Small Oilsands players refuel as market thaws

05/27/2009 http://communities.canada.com/calgar...

Smaller oilsands players have been making hay while the sun shines on frozen financial markets.

Two weeks ago, early stage company Oilsands Quest Inc. raised $29.8 million US through the sale of warrants.

On Wednesday, oilsands producer Connacher Oil and Gas Ltd. announced it will earn $150 million through an underwritten issue of shares at 90 cents each, with a 15 per cent overallottment possible when it closes in early June.

The price is a 13 per cent discount to the Tuesday closing price of $1.04 for Connacher, which owns the 10,000-bpd Great Divide in situ project.

"It’s a very tough market out there," said president and chief executive Dick Gusella. "At a little higher price, we might not have sold anything."

Great Divide is ramping up after being scaled back due to low oil prices at the end of 2008 but a $350-million second phase, called Algar, is still on hold.

Gusella said going ahead with Algar depends on the company’s ability to replace an unused credit facility it cancelled in the first quarter, one good for $150 million Cdn and $50 million US.

"With recovery in the capital markets you’re seeing more enthusiasm," said Glen Schmidt, chairman of the In Situ Oil Sands Alliance, a group that represents non-mining oilsands developers, noting Imperial Oil's announcement that it would build the $8-billion Kearl project is a promising sign.

"People will continue to be cautious," he said. "Clearly Exxon/Esso are in a league of their own using cash from their balance sheet to advance their project. They have a greater capacity to manager those time frames."

Schmidt is also president and chief executive of private Laricina Energy Ltd., a company with two proposed in situ oilsands projects potentially producing 350,000 to 400,000 barrels per day from a four-billion-barrel resource.

He said progress has been slowed. The company expects to have about $60 million in capital left at the end of the year and will have to go to the market next year to refuel.

-- Dan Healing, [email protected]

Best Wishes; Scott