OPTI Outlines Capital Expenditure Plans, Divests Long Lake Interest
OPTI has entered into a definitive agreement to sell a 15% working interest in all its joint venture assets to Nexen Inc. (Nexen) for $735 million. Following the transaction OPTI will have a 35% working interest in all the joint venture assets, including Phase 1 of the Long Lake Project (the Project), future phase reserves and resources, and future phases of development. Nexen will have a 65% working interest and will be the operator of both the Steam Assisted Gravity Drainage (SAGD) and Upgrader facilities for Phase 1 and future phases.
It is anticipated that after a transition period Nexen will make employment offers to OPTI's operating and Project staff. Closing is expected to occur in late January 2009 and is subject to approval from a majority of OPTI's bank
lenders in its $500 million revolving credit facility and customary closing conditions, including regulatory approvals.
"This is the conclusion of our previously announced process to review 2009 financing options," said Sid Dykstra, President and Chief Executive Officer. "OPTI is pleased to announce this transaction with our current
partner and, importantly, to retain a significant working interest in Phase 1 as well as in all future phases of development. These funds, combined with reduced capital expenditures, position the Company to withstand lower commodity prices and the significant uncertainty in current financial markets while preserving the opportunity for shareholders to benefit from future development of OPTI's significant resource base."
2009 Capital Expenditure Plans
OPTI's capital expenditure plans for 2009 will be significantly reduced as a result of this transaction to approximately $114 million for our new working interest share. Approximately $71 million of 2009 capital expenditures relate to OPTI's share of costs for Long Lake Phase 1. Phase 1 expenditures will be primarily directed towards sustaining capital for the SAGD operation, including the drilling of the first sustaining well pad, sustaining capital for the Upgrader, and costs associated with start-up of the SAGD debottlenecking project. As previously announced, final construction completion of the ash processing unit has been deferred to 2010 in order to avoid interference with initial Upgrader operations and to reduce 2009 capital expenditures.
In light of the current global economic situation and reduced commodity prices, the joint venture partners have agreed to reduce near term capital expenditures on future phases of development. OPTI anticipates remaining
capital expenditures of approximately $43 million in 2009 primarily to advance Phase 2 planning, drill delineation wells in the Phase 2 area to define future horizontal well locations, and to advance regulatory work for the Phase 3 upgrader. The partners have also agreed that Phase 2 will not be presented for approval prior to mid-2010.
McDaniel & Associates (McDaniel), our reserves and resource evaluator, has prepared a report evaluating the bitumen reserves and synthetic oil reserves of the Long Lake leases effective December 31, 2007.
The McDaniel evaluation of our Long Lake Phase 1 and 2 lands recognizes the impact of upgrading on the resources. Most of the raw bitumen will be upgraded and sold as Premium Sweet Crude (PSC(TM)) and butane, and is shown as synthetic crude oil or butane reserves. Bitumen will be sold upon start-up of the SAGD operations, prior to Upgrader start-up, and thereafter during periods of Upgrader downtime, and is shown as bitumen reserves. The following table shows OPTI's 50% working interest in the raw bitumen reserves and the
corresponding sales volumes at December 31, 2007 prior to taking account of the sale of the 15% working interest.
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