Sunshine looks to partners to fund output boost
Bloomberg in Calgary
Sunshine Oilsands, the first Canadian oil-sands operator to list shares on the Hong Kong exchange, is in "advanced" talks with joint-venture partners to boost production to a potential 1 million barrels a day.
Sunshine, whose shares have slumped 47 per cent since its Hong Kong trading debut in February last year, was in talks with "more than two and less than 10" investors, chief executive John Zahary said.
The company is betting its ownership structure, which includes several large Chinese investors, along with the Hong Kong listing, will give it access to the capital it needs to develop its 487,000 hectares of leases in Alberta, potentially making it one of the largest oil-sands producers.
"We have the ability to do different things with different people," Zahary said. "We need capital, they have capital, and this creates an opportunity for us."
Discussions had been with global companies that had expressed interest publicly in getting bigger or entering the oil-sands business, and those that had not publicly said anything, Zahary said.
The company's largest Chinese shareholders include Sinopec, China Investment Corp, and China Life Insurance Overseas.
"Sunshine is cheap from a valuation perspective," said John Stephenson, a fund manager with First Asset Investment Management in Toronto, which manages C$2.7 billion (HK$20.43 billion) in assets.
"But there's a huge risk they don't develop, they don't bridge that funding gap for their projects so they have no choice but to go out and look for someone."
Sunshine would consider co-operating with part-owner Sinopec on some oil-sands projects, including having some Sinopec employees work at the firm's operations in Alberta, Zahary said.
Sunshine, which raised HK$4.5 billion in a Hong Kong initial public offering last year, has a market value of HK$7.39 billion. The company is also listed in Toronto where the shares have declined 12 per cent since they began trading in November.
Sunshine's expansion plans are happening as much larger competitors in the oil-sands business, including Suncor Energy, Exxon Mobil and Statoi, are struggling with weak prices for Canadian heavy crude and a lack of pipeline capacity to get their commodity to markets beyond the United States.