Oil giants circle bargains in oil sandsLIKE I MENTION LAST WEEK, TOTAL LOOKING AT TECK!!! RUMORS ARE BACK!!!I AM HAPPY I BOUGHT TECK BEFORE THE NEWS AND SOLD DONKEY ALAMOS
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Monday, Feb. 16
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A fourth-quarter share profit of 27 cents is expected, down from 65 cents the previous year.
SOURCE: GLOBE AND MAIL
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Oil giants circle bargains in oil sands
While no one seems to be looking, the oil sands landscape is poisedto change once again as global oil majors take steps to stake out evenbigger holdings.
But in contrast to the last wave of foreigntakeovers, made at hefty premiums and sometimes for marginalproperties, multi-nationals including Paris-based Total SA,London-based BP PLC and Irving, Tex.-based Exxon Mobil Corp. arehunting for top-drawer properties at today's cheap stock prices ortaking advantage of the sector's downturn to bolster their presence.
As one investment banker put it: "If you are a major, this is a once-in-a-generation opportunity to build a huge position."
Whynow? Oil majors remain financially healthy even in today's depressedoil-price environment; they've been in the business long enough to knowthat oil prices are cyclical and that the current downturn won't last;those that missed acquisition opportunities in the past see the currentdownturn as a re-entry point at low prices; they see access to newreserves globally as a challenge; they have refineries in the UnitedStates that need feedstock; there are plenty of buying opportunitiesthat were not there when oil prices were high.
Paris-basedTotal has been front-and-centre with this strategy. The company made ahostile bid for UTS Energy Corp. that could ultimately put it in thedrivers' seat of the cost-challenged Fort Hills oil sands project.
Ifthe UTS takeover, now in progress, is successful, giving it 20% of thePetro-Canada run project, Total is expected to secure another 20% bybuying out Teck Cominco Ltd.'s 20%, and possibly get Petro-Canada tohand over another piece, increasing its stake to at least 50%. Industrysources say it wouldn't be a stretch for Petro-Canada and Total tosplit the integrated oil project into two, with Petro-Canada developingthe mine near Fort McMurray, and Total building the upgrader nearEdmonton.
Total seems to be confident no one will challenge itsmove on UTS. The bid and its Canadian oil sands plans were mentioned asurprising number of times by Total in its analyst call last Thursdayto discuss fourth-quarter results.
"Heavy oils are an importantcomponent of our strategy," Yves-Louis Darricarrere, president ofTotal's exploration and production division, said in Paris. "So, we aregrasping at opportunities available to us to consolidate our portfolioswhile making acquisitions at reasonable costs, as you know, Synenco(Energy Energy Inc., another oil sands company acquired by Total) in2008 and of course the bid we made for UTS."
If Total issuccessful, expect others to test the hostile takeover route in a worldwhere white knights are in short supply due to liquidity constraints.
Theother name to watch is BP. The company has appointed Anne Drinkwater torun its Canadian operation, which has been quietly elevated in theBritish major's hierarchy to a ‘strategic' unit. Ms. Drinkwater, aformer executive assistant to BP CEO Tony Hayward, a role reserved forup and coming executives, started her new job in Calgary in January.Ms. Drinkwater previously ran BP businesses in Norway, Indonesia andAngola.
The new leader will have a broader role in Canada than her predecessors, said BP spokesman Robert Wine from London.
"[Canada]has been a bit of a quiet corner of the BP empire and has picked up,"with the Husky Energy Inc. oil sands joint venture and its links toBP's refineries in the United States, and planning for the Alaska gaspipeline, he said.
Industry sources say one of Ms. Drinkwater'smandates is to build the oil sands business, an area where BP has thesmallest presence among oil majors because of its late entry last yearwith the Husky partnership.
While BP's name has come up inconnection with a possible move on Suncor Energy Inc., whose value inthe market has shrunk to a bargain $23-billion, the British company islikely eyeing a large in-situ position, which it sees as moreenvironmentally palatable than mining projects.
BP is slowingdown its Husky joint venture to take advantage of lower costs duringthe downturn. But the company has said repeatedly it would like moreoil sands. As Mr. Hayward put it: "The future is not cancelled."
ExxonMobil Corp. is the other oil major that will have a greater presence inthe oil sands, a sector for which it had only passing interest in thepast.
For now, the world's largest oil company is growinginternally by developing the Kearl mining project with its Canadiansubsidiary, Imperial Oil Ltd., while almost everyone else has put planson hold.
Will Exxon Mobil make a large oil sands acquisition?It's certainly been talked about in connection with Suncor as well asCanadian Oil Sands Trust, which has the largest interest in theSyncrude Canada Ltd. joint venture. Already, Exxon Mobil is managingthe project and Imperial owns a 25% stake. Regardless, Exxon Mobil willbe more visible and more influential in Alberta, and the oil sands arebecoming even more of a global oil village.
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