Korean fund takes second oilsands stake

$100M Osum buy follows Laricina investment

CALGARY - The Korean sovereign wealth fund that invested $50 million in one early stage Calgary-based oilsands company last summer is putting another $100 million into its partner.

Calgary-based Osum Oil Sands Corp. announced Wednesday it has entered into an agreement to sell to Korea Investment Corp. 7.7 million common shares at $13 per share for $100 million.

In August, the fund pumped $50 million into Laricina Energy Ltd. Both companies are private.

The Osum announcement comes just one day after the Thailand national oil company, PTT Exploration and Production, said it will buy 40 per cent of Statoil ASA's Kai Kos Dehseh project in northern Alberta for $2.3 billion US.

There have been a series of investments this year by Asian companies in Alberta oil companies including Penn West Energy Trust, Syncrude Canada, Athabasca Oil Sands Corp. and MEG Energy Ltd.

"We believe it's a very good next-stage investment for Osum for a couple of reasons," said chief executive Steve Spence in an interview.

"First, we believe it's good value, well above our last financing in 2008. We also believe that KIC is a very well-respected investor and it brings another high-quality investor into our family."

In its last financing in 2008, Spence said the company raised $275 million by selling shares to private investors at $10.50.

Osum expects to receive regulatory approval by mid-2011 for its 35,000 bpd Taiga project - to be built in two 17,500 bpd stages - near Cold Lake.

First oil from Taiga is anticipated in early 2014. It plans to use cyclic steam stimulation and steam-assisted gravity drainage at Taiga, which sits on 440 million barrels of recoverable resources.

Spence said the company will likely need to raise additional funds next year to help pay for Taiga, adding that listing its shares publicly is an option that's being looked at.

Meanwhile, Laricina's Saleski project - in which Osum holds a 40 per cent stake - will be the first to tap the untried Grosmont carbonates oilsands formation midway between Fort McMurray and Peace River in northern Alberta.

President and chief executive Glen Schmidt said the wells have been drilled and steam injection is expected to start before year-end on an 1,800 bpd pilot project.

"There's a lot of excitement and that's probably played a role in KIC's ongoing investment in the sector, that excitement with what's happening with Grosmont at Saleski," he said.

"Canada and Alberta are coming up roses relative to energy investment. We're meeting the hurdles of investors economically and in terms of social responsibility."

The Seoul-based fund was founded in 2005 and has nearly $30 billion US in assets under management, according to its website.

Analyst Phil Skolnick of Canaccord Genuity said he expects more international investors to grab big and small stakes in the oilsands.

"It's just like some of the other Asian investments we've seen, they want to get a hedge on energy consumption, to get a foothold in oilsands," he said.

"The carbonates - that's where Laricina is - are kind of the next stage of oilsands development."

Unlike the sandy McMurray formation, the Grosmont oilsands are trapped in rock such as limestone.

The Osum agreement provides KIC with the right to participate in future equity financings, board observer rights and, if it invests to hold more than 10 per cent of the shares, the right to designate a nominee to the board of directors, Spence said.

The company said the placement will give the Korean investor less than 10 per cent of the shares, without being specific. The transaction is expected to close on Friday.

Osum has previously raised $375 million, largely from major investors Warburg Pincus and Blackstone Capital Partners.

dhealing@calgaryherald.com