Canadian Oil Sands Trust buys another stake in Syncrude

Canadian Oil Sands Trust is paying $ 417 mm to buy EnCana's remaining 3.75 % interest in the Syncrude joint venture and a 6 % royalty from the world's largest oilsands project. The move will increase the trust's stake in Syncrude to 35.49 %, making it the biggest shareholder of the northern Alberta project. The trust picked up 10 % of the joint venture from EnCana in February in a deal valued at nearly $ 1.1 bn. The latest purchase is expected to close July 11.
"We are very pleased to be able to complete our acquisition of this additional Syncrude interest from EnCana continuing the terms of the earlier successful acquisition by the trust," president and CEO Marcel Coutu said. The 6 % "gross overriding royalty" being picked up is from certain leases related to a 1.25 % indirect Syncrude interest held by a third party, an independent oil and gas company.

The trust hopes to raise $ 228.5 mm through new unit sales to help finance the latest purchase. The trust will sell 4.3 mm units at $ 35.15 each to a syndicate of underwriters, which will raise gross proceeds of $ 151.1 mm. The underwriters have an option to buy another 1.2 mm units on the same terms.
In addition, the trust has agreed to sell 1 mm units in a private placement at the same price to raise $ 35.1 mm. "Should the option on the public offering be fully exercised, the total gross proceeds of the financings will be $ 228,475,000," the trust said.

Syncrude is Canada's largest single source of oil and the world's biggest producer of light sweet crude from oilsands. The other partners include Imperial Oil, Petro-Canada, Nexen, US oil giant Conoco Phillips and others.
The Syncrude Canada joint venture, with a workforce of 3,900, shipped nearly 84 mm barrels of oil last year and will undergo a $ 5.7 bn expansion to double production by 2015.