Oilsands Operator Opti Plans 'Poison Pill' to Block Takeovers

By James Stevenson
07 Mar 2006 at 03:07 PM GMT-05:00

The board of Opti Canada has developed a so-called 'poison pill' defence to fight off any hostile takeover bid for the oilsands operator - the adoption of a shareholder rights plan.

CALGARY (CP) - The board of Opti Canada Inc. [TSX:OPC] has developed a so-called poison-pill defence to fight off any hostile takeover bid as global interest in the northern Alberta oilsands sector continues to increase.

Calgary-based Opti said Tuesday that it's recommending adoption of a shareholder rights plan during a vote at its annual shareholders meeting on April 27.

Opti is a pure-play oilsands company with no significant production at present. But it's a joint owner of the C$3.8 billion Long Lake oilsands project, along with senior Canadian energy producer Nexen Inc. [TSX:NXY; NYSE:NXY].

With oil production expected to begin later this year and startup of the upgrader slated for mid-2007, Long Lake is the next major new project to come on stream in the oilsands.

''The plan is being recommended as a means to ensure the fair and equal treatment of shareholders in connection with any takeover offer for the company, and to provide the board and shareholders with adequate time to assess any unsolicited takeover bid on a fully informed basis,'' Opti said in a release.

''The plan would also provide the board with time to pursue, if appropriate, alternatives superior to the takeover bid that could maximize shareholder value in the event of a takeover bid.''

Under Opti's poison-pill plan, bids that meet certain requirements intended to protect shareholder interests are considered ''permitted bids'' and must remain open for a minimum of 60 days and can be trumped by a rival offer during that period.

Opti also said that the poison-pill defence was not in response to any specific proposal to take control of the company.

Energy analyst Tom Ebbern of Tristone Capital in Calgary said Tuesday that the poison-pill plan reflected the growing interest in the oilsands by some of the world's largest energy producers.

''From Opti's perspective, it's just prudent,'' said Ebbern.

''Its board is probably looking at this and saying, 'look, we're the next project to come on stream here, and if there's companies looking to jump the queue and buy something that doesn't have a five or 10-year waiting list to first cashflow, Opti becomes the obvious company to buy.'''

Last week, U.S. oil giant Chevron Corp. [NYSE:CVX] announced it is expanding its oilsands operations in northern Alberta by buying new oil leases near the Athabasca Oil Sands Project, in which it is a partner.

The California-based company hopes to build another oilsands operation in the area, at a cost of several billion dollars.

Chevron is already a major player in the Canadian oilsands as a 20% joint-venture partner in the Athabasca project - controlled by Shell Canada Ltd. [TSX:SHC] and includes Western Oil Sands Ltd. [TSX:WTO] - which produces about 155,000 barrels of oil a day.

Other large U.S. energy producers already planning or building oilsands projects include Texas-based ExxonMobil [NYSE:XOM], ConocoPhillips [NYSE:COP] and Devon Energy [NYSE:DVN] of Oklahoma City

The sector has also attracted attention from farther afield.

French energy giant Total SA expanded its oilsands holdings last year with a C$1.6 billion purchase of junior oilsands company Deer Creek Energy Ltd. and now hopes to be producing 200,000 barrels per day by 2015.

Also last year, China's largest oil refiner Sinopec Group, bought a 40% stake in the C$5.3-billion Northern Lights project currently being pursued by Synenco Energy Inc. [TSX:SYN]

And during a visit to Calgary earlier this year, a representative of India's energy ministry said his country plans to invest C$1 billion in the oilsands over the next year.

The Long Lake project will use technology new to the oilsands which will convert some of the bitumen to synthetic gas. This process is expected to drastically reduce operating costs of the project as natural gas prices have become one of the biggest cost pressures in the oilsands.

Even though the first phase of Long Lake - aimed at producing 72,000 barrels per day - has yet to be completed, Opti and Nexen have an expansion schedule to take the project up to 240,000 barrels per day over the next decade.

In trading on the Toronto Stock Exchange Tuesday, Opti shares were off six cents to C$41.69.

© The Canadian Press 2006