Steven Ward

UTS Energy: Risky Play?

The highest sale for undeveloped oil sands in the ground has been Oxy's purchase of Enerplus' share in the Joslyn Project. at a price of $1.57 a barrel. Most oil sands go for 50 cents to a dollar a barrel. The Joslyn sale was done at much higher oil prices, well over $100.00 per barrel. So it is doubtful that UTS will get a $1.57 if they sold out and distributed their share of the cash to shareholders. If UTS did sell their oil sands assets for the previous high then they would receive about $4.90 per share, considerably higher than the stock is now.

If they sold at a low of 50 cents per barrel, that would translate into $1.58 per share. Assuming UTS doesn't receive adequate financing for future projects selling out would be the prudent thing for shareholders.
Current estimates of costs are 80 to 90 dollars a barrel for a 10 to 12 percent return on oil sands projects. UTS has to ask itself if it is worth it.

UTS is in a good poition to sell to well heeled partners involved in the project. UTS can sell for some cash now and lower its developmwent costs and retain a smaller percentage or sell all its assets for a lower price and retain a royalty on future net production or sell all outright at the highest possible price.

It is doubtful UTS can achieve the financing necessary to stay with the project with production so far away. UTS should be thinking of its shareholders and how to get them money now.