oil at $120 becomes biggest energy bet, page-2

China Buys Canadian Oil Sands Producer, should make LNC's Alaskan acquisition look like a bargain.

http://howestreet.com/2011/07/chinese-interest-canadian-oil-remains-strong/
China Buys Canadian Oil Sands Producer
By the Casey Research Energy Team
Less than a week after struggling oil sands producer Opti Canada (T.OPC) filed for creditor protection, China?s largest offshore oil producer, CNOOC Ltd., stepped forward with an offer to buy the company for $34 million in cash and $2 billion in debt. It is the second-largest Chinese investment in Canada?s oil patch to date; and it immediately erased any doubts that the Chinese were losing interest in Canada after a major deal fell through last month.
The deal ends Opti?s two-year search for a buyer willing to absorb its crushing debt. In November 2009, the company started reviewing its strategic options as it tried to deal with a declining share price. Then last week, the company filed for bankruptcy protection based on a restructuring plan involving C$375 million in new equity. But even that cash injection was not going to be enough to save Opti, whose balance sheet was over-leveraged and whose access to capital was drying up.
CNOOC is buying Opti for its 35% stake in the Long Lake project in northern Alberta. Long Lake is a steam-assisted gravity drainage operation with an upgrader that started operations in 2008. However, the installation has run into one problem after another and continues to produce just 30,000 barrels of upgraded bitumen per day, well short of its design capacity of 70,000 barrels. The project finally generated positive cash flow in the second quarter of this year.
Nexen (a Canadian-based global energy company) holds the other 65% of Long Lake and operates the site. Nexen says it is happy with its new partner, as CNOOC comes with the deep pockets and long timelines necessary in the oil sands sector.
Opti also owns interests in three undeveloped properties in northern Alberta: Kinosis, Leismer, and Cottonwood, which together host total proven reserves of 195 million barrels of oil.