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UTS Energy sells half-interest in oilsands leases to Imperial Oil, ExxonMobil

From Lauren Krugel, The Canadian Press, November 2, 2009 - 2:26 p.m.

UTS Energy sells half-interest in oilsands leases to Imperial Oil, ExxonMobil

By Lauren Krugel, The Canadian Press

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CALGARY - Calgary-based oilsands junior UTS Energy Corp. (TSX:UTS) plans to sell its half-interest in three northern Alberta properties to Imperial Oil Ltd. (TSX:IMO) and its parent ExxonMobil Corp. (NYSE:XOM), freeing up $200 million for other projects in the region.

"This transaction demonstrates the success of UTS' strategy of generating cash reserves organically by finding new oilsands resources," the company's chief executive officer, William Roach, said in a statement Monday.

The land package, east of the Firebag River in northeastern Alberta, includes Lease 421, which UTS acquired in a land sale in late 2006. The two adjacent leases, Nos. 022 and 023, were purchased in the 2008-09 winter season.

Control of the Lease 421 area is split evenly between UTS and Vancouver-based miner Teck Resources Ltd. (TSX:TCK.B).

UTS expects its after-tax proceeds will be $200 million, or $250 million before taxes.

The company's shares gained eight cents, or 3.9 per cent, to $2.12 in afternoon trading Monday on the Toronto Stock Exchange after going as high as $2.26 earlier in the day.

The sale gives UTS "significant dry powder and room to run," wrote UBS Investment Research analyst Andrew Potter in a note to clients.

"The company remains well positioned to respond to any needs associated with the Fort Hills Project or take advantage of opportunities as they arise."

UTS has a 20 per cent stake in the Fort Hills project, which was put on hold around a year ago in the midst of soaring costs and plummeting oil prices.

Suncor Energy Inc. (TSX:SU) holds the controlling 60 per cent stake, which had been Petro-Canada's before those two companies merged in August. Teck has the remaining 20 per cent interest.

"With Suncor operating the Fort Hills Project and the macro environment substantially improved, we continue to be quite encouraged and optimistic about the prospects for Fort Hills," said Roach.

Suncor has not yet indicated which of its delayed oilsands projects will be revived first, but analysts have suggested expansions to its Firebag project precede before Fort Hills.