CALGARY – With a new chief executive at the helm, Athabasca Oil Corp. is seeking to gain back credibility from investors by bolstering its governance and making sure it can deliver on its promises.
Tom Buchanan says he’s been has been reviewing Athabasca’s operations and organizational structure and listening to shareholders’ concerns since taking over about a month ago.
“At Athabasca we recognize that we have to transition into being a producer that is focused on delivering strong production and cash flow growth, while at the same time preserving strong balance sheet and financial flexibility,” Buchanan told a conference call Friday.
“That is a key priority for us going forward. This transition will require focus, attention to detail and discipline and I have confidence the Athabasca team will deliver. Change is underway and I look forward to updating you in the coming months on our progress.”
Athabasca (TSX:ATH) has hired a firm to look at ways to strengthen its board of directors with plans to recruit two new independent members in the near term. A cultural shift is also underway at the company, with a heightened focus “accountability and cost discipline.”
Athabasca has had a bumpy ride over the past several years.
The sale of its share in the Dover oilsands project to its Chinese partner for $1.2 billion dragged on for much longer than the company had hoped and it has struggled to find a joint venture partner for its Duvernay shale lands in Alberta.
Shares in the company hit a 52-week low earlier this week of $3.04, after having gone public at $18 per share in 2010.
“Delivering on our promises is a critical step to regaining and rebuilding credibility with investors,” Buchanan said.
He said Athabasca has also learned from its drilling program in the Montney formation, in northern Alberta and British Columbia, from a few years ago, which he acknowledged “underperformed expectations.”
“Quite simply, we were overzealous and did not take time to understand the results. We now have new leadership in key technical and operational roles and we are embarking on the Duvernay opportunity in a much more measured approach,” he said.
Buchanan, who took over from Sveinung Svarte in early October, is “making his mark” already, Desjardins Capital Markets analyst Justin Bouchard wrote in a research note.
“Tom Buchanan appears to be wasting no time in evaluating the state of the company, and has launched initiatives to examine the cost structure and strategic initiatives to better position the company to leverage the asset base,” he wrote.
“Athabasca also identified four strategic goals to align its focus: cash flow growth; balance sheet strength; execution excellence and delivering on commitments (granted these are things that all companies should be doing anyway) — in Athabasca’s case, it is nice to be reminded that these items are front and centre.”
Earlier Friday, Athabasca reported a narrower net loss and improved cash flow compared to last year.
Athabasca said Friday it lost $19.9 million or five cents per share in the three months ended Sept. 30, compared with a loss of $30.5 million or seven cents per share a year earlier. Revenue improved to $32.6 million, up from $28.3 million.
Operations provided $7.2 million in positive funds flow, versus negative fund flow of $5.3 million during the same 2013 period.
It said its light oil division will focus on the Kaybob region, with the Duvernay formation serving as the primary growth driver. The thermal oil division will focus on commissioning and ramping up Phase 1 of the Hangingstone oilsands project.
The light oil division produced the equivalent of 6,381 barrels per day in the third quarter. The thermal oil division is expected to begin production in 2015 and reach an output plateau of 12,000 barrels per day in 2016.
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