Oct. 28, 2010 (Canada NewsWire Group) --
CALGARY, Oct. 28 /CNW/ - Athabasca Oil Sands Corp. (TSX: ATH) announces it has filed its financial statements and management's discussion and analysis (MD&A) for the three and nine-month periods ended September 30, 2010. These documents can be retrieved electronically from SEDAR (www.sedar.com) or from AOSC's website (www.aosc.com).
AOSC Updates 2010 Activities
Athabasca reports its joint venture project at MacKay River is on-schedule and on-budget and the team expects to file the regulatory application for the Dover commercial oil sands project before year-end. Athabasca has entered into an agreement to acquire Excelsior Energy Limited (TSXV: ELE) and is planning its exploration program for the upcoming winter.
According to Bill Gallacher, Athabasca's chairman of the board of directors, the company continues to achieve the milestones it has established. "Our management team has large company experience and an entrepreneurial spirit that captures both local oil sands knowledge and world-wide mega-project expertise. We require the team to achieve their goals and they have a track record of delivering on their promises."
MacKay River and Dover applications on-schedule and on-budget
Athabasca, together with a wholly-owned subsidiary of PetroChina, formed Dover Operating Corp. (Dover OpCo) this year (with 40% and 60% interests respectively). Dover OpCo is charged with the development and management of the MacKay River and Dover commercial oil sands projects. The new company is currently staffed by 31 Athabasca secondees, six on loan from the PetroChina subsidiary and seven directly hired by Dover OpCo.
As Dover OpCo awaits regulatory approval for the MacKay River project from Alberta's Department of Environment and the Energy Resources Conservation Board (ERCB), staff continue to work on engineering, resource delineation and project development. Construction on the first nine kilometre section of road into the leases began during the quarter.
Construction on the MacKay River project is expected to begin in early 2012.
"The group is doing an excellent job," reports Sveinung Svarte, Athabasca's president and CEO. "The project continues on-time and is meeting our budget prognosis. Subject to regulatory and partner approval, we expect first steam for the initial phase of production targeting to start in 2014. It should ultimately achieve daily rates of 35,000 barrels."
A second application, for the Dover commercial project, just north of MacKay River, is targeted to be completed and submitted to the province's two regulatory bodies (Alberta Environment and the ERCB) before year-end. The company has allowed a two-year window for the various regulatory groups to review the paperwork and approvals are expected late 2012 or early 2013.
The construction period should take approximately two years and the first phase is being designed to reach 35,000 to 50,000 barrels a day. Athabasca estimates the entire project will run for 40 to 50 years at peak production rates of 200,000 to 270,000 barrels a day.
"We formed this strategic joint venture with PetroChina's subsidiary to bring together the best technology, research and operational strength," Svarte says. "Both projects will deliver high standards in environmental performance and risk management."
Hangingstone acquisition offers accelerated development
On September 13, Athabasca announced an agreement with Excelsior Energy Limited to acquire all the company's issued and outstanding common shares by way of a plan of arrangement. Excelsior's assets include oil sands acreage in Hangingstone and at West Surmont.
The boards of directors of both companies unanimously approved the acquisition. The Excelsior shareholder meeting, to consider the transaction, is scheduled for November 9. Assuming receipt of shareholder and final Court approvals, it is anticipated the acquisition will close the same day.
Svarte states, "The acquisition of Excelsior is consistent with our strategy to take advantage of consolidation opportunities that complement our existing asset portfolio."
The combined Hangingstone property will provide Athabasca with a project of critical size and allow for an accelerated development of the area. It is ideally suited to several 10,000 barrels per day pods using Steam Assisted Gravity Drainage (SAGD)."
Winter tests planned for Dover West Carbonates
Athabasca has filed two regulatory applications to conduct experimental tests during the 2010-2011 winter drilling season in Dover West. The first uses steam injection to evaluate SAGD in the Leduc formation. The second is a two-well conduction heating trial to assess the effectiveness of Thermal Assisted Gravity Drainage (TAGD) in the same zone. Plans are to drill two 250-metre wells and then complete them with downhole electric conductive heating. The reef will be gently heated for 10 to 12 months, after which the lower well will be turned into a producer.
"Athabasca believes both experiments will provide very valuable information about the reservoirs," states Svarte, "and the optimal production methods to ultimately derive commercial-scale bitumen production of this 100% owned field."
Ambitious drilling program for Birch and Grosmont
Athabasca has planned its winter exploration program of the Birch asset, based on recently acquired and processed 2-D seismic. The southern portion of the area, where contingent resources have been identified, has been prioritized and the remaining wells would target geological and seismic leads in areas where no resources are currently recognized.
