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EXTRACT: “…Shell or Chevron are the most likely buyers of Western Oil Sands, but neither seems to be in a rush and may wait for someone else to make a bid before making a move


STOCK JUMPS 7%; Total SA preparing bid for Western Oil Sands, French report says…

Claudia Cattaneo, Financial Post
Published: Saturday, June 16, 2007

CALGARY – A Total SA takeover offer for Western Oil Sands Inc. could spark another battle between two European supermajors over Canadian oilsands assets.

Shares of Western Oil Sands, a 20% partner in the Athabasca Oil Sands Project, bounced almost 7%, to close at $37.91 yesterday in Toronto on a report in France that the French oil multi-national has hired Merrill Lynch to prepare a takeover bid. Total shares rose to a record in Paris, closing at ?58.86, up 1.5%.

The two-sentence report, in yesterday’s edition of Paris-based La Lettre de L’Expansion, also notes other global oil groups, including Shell and Texaco — now known as Chevron Corp. and also a 20% partner in the Athabasca project — may be interested in bidding for the oilsands company.

A takeover of Western, worth more than $6-billion in the market, would thrust Total inside the Shell-controlled Athabasca mining project and provide Total with oilsands mining expertise.

Both companies are expanding aggressively in the business. Shell recently completed the privatization of Shell Canada Ltd., one of Canada’s most experienced oilsands players. Total, a relative newcomer, said it wants to invest up to US$15-billion in oilsands projects in Canada, including an upgrader and development of the Surmont in-situ and Joslyn in-situ and mining projects.

Two years ago, the two companies fought behind the scenes for control of Deer Creek Energy Ltd., which in the end was won by Total for $1.67-billion.

“It’s not like Total and Royal Dutch haven’t danced before,” said Brian Prokop, vice-president at Canaccord Adams. However, “This would be a strange one for Total,” he said.

Observers said it would make more sense for Total to buy oilsands assets that allow it to be in control or at least own a greater share.

Western is on the block as it seeks a downstream upgrading home for growing output from the Athabasca project. The project’s current expansion includes building a second upgrader, but upgrading capacity in future phases is restricted to Shell. Western has hired TD Securities and Goldman Sachs to investigate its options.

Western Oil Sands could also continue as an independent entity and sell a project in Iraq that angered many of its shareholders last year.

Phil Skolnick, an analyst at Genuity Capital Markets, said Shell or Chevron are the most likely buyers of Western Oil Sands, but neither seems to be in a rush and may wait for someone else to make a bid before making a move.

“It wouldn’t surprise me if Total is looking around the oilsands, but whether it’s WTO, who knows?” he said.

The stock is getting expensive as it moves closer to its implied value of about $42 a share based on the price paid by Royal Dutch Shell for the minority shares in Shell Canada, he said.


Ticker WTO/TSX

Close $37.91, up$2.41

Volume 5,988,959

Avg. 6-month vol. 1,164,719

Rank in FP500 307

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© National Post 2007
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