The news shocked North American markets causing units in the trust to nosedive 16% to C$44.90 which effectively wiped C$726 million off the firm’s market value in one day. Such has been the fallout from the overrun, that some local commentators are calling it the end of the age of multibillion-dollar mega projects.
The loss relates to unforseen costs at Syncrude Canada Ltd’s (of which C.O.S.T holds 35.49%) stage 3 expansion of its oil sands operation. The blowout, coupled with previous overruns, means it will cost C$4.1 billion to complete the expansion.
The company already has plans to take the operation all the way out to a stage 5 expansion by the end of the next decade. The price tag to get there could be in the order of C$10 billion.
Stage 3, which will add 100,000 barrels per day to output, has a current price tag of C$7.8 billion. Stage 5, according to preliminary estimates, will add another 137,000bpd.
The C.O.S.T announcement has investors nervously eyeing other oil sands producers. Petrocan is due to meet with punters and analysts this week to discuss its plans.
Australia’s oil shale project, the Stuart project, was recently sold by the receiver managers to Queensland Energy Resources Ltd (QER), an entity associated with Texan oil investor Jeff Sandefer, the project's major backer, who placed the embattled Southern Pacific Petroleum into receivership last December after having invested $34 million in the project in May.
Filed from the PDAC in Toronto
