By Jeffrey Jones and Tom Bergin
CALGARY/LONDON, Jan 28 (Reuters) - Shares in Canadian oil sands developer UTS Energy Corp more than doubled on Wednesday as investors wagered that a C$617 million ($510 million) takeover bid from French oil major Total SA will be beaten or sweetened.
Total's unsolicited C$1.30 a share cash bid, launched late on Tuesday, represents the first takeover attempt in Canada's oil sands since the high-cost sector's fortunes went from boom to bust in just five months.
Shares in UTS, whose main asset is a 20 percent stake in the delayed Fort Hills project in northern Alberta, surged 90 Canadian cents to C$1.73 on the Toronto Stock Exchange.
'Total is likely going to have to raise their bid -- the market's telling them that, anyway,' Genuity Capital Markets analyst Philip Skolnick said.
Analysts said the bid places some value on UTS's working capital but essentially none on its oil sands in the ground.
Total, trying to bolster its already large oil sands position at a bargain price, was forced to up its bid by about 14 percent when it bought another oil sands player, Synenco Energy Inc, for C$531 million last summer.
It also raised its offer for Deer Creek Energy by 24 percent to C$1.6 billion in 2005.
'It is giving no value to the bitumen resource itself, which is an interesting way to approach an acquisition,' analyst Menno Hulshof of Dundee Securities Corp said.
'But Total does have a history of doing this -- opening up with a low-ball bid and bringing it up over time.'
Such an increase for UTS -- which hired RBC Capital Markets and TD Securities as financial advisers as it weighs how to respond -- would be a small burden for Total, Skolnick said.
Shares in Europe's third-largest listed oil company were 2.4 percent higher at 39.79 euros on the Paris exchange.
Before the bid, UTS stock had skidded 84 percent in a year as Fort Hills construction costs soared, oil fell and concerns grew over its ability to fund its share of the project.
Petro-Canada is operator of Fort Hills and the other partner is miner Teck Cominco Ltd. Both have agreed to fund much of UTS's early development costs.
The project has suffered several setbacks, most notably in September when the partners said costs had jumped 50 percent to more than C$21 billion. They deferred a go-ahead decision late last year, saying they needed to take more time to try to make the four-billion-barrel project economically viable.
Canada's oil sands represent the largest crude deposits outside Saudi Arabia, but the tar-like oil is far more expensive to extract, requiring open pit mines or steam-injection techniques rather than conventional wells.
All told, oil sands developers have delayed or canceled more than C$90 billion of projects since September due to falling oil prices and shaky credit markets.
PETRO-CANADA PASSES ON BID
Petro-Canada said it is happy with its 60 percent stake in Fort Hills and has no interest in being UTS's white night. Indeed, it said it would welcome Total as a partner.
'They offer international expertise and scale, which for a capital-intensive project like Fort Hills is a good thing and good for investors,' spokesman Peter Symons said.
Analysts said UTS is a good fit for Total and that other oil majors or foreign state oil companies could follow its lead in buying oil sands operators or acreage at depressed prices.
'It makes sense if you believe in the oil price rising again,' said Gordon Gray at Collins Stewart.
U.S. crude was about $42 a barrel on Wednesday, down from a record above $147 set in July.
Skolnick said Total's next logical move would be to snap up Teck's 20 percent Fort Hills stake. The Canadian miner has said it is open to selling assets to help pay down a $5.8 billion loan it took on to fund its acquisition of Fording Canadian Coal Trust.
Total spokesman Paul Floren said the company would only consider taking a bigger stake in Fort Hills if it succeeds in its quest for UTS.
Teck shares jumped 6 percent to C$5.95 in Toronto.
UTS's assets would add to Total's largely undeveloped portfolio in Alberta's vast oil sands. It has a 74 percent interest in the Joslyn project and 60 percent of the Northern Lights project, a stake it got in its Synenco takeover.
Total's move shows it is more focused on small-scale deals in the oil sands sector than acquiring large companies, analysts at Morgan Stanley said in a research note.
It is often rumored as a potential buyer of Canada's Nexen Inc, which has large oil sands interests and a market capitalization of C$9.5 billion.
