Skip to main content

The Globe and Mail

Athabasca Oil releases makeshift budget amid legal battle

An Athabasca Oil drilling rig. A northern Alberta First Nation has made good on pledge to keep fighting an oil sands project proposed by Athabasca Oil Corp., a move that could delay the $1.3-billion sale of the company’s interest to its Chinese partner.

Athabasca Oil Corp.

Athabasca Oil Corp. has put out a makeshift budget – a lean spending plan given cash will be tight unless it finds joint-venture partners or receives money from its Chinese partner in the oil sands – as its major project is caught up in a legal battle between a First Nations band and the province's energy regulator.

Athabasca Oil intends to spend roughly $460-million in 2014, according to the budget it released Tuesday. It left room, however, to adjust this plan should it sell assets in the oil sands, as well as stakes in light and thermal oil. It hopes to collect $1.32-billion from PetroChina Co. Ltd. after the Dover oil sands receives all the necessary regulatory approvals.

The Dover project is being challenged in court by the Fort McKay First Nation, which wants a 20-kilometre buffer zone between the project and the reserve boundary. While the court challenge is specific to the Dover project and has directly affected Athabasca Oil's initial 2014 budget, the energy industry and First Nations across the board are struggling to find the balance between developing Alberta's oil reserves and meeting First Nations' demands over land rights.

Story continues below advertisement

"Very positively, constructive talks are taking place between the Fort McKay First Nation and [the project's operator], and they are hopeful a manageable solution can be reached between the parties on the Dover project," Sveinug Svarte, Athabasca Oil's chief executive, said during a conference call Tuesday. "It is our view that [a] mutually acceptable solution is achievable."

Athabasca Oil owns 40 per cent of the Dover project, while PetroChina controls the rest. The Chinese state-controlled energy firm finances the project's jointly owned operating company.

Athabasca Oil is also looking for partners in its light-oil and thermal-oil assets. It said it would "review" its budget should it find partners or receive cash from PetroChina. The company would not approve any new projects until it has secured funding, it said in its press release.

Under its current budget, Athabasca Oil expects to produce between 6,000 and 6,500 barrels of oil equivalent per day in the first quarter.

Athabasca Oil's ongoing issues chilled some analysts.

"We would continue to avoid this name given the high degree of uncertainty at this time," Mark Friesen, an analyst at RBC Capital Markets, said in a note after the company released its budget.

Athabasca has the right to force PetroChina to pay $1.32-billion for the Canadian company's 40-per-cent stake in Dover within 30 days after it receives government approval. (PetroChina can also force Athabasca to sell its stake to the state-controlled energy firm within 30 days of approval, thanks to the put/call option that came with the original joint venture struck in February, 2010). It is unknown whether Alberta will approve the project, or when its decision may come. PetroChina and Athabasca Oil struck a similar arrangement over the MacKay River project. PetroChina now owns 100 per cent of that project.

Story continues below advertisement

The provincial energy regulator has already given the Dover project its blessing, although that sparked the legal battle.

Alberta Court of Appeal Justice Frans Slatter in October granted Fort MacKay First Nation the right to appeal the energy regulator's approval of the Dover project, based on questions about whether the watchdog made a mistake in defining the scope of the case's constitutional issues as it made its decision.

Athabasca also announced two deals that would give the financially pinched company some liquidity.

Athabasca on Monday exercised its right to sell a 50-per-cent interest in the Kaybob-area light-oil infrastructure for $145-million, the company said in its budget announcement. It retains a 50-per-cent interest in its light oil pipeline and other infrastructure assets in the area, the company noted. It also negotiated new credit facilities, giving it access to more debt.

Report an error Licensing Options
About the Author

Carrie Tait joined the Globe in January, 2011, mainly reporting on energy from the Calgary bureau. Previously, she spent six years working for the National Post in both Calgary and Toronto. She has a master’s degree in journalism from the University of Western Ontario and a bachelor’s degree in political studies from the University of Saskatchewan. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at