UPDATE 1-Korea fund buys stake in Canadian oil sands firm

Wed Nov 24, 2010 5:39pm EST

* South Korean fund buys 7.7 million Osum shares

* KIC's second oil sands investment

* Osum developing thermal, carbonate properties (Adds company comment; in U.S. dollars unless noted)

CALGARY, Alberta, Nov 24 (Reuters) - Osum Oil Sands Corp, a small privately owned oil sands development company, said on Wednesday it will sell C$100 million ($99 million) worth of its shares to Korea Investment Corp, marking the sovereign wealth fund's second investment in Canada's oil sands.

Osum, which is developing a thermal oil sands project near Cold Lake, Alberta, and owns properties it estimates contain 9 billion barrels of bitumen in the largely undeveloped Grosmont Carbonate play, said in a press release it sold the South Korean fund 7.7 million shares at C$13 each in a private placement.

Osum expects to use the cash to fund development of its projects in the oil sands, the largest crude oil reserves outside the Middle East.

"It really adds to the war chest we've got that helps cover the front-end costs of all our projects," said Steve Spence, the company's chief executive.

It's the second investment in the oil sands by Asian interests this week, and follows the $2.3 billion purchase of a 40 percent stake in Statoil ASA's (STL.OL) Kai Kos Dehseh project by Thailand's PTT Exploration and and Production PTTE.BK on Monday. [ID:nSGE6AM02H]

It's also Korea Investment Corp's second investment in an startup oil sands company looking to develop a Grosmont Carbonate property.

In August, KIC paid C$50 million for a minor stake in Laricina Energy Ltd. Laricina is building the first project to tap the Grosmont formation, which contains an estimated 318 billion barrels of tar-like bitumen trapped in porous rock, making it more difficult to exploit than the oil sands.

Osum holds a 40 percent stake in Laricina's Saleski project, which will test carbonate production. It's also developing its 35,000 barrel per day Taiga project near Cold Lake, a thermal development that will pump steam into the ground to liquefy bitumen so it can flow the the surface.

Production from Taiga is expected to begin in 2014.

Osum said it agreed to give KIC the right to participate in future financings and that it was also given "board-observer rights". If its stake the company rises above 10 percent, KIC will also be able to appoint a director to Osum's board.

Osum did not say what percentage of the company KIC will own following the purchase, only that it was less than 10 percent of the outstanding shares.

Osum said in its release that it was advised by Credit Suisse Securities (Canada) Inc, while Macquarie Capital Markets Canada Ltd acted for KIC.

($1=$1.01 Canadian) (Reporting by Scott Haggett; editing by Rob Wilson)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.