CALGARY – A big weight has been lifted off Athabasca Oil Corp. (TSX:ATH) with the sale of its Dover oilsands stake finally closing.
The sale, to a Canadian unit of PetroChina, will bring in proceeds of $1.184 billion, $600 million of which has already been paid in cash.
The Calgary-based company has received interest-bearing promissory notes for the remainder, committing PetroChina to make three payments over the next two years.
“Closing of the Dover transaction is an important milestone for Athabasca and marks the beginning of a new chapter for our company,” CEO Sveinung Svarte said in a release Friday.
“We can now finalize our business strategy which will be focused on profitable production and reserve growth, cash flow growth, cost discipline and balance sheet flexibility.”
The company plans to provide a strategic update some time in the next few weeks, including revised guidance and spending plans.
Athabasca now has “ample liquidity” to continue developing its holdings in Alberta’s promising Duvernay shale and the Hangingstone oilsands project and the timing of the promissory notes is aligned with spending plans over the next few years, Svarte added.
The notes are unconditional and secured by irrevocable, standby letters of credit issued by HSBC Bank Canada.
Earlier this month, Athabasca said it had set aside $49 million to settle PetroChina claims related to the cost of abandoning old oil and gas wells at Dover and MacKay River so that the oilsands resource there can be developed using steam-assisted gravity drainage technology.
Trading in Athabasca shares had been halted pending news before Friday’s announcement.
The stock closed up more than four per cent at $7.92 on the Toronto Stock Exchange.
Athabasca had been aiming to close the Dover deal by mid-year and the delays had been weighing on its stock price.
With the “much needed cash infusion,” Athabasca will likely focus this winter on stepping up drilling in the Duvernay, Dejardins analyst Justin Bouchard wrote in a note to clients.
Athabasca is looking for a partner to help develop its Duvernay acreage.
“We view the outcome of the process as the last ‘big’ near-term catalyst for the company, potentially adding significant shareholder value given comparable transactions on nearby acreage,” wrote Bouchard.
A 2009 joint-venture deal between Athabasca and PetroChina covering the MacKay River and Dover projects included an exit strategy of sorts for the Canadian company. In 2012, PetroChina took full control of the MacKay River project without any significant glitches.
But the process for Dover — in which PetroChina would buy Athabasca’s 40 per cent stake in the project, giving the Chinese company complete ownership — has been anything but easy.
Concerns over the transaction had been mounting amid Chinese reports that a handful of PetroChina officials with Canadian ties were caught up in a corruption probe.
The Financial Post reported in July that PetroChina was trying to lower the amount owed to Athabasca because it is unhappy with the quality of the oilsands assets.
Months before that, regulatory approval for Dover — a prerequisite for the sale to PetroChina — had been held up by a legal challenge from a nearby First Nation.
The proposed five-phase Dover project aims to eventually produce 250,000 barrels of crude a day.
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