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http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/silverbirch-new-kid-on-the-oil-sands-block/article1742361/

SilverBirch Energy Corp. is not lining up investors for a quick sale – or at least, that’s the message from the chief executive officer of Canada’s newest oil sands company.

SilverBirch was formed from the remnants of UTS Energy Corp., after it sold its 20-per-cent interest in the proposed Fort Hills oil sands mine to Total SA for $1.5-billion. SilverBirch’s primary objective, new company head Howard Lutley said in an interview, is to gain value by developing a proposed oil sands mine for its Frontier and Equinox projects.

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But it’s impossible not to hear the sales pitch when Mr. Lutley describes a company that only came into being on Monday.

“We have the last mining project owned by an independent company, and our share is close to one billion barrels. So I have to believe there are a number of different entities looking at it,” he said.

“And I suspect it wouldn’t just be Asians. I would think there might be other international entities, and even North American, that might be saying, ‘Well, if I want to be in this business, here’s the last way in.’ I’d imagine there would be a fair level of interest.”

That is not, he argued, a marketing strategy. “Our history and our objective is moving these projects to the point where we can actually build something, and that’s our No. 1 focus.”

SilverBirch will begin trading on Wednesday or Thursday. Its implied value, based on trading in UTS last week, suggests shares could go for about $5.20, creating a market cap of roughly $250-million.

That’s slightly more than 20 cents per barrel, based on SilverBirch’s best estimate of contingent resources, “which is what we’d consider at the low end of the range,” Mr. Lutley said.

That figure could substantially increase as SilverBirch works to develop Frontier and Equinox with Teck Resources Ltd., its 50-per-cent partner on that project. It plans to make a regulatory application next year, and release a cost estimate in January. Approval will take until 2013 or 2014, the company estimates, but once it’s in hand, experience has shown that SilverBirch’s value could grow to between 80 cents and $1 per barrel.

Whether SilverBirch can reach that level depends in part on how long it can remain an independent entity. It will likely take until 2020 before oil starts flowing from Frontier and Equinox, and Silver Birch currently has just over $50-million in working capital, enough for about 18 months of operation at current burn rates.

“The reality is they’re going to have to raise a lot of capital,” BMO Nesbitt Burns analyst Randy Ollenberger said. “So they’ll be looking at either having to raise equity or sell off other pieces of the company, other assets, to fund development.”

Mr. Lutley said he is open to taking on strategic partners or to selling some of its project stakes. He admits that “a company the size of SilverBirch can’t take on a full-scale mining project, even as a 50-50 partner.”

But analysts said the company will prove attractive to acquirers. Not only does it have a substantial portfolio of undeveloped oil sand lands, it also has a strong Canadian partner in Teck – a fact that could mollify foreign takeover concerns if an international firm was to make a move. Yet it also has nearly 40 per cent of its stock committed to just two shareholders – a fact that could make it difficult for another company to snap it up, especially when those shareholders believe it hasn’t yet reached its potential.

“Right now the company’s priority is delineating and maximizing the value of their asset base. It’ll still take a little bit of time for that value to surface,” said Greg Boland, co-founder of West Face Capital, one of the two major shareholders.

Still, “all options are open when you have a market cap the size of Silver Birch, which isn’t going to be very high,” said Peter Ogden, an analyst with National Bank Financial. “It’s a rounding error for any potential buyer.”