Calgary Herald

Oilsands stocks take a hit

Investors wary of report’s implicatio­ns

- Dan Healing

tock in oilsands companies fell Wednesday in the wake of an Alberta government announceme­nt after markets closed Tuesday that could limit developmen­t in new conservati­on areas.

Cenovus Energy Inc. dropped 2.03 per cent, Suncor Energy Inc. was down 1.93 per cent, Imperial Oil slipped 1.81 per cent and Canadian Natural Resources Ltd. was off 1.46 per cent.

Meanwhile, benchmark U.S. crude edged up 49 cents US in New York to close at $108.83 US on Wednesday, a trend that normally boosts oil stocks.

Dave Pryce, vice-president of operations for the Canadian Associatio­n of Petroleum Producers, said the stock market reaction reflects uncertaint­y by investors who are concerned after the government said some producers will have to give up some of their mineral or oilsands leases.

“In part, it’s probably, ‘So what does this all mean?’ on the stock market,” he said. “That’s why I think government needs to start explaining it.”

CAPP has said it will lobby the government about compensati­on, arguing that com- panies should be paid for lost opportunit­y as well as the amount spent on buying and developing leases they lose.

Under the draft land use plan, the government could set aside nearly two million hectares of conservati­on lands near the oilsands, although it says it will allow motorized recreation and honour existing oil and gas leases in all but a small fraction of those areas.

Sustainabl­e Resource Developmen­t Minister Mel Knight said Tuesday he is braced for criticism from all sides and that Albertans have 60 days to give the government their opinion on the draft plan.

The list of energy companies expected to be affected includes: Alberta Oilsands Inc., Canadian Natural Resources Ltd., Imperial Oil Resources Ltd., Pan Pacific Oils Ltd., Southern Pacific ResourceCo­rp.,StatoilCan­ada Ltd., Stone Petroleums Ltd., SunshineOi­lsandsLtd., Athabasca Oil Sands Corp., Bancroft Oil and Gas Ltd., Cavalier Land Ltd., Koch Exploratio­n Canada G/P Ltd. and Perpetual Energy Operating Corp.

In a news release, Southern Pacific said the plan would have a minimal impact on its developmen­t plans, noting it would render “potentiall­y inaccessib­le” only about 12 per cent of its Anzac block, one of six blocks it owns.

“The government has taken our input into considerat­ion under the proposed conservati­on area around our Anzac property,” said president and chief executive Byron Lutes.

“The draft plan would allow for maximum resource recovery while protecting sensitive areas from surface disturbanc­es.”

The plan attracted harsh criticism from the Wildrose Alliance, which called it a “devastatin­g assault on the Alberta economy” in a news release on Wednesday.

“Up until yesterday, I truly believed the greatest threat to the Alberta economy was the Liberal Party of Canada. Turns out it’s the Alberta Progressiv­e Conservati­ves,” stated Wildrose Leader Danielle Smith.

The party charged the plan will freeze developmen­t on 20 per cent of the oilsands in Alberta and leave roughly $3.4 trillion worth of recoverabl­e oil resources locked in the ground, at the cost of billions in royalty revenues and thousands of jobs.

In an interview, minister Knight said the charges are “a bunch of BS” that don’t reflect the true cost. “I don’t know how they arrived at that $3.4 trillion figure, I’d like somebody to explain that to me,” he said.

“If you’re a little bit reasonable and rational about it, it wouldn’t touch anything near that sort of figure.”

The number was apparently arrived at by multiplyin­g 20 per cent of 180 billion barrels at $100 per barrel, which works out exactly to 3.4 trillion.

Knight said the actual cost to the province will be determined through negotiatio­ns with affected parties. When mineral rights have been expropriat­ed from oil companies in the past, it’s usually involved a combinatio­n of royalty and tax credits.

Knight further suggested the drop in stock prices of oilsands companies represents a buying opportunit­y for investors.

Despite the acrimoniou­s political exchange, oilsands analysts said they don’t see a big impact on current company plans even if the draft plan is adopted.

“It’s very minimal,” said Phil Skolnick of Canaccord Genuity. “Largely all the land they’re looking to put under these parks and conservati­on areas are really areas that are not prospectiv­e.

“There’s only really one company with a big chunk of land, that’s Sunshine Oilsands, and that even looks like it’s in an area they are not paying much attention to.”

Sunshine, a Calgary-based private company with over $200 million invested by Chinese sources, hopes to go public later this year, possibly on the Hong Kong Stock Exchange.

It has applied to the province to build a $350-million, 10,000-barrelper-day thermal oilsands project at its West Ells site near Fort McMurray. It hopes to grow West Ells to output of 90,000 bpd.

Lanny Pendill of Edward Jones agreed Alberta oilsands companies have little to fear with regard to current plans.

“I see it as a starting point for the oilsands companies to do a better job working with others to develop reserves in the most responsibl­e manner,” he said.

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