($1=$1.21 Canadian)
(Editing by Rob Wilson) 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/LONDON, Jan 28 (Reuters) - Shares in Canadian oil sands developer UTS Energy Corp more than doubled on Wednesday as investors wagered that a C$617 million ($510 million) takeover bid from French oil major Total SA will be beaten or sweetened.
Total's unsolicited C$1.30 a share cash bid, launched late on Tuesday, represents the first takeover attempt in Canada's oil sands since the high-cost sector's fortunes went from boom to bust in just five months.
Shares in UTS, whose main asset is a 20 percent stake in the delayed Fort Hills project in northern Alberta, surged 90 Canadian cents to C$1.73 on the Toronto Stock Exchange.
'Total is likely going to have to raise their bid -- the market's telling them that, anyway,' Genuity Capital Markets analyst Philip Skolnick said.
Analysts said the bid places some value on UTS's working capital but essentially none on its oil sands in the ground.
Total, trying to bolster its already large oil sands position at a bargain price, was forced to up its bid by about 14 percent when it bought another oil sands player, Synenco Energy Inc, for C$531 million last summer.
It also raised its offer for Deer Creek Energy by 24 percent to C$1.6 billion in 2005.
'It is giving no value to the bitumen resource itself, which is an interesting way to approach an acquisition,' analyst Menno Hulshof of Dundee Securities Corp said.
'But Total does have a history of doing this -- opening up with a low-ball bid and bringing it up over time.'
Such an increase for UTS -- which hired RBC Capital Markets and TD Securities as financial advisers as it weighs how to respond -- would be a small burden for Total, Skolnick said.
Shares in Europe's third-largest listed oil company were 2.4 percent higher at 39.79 euros on the Paris exchange.
Before the bid, UTS stock had skidded 84 percent in a year as Fort Hills construction costs soared, oil fell and concerns grew over its ability to fund its share of the project.
Petro-Canada is operator of Fort Hills and the other partner is miner Teck Cominco Ltd. Both have agreed to fund much of UTS's early development costs.
The project has suffered several setbacks, most notably in September when the partners said costs had jumped 50 percent to more than C$21 billion. They deferred a go-ahead decision late last year, saying they needed to take more time to try to make the four-billion-barrel project economically viable.
Canada's oil sands represent the largest crude deposits outside Saudi Arabia, but the tar-like oil is far more expensive to extract, requiring open pit mines or steam-injection techniques rather than conventional wells.
All told, oil sands developers have delayed or canceled more than C$90 billion of projects since September due to falling oil prices and shaky credit markets.
PETRO-CANADA PASSES ON BID
Petro-Canada said it is happy with its 60 percent stake in Fort Hills and has no interest in being UTS's white night. Indeed, it said it would welcome Total as a partner.
'They offer international expertise and scale, which for a capital-intensive project like Fort Hills is a good thing and good for investors,' spokesman Peter Symons said.
Analysts said UTS is a good fit for Total and that other oil majors or foreign state oil companies could follow its lead in buying oil sands operators or acreage at depressed prices.
'It makes sense if you believe in the oil price rising again,' said Gordon Gray at Collins Stewart.
U.S. crude was about $42 a barrel on Wednesday, down from a record above $147 set in July.
Skolnick said Total's next logical move would be to snap up Teck's 20 percent Fort Hills stake. The Canadian miner has said it is open to selling assets to help pay down a $5.8 billion loan it took on to fund its acquisition of Fording Canadian Coal Trust.
Total spokesman Paul Floren said the company would only consider taking a bigger stake in Fort Hills if it succeeds in its quest for UTS.
Teck shares jumped 6 percent to C$5.95 in Toronto.
UTS's assets would add to Total's largely undeveloped portfolio in Alberta's vast oil sands. It has a 74 percent interest in the Joslyn project and 60 percent of the Northern Lights project, a stake it got in its Synenco takeover.
Total's move shows it is more focused on small-scale deals in the oil sands sector than acquiring large companies, analysts at Morgan Stanley said in a research note.
It is often rumored as a potential buyer of Canada's Nexen Inc, which has large oil sands interests and a market capitalization of C$9.5 billion.
($1=$1.21 Canadian)
(Editing by Rob Wilson) 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.