By Jeffrey Jones
CALGARY, Alberta, Jan 28 (Reuters) - French oil major Total SA has launched an unsolicited C$617 million ($502 million) takeover bid for Canada's UTS Energy Corp, taking advantage of weak asset prices to try and expand its presence in Canada's oil sands industry.
In the first takeover attempt in the oil sands sector since falling oil prices triggered an economic meltdown, Total said on Tuesday it would bid C$1.30 cash per UTS share, a 51 percent premium over the small developer's stock price over the past 30 days.
UTS, whose main asset is a 20 percent stake in the delayed multibillion-dollar Fort Hills oil sands project, said in a statement that it was reviewing the offer.
'It's a shocker -- I wasn't expecting that,' said William Lacey, analyst at FirstEnergy Capital Corp in Calgary.
A successful deal would bolster Total's already extensive position in northern Alberta's vast oil sands at a fraction of the price per barrel it paid for other assets in the region.
One analyst said it was a good move for Total, allowing it to take advantage of depressed asset prices in the oil sands industry, which many oil men believe will be an important and profitable energy resource when oil prices recover.
UTS also has interests in two undeveloped oil sands leases.
Its shares have tumbled 84 percent in the past year, as project costs rose, oil prices sank and investors questioned the company's ability to finance its share of Fort Hills.
Operated by Petro-Canada, Fort Hills is a proposed four-billion-barrel project in northern Alberta. The other partner is miner Teck Cominco Ltd.
In September, as oil prices were dropping, Petro-Canada surprised the industry and investors by saying development costs had surged 50 percent to more than C$21 billion.
As crude prices fell through the rest of the year to $40 a barrel from their July peak of $147, Petro-Canada decided to hold off on its decision to go ahead with construction.
Now, Fort Hills is one of more than C$90 billion worth of oil sands projects that have been deferred. Canada's oil sands represent the largest crude deposits outside Saudi Arabia, but the tar-like oil is far more expensive to produce, requiring open pit mines or steam-injection techniques.
Total has a 74 percent interest in the nearby Joslyn project and 60 percent of the Northern Lights project, a stake which it acquired last summer in a C$531 million takeover of struggling Synenco Energy Inc. Neither has been developed. It also has 50 percent of the producing Surmont project.
'We have a strategy to grow our position in North America,' Total spokesman Paul Floren said from the company's headquarters in Paris.
'Acquiring the UTS interest in the Fort Hills project complements the strategy by allowing us to acquire a relatively large, attractive land position with a significant oil sands project and a capable operating partner at a fair price.'
All of UTS's assets could add about 2.1 billion barrels of resources to Total's Canadian oil sands portfolio, Lacey said.
'Oil is what it is right now, and the markets are what they are,' he said. 'But there's a pretty material resource behind what you've got here.'
He suggested Petro-Canada may be chief among firms that could consider a rival bid.
Floren said Total may consider increasing its stake in Fort Hills if it is successful in scooping up UTS. But he declined to comment on whether the French oil company was looking at Teck's 20 percent interest.
Reports have said Teck may be interested in selling its stake to help it repay billions of dollars in debt it took on last year to buy Fording Canadian Coal Trust.
UTS shares closed down 2 Canadian cents at 83 Canadian cents on the Toronto Stock Exchange. Total announced its bid after the market closed.
($1=$1.23 Canadian)
(Addition reporting by Tom Bergin; Editing by Rob Wilson, Gary Hill and David Cowell) Keywords: UTS TOTAL/ (jeff.jones@thomsonreuters.com; +1 403 531 1624; Reuters Messaging: jeff.jones.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
CALGARY, Alberta, Jan 28 (Reuters) - French oil major Total SA has launched an unsolicited C$617 million ($502 million) takeover bid for Canada's UTS Energy Corp, taking advantage of weak asset prices to try and expand its presence in Canada's oil sands industry.
In the first takeover attempt in the oil sands sector since falling oil prices triggered an economic meltdown, Total said on Tuesday it would bid C$1.30 cash per UTS share, a 51 percent premium over the small developer's stock price over the past 30 days.
UTS, whose main asset is a 20 percent stake in the delayed multibillion-dollar Fort Hills oil sands project, said in a statement that it was reviewing the offer.
'It's a shocker -- I wasn't expecting that,' said William Lacey, analyst at FirstEnergy Capital Corp in Calgary.
A successful deal would bolster Total's already extensive position in northern Alberta's vast oil sands at a fraction of the price per barrel it paid for other assets in the region.
One analyst said it was a good move for Total, allowing it to take advantage of depressed asset prices in the oil sands industry, which many oil men believe will be an important and profitable energy resource when oil prices recover.
UTS also has interests in two undeveloped oil sands leases.
Its shares have tumbled 84 percent in the past year, as project costs rose, oil prices sank and investors questioned the company's ability to finance its share of Fort Hills.
Operated by Petro-Canada, Fort Hills is a proposed four-billion-barrel project in northern Alberta. The other partner is miner Teck Cominco Ltd.
In September, as oil prices were dropping, Petro-Canada surprised the industry and investors by saying development costs had surged 50 percent to more than C$21 billion.
As crude prices fell through the rest of the year to $40 a barrel from their July peak of $147, Petro-Canada decided to hold off on its decision to go ahead with construction.
Now, Fort Hills is one of more than C$90 billion worth of oil sands projects that have been deferred. Canada's oil sands represent the largest crude deposits outside Saudi Arabia, but the tar-like oil is far more expensive to produce, requiring open pit mines or steam-injection techniques.
Total has a 74 percent interest in the nearby Joslyn project and 60 percent of the Northern Lights project, a stake which it acquired last summer in a C$531 million takeover of struggling Synenco Energy Inc. Neither has been developed. It also has 50 percent of the producing Surmont project.
'We have a strategy to grow our position in North America,' Total spokesman Paul Floren said from the company's headquarters in Paris.
'Acquiring the UTS interest in the Fort Hills project complements the strategy by allowing us to acquire a relatively large, attractive land position with a significant oil sands project and a capable operating partner at a fair price.'
All of UTS's assets could add about 2.1 billion barrels of resources to Total's Canadian oil sands portfolio, Lacey said.
'Oil is what it is right now, and the markets are what they are,' he said. 'But there's a pretty material resource behind what you've got here.'
He suggested Petro-Canada may be chief among firms that could consider a rival bid.
Floren said Total may consider increasing its stake in Fort Hills if it is successful in scooping up UTS. But he declined to comment on whether the French oil company was looking at Teck's 20 percent interest.
Reports have said Teck may be interested in selling its stake to help it repay billions of dollars in debt it took on last year to buy Fording Canadian Coal Trust.
UTS shares closed down 2 Canadian cents at 83 Canadian cents on the Toronto Stock Exchange. Total announced its bid after the market closed.
($1=$1.23 Canadian)
(Addition reporting by Tom Bergin; Editing by Rob Wilson, Gary Hill and David Cowell) Keywords: UTS TOTAL/ (jeff.jones@thomsonreuters.com; +1 403 531 1624; Reuters Messaging: jeff.jones.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.