Private Osum Oil Sands Sells Production Royalty for $92.5M to Pay for Expansion

By Healing, Dan | The Canadian Press, October 2, 2017 | Go to article overview

Private Osum Oil Sands Sells Production Royalty for $92.5M to Pay for Expansion


Healing, Dan, The Canadian Press


Osum Oil Sands sells royalty to fund growth

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CALGARY - A private Calgary oilsands producer is selling a portion of future production to raise money to expand its northern Alberta project, a funding method gaining traction in a sector having difficulty attracting investors.

Osum Oil Sands Corp. said Monday it has approved a 3,000-barrel-per-day expansion of its Orion project to take output to over 12,000 barrels per day by mid-2019.

The company said it will pay for the expansion with part of about $92.5 million in cash it has raised by selling to an unnamed buyer a four per cent share or royalty in all future production from Orion.

Similar royalty sales have been used recently by publicly traded Calgary-based oilsands producers BlackPearl Resources Inc. (TSX:PXX), Pengrowth Energy Corp. (TSX:PGF) and Athabasca Oil Corp. (TSX: ATH) to raise growth capital.

"It's a substitute for issuing equity which, at these (share) prices for many issuers, would be highly dilutive for their shareholder base, even when considering the recent bounce off of the bottom," said AltaCorp Capital oilsands analyst Nick Lupick.

"It is definitely being pitched to companies as an alternative source of financing other than debt and equity. …

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