Sunshine sells assets to raise funds
Firm still needs millions to finish oilsands project
Struggling Sunshine Oilsands Ltd. announced Tuesday it has sold “non-core oilsands assets” for $20 million, without being specific about what has been sold.
No company spokesman was available for comment Tuesday but analyst Mark Friesen of RBC Dominion Securities said the price per barrel is low, adding the proceeds don’t come close to the $150 million to $200 million needed to allow Sunshine to finish building its $500-million West Ells thermal oilsands project in northern Alberta.
Construction of the two-phase, 10,000-barrel-per-day project was halted last August due to a shortage of capital with about four months work left.
In a news release, Calgary-based Sunshine said it entered into a “petroleum, natural gas and general rights conveyance agreement” last week for the sale of assets which relate to “among other things, lands and petroleum and natural gas rights ... to a third party industry partner.”
It says the assets have about 225 million barrels of contingent resource as estimated by GLJ Petroleum Consultants Ltd. — the sale would equate to a little over 11 cents per barrel.
It said the “disposal” was conducted between the parties on an arm’s length basis and was com- pleted this week — the proceeds are to be added to working capital and will place the corporation in a positive cash position, it stated.
On its website, Sunshine says it holds rights on 400,000 hectares of land which contain 4.178 billion barrels of proved plus probable and contingent resources.
Friesen said he rates the stock underperform, speculative risk.
“The company continues to experience significant financial liquidity challenges stemming from project cost overruns at West Ells,” he wrote. “In the event that debt financing can be secured, we expect that the company would likely be forced to pay a punitively high rate with very restrictive covenants.”
He said the asset sale, which he calculated amounted to less than 10 cents per barrel of contingent resource, was below the value RBC had assigned to Sunshine’s non-core assets at 13 cents per barrel.
More sales of its undeveloped assets could help Sunshine to close the funding gap but the market for early stage oilsands leases is soft, Friesen noted.
In a note last week, he said the resignation of two directors and the withdrawal of a $325-million debt offering due to a lack of interest in the market are negative signs of Sunshine’s ability to overcome its financial woes.
RBC cut its 12-month target price to five cents from 10 cents per share.
The stock has been stuck at around 12 cents per share, giving the company a market capitalization of $467 million.
On Tuesday, Sunshine also announced it has appointed an interim chief financial officer, Men Qiping, an engineer who was educated in Harbin and Dalian in China before winning an accounting designation at SAIT Polytechnic in Calgary.
The previous chief financial officer, Robert Pearce, resigned with president and chief executive John Zahary in December. Sunshine also has an interim CEO, David Sealock.
Co-founder and co-chairman Songning Shen, credited with finding and obtaining Sunshine’s oilsands leases, recently resigned from the board, along with independent director Wazir Chand Seth.
Sunshine raised $150 million each from sovereign wealth fund China Investment Corp. and state-controlled Sinopec Group in its $570-million initial public offering on the Hong Kong Stock Exchange in 2012.