By October 3, 2017 0 Comments Read More →

Osum closes royalty sale to fund oil sands expansion

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Osum plans to expand oil sands production.

Expansion expected to add 1,500 barrels per day of production

Osum Oil Sands Corp., a private oil sands company, announced it has approved the commencement of the Phase 2B expansion at its Orion Thermal Project, according to a press release.

In conjunction with this, Osum, through its wholly-owned subsidiary, Osum Production Corp., sold a 4 per cent gross overriding royalty interest on its Orion Project for cash proceeds of $92.5 million, before transaction costs. The sale has an effective date of Sept. 1, 2017.

The Phase 2B expansion will be funded from a portion of the proceeds of the sale of the Royalty Interest.

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The Royalty Interest covers current and any future expansions of the Orion Project. TD Securities Inc. acted as Osum’s exclusive financial advisor on the sale.

Orion is currently producing 7,500 – 8,000 barrels per day of bitumen from the Clearwater Formation in the Cold Lake oil sands region, about 200 km north east of Edmonton, Alberta.

The just completed Phase 2A expansion is expected to add 1,500 barrels per day of production over the next twelve months.

The Phase 2B expansion is projected to be completed in mid-2018 and is expected to increase production progressively through mid-2019 by an additional 3,000 barrels per day.

The Orion Project has regulatory approval for production of up to 20,000 barrels per day.

“We are on a clear path for positive growth over the next two years. The sale of the royalty enables us to accelerate our staged expansion strategy, moving us closer to our goal of producing 20,000 barrels per day from Orion. By taking a measured approach to adding capacity, we are building an oil sands business that is robust, and can grow sustainably in a moderate oil price environment,” said Steve Spence, president and CEO of Osum.

This has resulted in volume increases of more than 25 per cent in the company’s gross proved reserves and 5 per cent in gross proved plus probable reserves. The GLJ Report has an effective date of Sept. 1, 2017.

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The following table displays gross bitumen reserves and bitumen reserves net of forecast royalties, inclusive of the Royalty Interest, along with the present values of estimated future net revenue using a range of discount rates at Sept. 1, 2017:

Bitumen Reserves
– (Mbbl)
Net Present Value of Future Net Revenue
– Before Taxes ($millions)
Forecast Prices and Costs
Gross
Net
0%
5%
10%
15%
20%
Total proved (1P)
60,138
49,697
1,064
690
471
336
250
Total probable
477,272
391,715
10,011
3,768
1,540
622
198
Total proved plus probable (2P)
537,410
441,412
11,075
4,458
2,011
958
448

 

Posted in: Energy Financial

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