.6 percent to 37.21 euros.
This is the fourth-largest transaction among Canada’s oil and gas deals this year, which are valued at a total of C$17.4 billion, according to Bloomberg data.
UTS is a “high-quality asset that will allow us to strengthen and reorganize our asset portfolio in the Canadian oil sands,” Yves-Louis Darricarrere, Total’s president for exploration and production, said in a separate statement.
UTS rebuffed a C$830 million hostile takeover attempt by Total last year after a four-month contest that included a sweetened offer from the Paris-based oil company. UTS agreed in November to sell stakes in three oil-sands projects to Exxon Mobil for C$250 million.
Surmont Project
Total is seeking to revive output growth following OPEC cutbacks and disruptions in Nigeria. The company has teamed up with Houston-based ConocoPhillips to begin a second phase at the Surmont oil-sands project in Canada. Unconventional projects including shale-gas deposits and oil sands were too complex to develop until new technologies made extraction feasible.
The ecological costs of extracting crude from western Canada’s tar-soaked bogs have drawn criticism. Oil from Canada’s tar sands generates as much as 40 percent more carbon-dioxide emissions than conventional wells, according to the Resources Defense Council, a U.S.-based environmental group.
Total also said it is considering divesting some of its stake in the Canadian Joslyn mining project. The company will remain the operator of the project with an interest of about 50 percent.
--With assistance from Irene Shen in Calgary. Editors: Kim Jordan, Charles Siler.
To contact the reporters on this story: Kari Lundgren at klundgren@bloomberg.net; Stephen Cunningham at scunningha10@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
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