Petro-Canada Builds on Oil Sands Growth Strategy

Petro-Canada has entered into an agreement to become a partner in the Fort Hills Oil Sands Mining Project, currently owned by UTS Energy Corporation (UTS). Under the terms of the agreement, which has been approved by the Boards of Directors of both companies, Petro-Canada will assume a 60 per cent interest and become the operator of the project. UTS will own the other 40 per cent. To pay for its stake, Petro-Canada will fund 75 per cent of UTS' share of the next $1 billion of development capital, or $300 million.

"This partnership builds on Petro-Canada's oil sands experience and adds the next leg of our growth strategy," said Ron Brenneman, Petro-Canada President and Chief Executive Officer. "Oil sands mining integrated with upgrading offers decades of substantial production with solid returns. The Fort Hills project offers a high quality mining lease that has already achieved regulatory approval and that can be brought on-stream by the end of the decade."

"Adding a partner of Petro-Canada's calibre moves our project a giant step forward," said Will Roach, UTS President and Chief Executive Officer. "Petro-Canada also brings value-adding upgrading expertise to the table, along with the combination of financial and project management capability that we wanted in a partner. Together, we will build an outstanding project for the benefit of all stakeholders."

UTS is currently the owner of a block of oil sands leases north of Fort McMurray and has a plan to develop 2.8 billion barrels of bitumen resource. Approval from the Alberta Energy and Utilities Board to develop a new oil sands project on the site is already in place. The resource is a long-life asset that has no exploration risk and significant development potential with further investment. Current plans call for an initial mining development producing 50,000 barrels per day and corresponding upgrader. Subsequent development phases would expand production up to 190,000 barrels per day of bitumen integrated with upgrading. With Petro-Canada assuming operatorship, the partners will consider a range of options, including a 100,000 barrels per day initial mining operation, before finalizing the development plan.

"For Petro-Canada, this partnership fits perfectly with our strategy of adding more long-life assets to our corporate portfolio," Mr. Brenneman said. "It builds on our oil sands plans and capabilities, adding significant future earnings and production in a timeframe that works very well with our existing suite of projects. We look forward to bringing our 25 years of oil sands experience to bear while building Fort Hills into a first-rate development."

Petro-Canada is a 12 per cent owner of Syncrude, the world's largest oil sands mining and upgrading project. The company also owns and operates the MacKay River in situ oil sands plant. Plans already in place will significantly expand Petro-Canada's oil sands production beyond the current level of almost 50,000 barrels per day. Petro-Canada is also proceeding with a major conversion program at its Edmonton refinery that will enable the facility to run exclusively on oil sands feedstock.

The transaction is subject to all applicable governmental and regulatory approvals.

Scotia Capital Inc. acted as Petro-Canada's financial advisor in connection with this transaction.