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The Fort Hills project is located in the Athabasca oil sands region approximately 90 kilometres north of Fort McMurray, Alberta.

It took nineteen months and nearly $1.5-billion, but Total SA has finally succeeded in wresting a prized oil sands jewel from UTS Energy

The French oil and gas giant struck a deal to buy the Calgary company by boosting a previous offer by about $630-million. Total will become a 20-per-cent owner of the Fort Hills project, a massive oil sands property that UTS estimates will cost some $8-billion to $10-billion to develop.

Even accounting for the $355-million that UTS has in cash, the new offer is a huge boost from Total's last offer of $830-million, made in the spring of last year amid a months-long hostile takeover attempt. That effort foundered when shareholders refused to tender to a deal they considered too poor.

This time is different. Crude prices have strengthened. A string of international deals has proven that the oil sands are back in favour on the global energy stage. The Gulf Coast spill has drawn greater attention to Fort McMurray's abundant land-based oil resource. And shareholders have flocked to a deal that they now believe fairly values UTS.

Total's offer of $3.08 per share is up from the earlier offer of $1.75. The deal set fire to UTS shares, which shot up 63 per cent to close at $3.44. Under the deal, UTS will acquire only Fort Hills; UTS's remaining oil sands properties will be spun out into a new company called SilverBirch Energy Corp.

Some 15 per cent of UTS owners - including its largest holder, Toronto-based West Face Capital - have already confirmed support for the transaction. Others are pledging to do the same.

"They've generated some good value for shareholders, and I think it's the right deal at the right time," said Robert Lyon, senior vice-president and portfolio manager at AGF Investments Inc., a long-time major UTS shareholder. "I would be surprised if there was significant dissension against this deal."

The seeds of this deal were planted in the wreckage of the last one. A week after Total's bid expired last April, UTS chief executive officer Will Roach sat down for breakfast with Michael Borrell, then head of Total's operations in Canada.

"I said, 'we understand what you're trying to do,' " Mr. Roach said. " 'And if you like the assets, you should talk to us' … I had one disagreement with them: the price. The idea was great."

Total has, for at least two years, coveted Fort Hills for its tremendous bitumen resource - an estimated 3.4 billion barrels - and its near-term viability. The French company has committed to spending $15-billion to $20-billion in the oil sands, which it sees as a critical resource in an age of dwindling oil supplies. But Joslyn and Northern Lights, two of the other northeastern Alberta properties it owns, remain without environmental approvals and are far from construction.

Fort Hills is approved and ready to go, an attractive proposition for Total, which negotiated in earnest for the property over the last few weeks before talks ended just before 1 a.m. Wednesday. Hours later, the deal was announced.

"We are especially very pleased with the opportunities for this project to be working [with]Suncor, the leader in the oil sands," said Jean-Michel Gires, who is now Total E&P Canada's chief executive officer. Total is "building its learning curve" in the oil sands, he said; at one point, the company hopes to run its own oil sands mines. Having oil from Fort Hills could also boost its efforts to build an upgrader, which refines heavy bitumen into lighter crude.

Mr. Gires defended the price paid for the property, which far exceeds the $2.25 per share that some investors said could seal the deal last year.

"Last year was last year. It was a very different type of environment. Financial markets were very much down. In such situations, you have very different expectations from potential buyers and sellers," he said. "Today we're very pleased to see the current conditions do allow such a deal."

Yet one question continues to hang over Fort Hills: when will it be built? Under the ownership of Petro-Canada, which held 60 per cent of the project, its construction seemed imminent. Under Suncor Energy Inc., which merged with Petro-Canada last year, Fort Hills suddenly had to battle with a fistful of other projects, raising questions over when Suncor will push it forward.

That uncertainty - along with doubts over the project's cost, which rose by 50 per cent in late 2008 before being trimmed later - had placed a substantial anchor on UTS, whose efforts to raise value in the past two years saw it talk to more than 70 companies and sell a key piece of prospective land to Exxon Mobil Corp. for $250-million.

There is little doubt, however, that Total expects the mine to move forward quickly. The company said Wednesday it expects first oil at Fort Hills as early as 2015; that would require a sanctioning decision by next year, Mr. Gires said. Suncor has said it plans to further detail its plans for Fort Hills later this year.

Total could potentially speed the project by buying an ownership share, and has in the past spoken publicly about snapping up the 20 per cent of Fort Hills owned by Teck Resources Ltd. Asked whether this remains an interest, Mr. Gires would only say, "we will see at a later stage what might happen."

Neither Suncor nor Teck, however, appear eager to part with their stakes.

"We're happy with our current position in the project," said Suncor spokeswoman Sneh Seetal.

Teck, meanwhile, has been adding to its Calgary-based energy group in recent months, and considers the oil sands "a very good long-term business," said Marcia Smith, the company's vice-president for corporate affairs.

Teck's 20-per-cent stake is not for sale, Ms. Smith said.

"Really, the Total transaction today validates our view that what we have in the oil sands is valuable," she said.

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