Athabasca and its joint venture participant, ZAM Ventures Alberta Inc., own approximately 800,000 acres (each holding a 50% working interest) in the Grosmont asset. The joint venture plans to drill a number of wells to further delineate how much bitumen the carbonate reservoir holds.
In 2010, the ERCB updated its reserves study for the Grosmont formation, increasing the in-place volumes of bitumen by 28%, to 408 billion barrels for the entire deposit.
"The Grosmont region is Athabasca's longest-term development area," Svarte reports.
AOSC's Financial Review
On September 30, the company owned more than 1.8 million net acres of mineral leases and permits.
Athabasca's expenditures for the first nine months included the delineation drilling of 16 wells; 12 in Dover West and four Grosmont. It also included core analysis and the acquisition of a total of 98 kilometres of 2-D seismic and 28 square kilometres of 3-D seismic.
As of September 30, the company had $1.9 billion of working capital, including $1.7 billion in cash, cash equivalents and short-term investments. Management believes Athabasca's working capital, combined with the second loan from PetroChina (and if the put/call option is not exercised, PetroChina's third loan), is sufficient to fund its expenses into 2014, based on current plans.
"Athabasca continues to enjoy a bright future," says Svarte. "We have planned a busy drilling season and are confident we can announce an increase in our resource estimates from the 8.591 billion barrels of contingent resource (best estimate) and 114 million barrels of probable reserves we currently have."
Reader Advisory
This News Release contains forward-looking information that involves
various risks, uncertainties and other factors. All statements other
than statements of historical fact are forward-looking statements. The
use of any of the words "anticipate", "plan", "continue", "estimate",
"expect", "may", "will", "project", "should", "believe", "predict",
"pursue" and "potential" and similar expressions are intended to
identify forward-looking statements. The forward-looking information is
not historical fact, but rather is based on AOSC's current plans,
objectives, goals, strategies, estimates, assumptions and projections
about AOSC's industry, business and future financial results. These
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results or events to differ materially
from those anticipated in such forward-looking statements. No assurance
can be given that these expectations will prove to be correct and such
forward-looking statements included in this News Release should not be
unduly relied upon. These statements speak only as of the date of this
News Release. In particular, this News Release may contain
forward-looking statements pertaining to the following: AOSC's capital
expenditure programs; the estimated quantity of AOSC's Probable and
Possible Reserves and Contingent Resources; AOSC's drilling plans;
AOSC's plans for, and results of, exploration and development
activities; AOSC's estimated future commitments; proposed experimental
testing in the Dover West area and the results there from; business
plans; development of the MacKay River and Dover oil sands projects;
timing of facilities construction and production at MacKay River;
estimated initial and full production of the MacKay River and Dover
projects; timing of submission of the Dover project's commercial
application; AOSC's plans with respect to the Birch and Grosmont
assets; timing of completion of the Excelsior transaction, AOSC's plans
with respect to the assets to be acquired from Excelsior and the
expected benefits to be received by AOSC from such assets; the
pro-forma effect of the Excelsior transaction on AOSC's resources and
undeveloped land position; and the timing for receipt of regulatory
approvals. With respect to forward-looking statements and
forward-looking information contained in this News Release, assumptions
have been made regarding, among other things: AOSC's ability to obtain
qualified staff and equipment in a timely and cost-efficient manner;
the regulatory framework governing royalties, taxes and environmental
matters in the jurisdictions in which AOSC conducts and will conduct
its business; the applicability of technologies for the recovery and
production of AOSC's reserves and resources; future capital
expenditures to be made by AOSC; future sources of funding for AOSC's
capital programs; AOSC's future debt levels; geological and engineering
estimates in respect of AOSC's reserves and resources; the geography of
the areas in which AOSC is conducting exploration and development
activities; the impact that AOSC's transaction with the PetroChina
subsidiary (as described in the News Release) will have on AOSC,
including on AOSC's financial condition and results of operations; the
receipt of all required regulatory, shareholder and other third party
approvals of the Excelsior transaction; the completion of the Excelsior
transaction on the terms and on the schedule outlined in this New
Release; and AOSC's ability to obtain financing on acceptable terms.
Actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risk factors set forth
above and under the headings "Notice to Investors -Forward-Looking
Statements" and "Risk Factors" in the Company's prospectus dated March
30, 2010, which is available on the SEDAR website at www.sedar.com ("Prospectus"), including: fluctuations in market prices for crude oil
and bitumen blend; general economic, market and business conditions;
dependence on the PetroChina subsidiary as the joint venture
participant in the MacKay River and Dover oil sands projects;
variations in foreign exchange and interest rates; factors affecting
potential profitability; the global financial crisis; uncertainties
inherent in estimating quantities of reserves and resources; AOSC's
status and stage of development; uncertainties inherent in Steam
Assisted Gravity Drainage ("SAGD"), Cyclic Steam Stimulation ("CSS")
and other bitumen recovery processes; the potential impact of the
exercise of the Put/Call Options (as defined in the Prospectus) on
AOSC; failure to meet the conditions precedent to the exercise by AOSC
of the Put/Call Options, including failure to receive regulatory
approval for the MacKay River oil sands project and/or the Dover oil
sands project when anticipated or at all; failure to obtain necessary
regulatory approvals for completion of the Put/Call Option transactions
on the terms and conditions set forth in the Put/Call Option Agreement;
failure to meet development schedules and potential cost overruns;
increases in operating costs can make projects uneconomic; the effect
of diluent and natural gas supply constraints and increases in the
costs thereof; gas over bitumen issues affecting operational results;
the potential for adverse consequences in the event that AOSC defaults
under certain of the PetroChina Transaction Agreements (as defined in
the Prospectus); environmental risks and hazards and the cost of
compliance with environmental regulations, including greenhouse gas
regulations and potential Canadian and U.S. climate change legislation;
failure to obtain or retain key personnel; the substantial capital
requirements of AOSC's projects; the need to obtain regulatory
approvals and maintain compliance with regulatory requirements; extent
of, and cost of compliance with, government laws and regulations and
the effect of changes in such laws and regulations from time to time;
changes to royalty regimes; political risks; failure to accurately
estimate abandonment and reclamation costs; risks inherent in AOSC's
operations, including those related to exploration, development and
production of oil sands reserves and resources, including the
production of oil sands reserves and resources using SAGD, CSS or other
in-situ technologies; the potential for management estimates and
assumptions to be inaccurate; long term reliance on third parties;
reliance on third party infrastructure for project facilities; failure
by counterparties (including without limitation on the PetroChina
subsidiary) to make payments or perform their operational or other
obligations to AOSC in compliance with the terms of contractual
arrangements between AOSC and such counterparties and the possible
consequences thereof; the potential lack of available drilling
equipment and limitations on access to AOSC's assets; aboriginal
claims; seasonality; hedging risks; risks associated with establishing
and maintaining systems of internal controls; insurance risks; claims
made in respect of AOSC's operations, properties or assets; the
potential for adverse consequences as a result of the change of control
provisions in the PetroChina Transaction Agreements; competition for,
among other things, capital, the acquisition of reserves and resources,
export pipeline capacity and skilled personnel; the failure of AOSC or
the holder of certain licenses or leases to meet specific requirements
of such licenses or leases; risks arising from future acquisition
activities; risks relating to the reliance on financial information,
including that financial information does not reflect the added costs
that AOSC expects to incur as a public entity; volatility in the market
price of the common shares; the effect that the issuance of additional
securities by AOSC could have on the market price of the common shares;
the Excelsior transaction may not close when planned or at all; the
failure of AOSC and Excelsior to obtain the necessary security holder,
Court, regulatory and other third party approvals or satisfy the other
conditions to proceed with the Excelsior transaction; incorrect
assessment of the value of the Excelsior transaction; failure to
realize the anticipated benefits of the Excelsior transaction; and
risks relating to AOSC's dividend policy. In addition, information and
statements in this News Release relating to "reserves" and "resources"
are deemed to be forward-looking information and statements, as they
involve the implied assessment, based on certain estimates and
assumptions, that the reserves and resources described exist in the
quantities predicted or estimated, and that the reserves and resources
described can be profitably produced in the future. The assumptions
relating to AOSC's reserves and resources are contained in the reports
of GLJ Petroleum Consultants Ltd. dated effective April 30, 2010 and
DeGolyer and MacNaughton Canada Limited dated effective April 30, 2010.
The risks and uncertainties referred to above are described in more
detail in AOSC's prospectus dated March 30, 2010 and in AOSC's
Statement of Oil and Gas Reserves Data and Other Oil and Gas
Information for the Year Ended December 31, 2009, each of which is
available on the SEDAR website at www.sedar.com. See also AOSC's press release issued on June 9, 2010 and its material
change report dated June 18, 2010. Readers are cautioned that the
foregoing list of risk factors should not be construed as exhaustive.
The forward-looking statements included in this News Release are
expressly qualified by this cautionary statement. AOSC does not
undertake any obligation to publicly update or revise any
forward-looking statements except as required by applicable securities
laws.
Heather Douglas
Vice President, Communications & External Affairs
(403) 532-7408
hdouglas@aosc.com