June 23, 2008, Enerplus announced an agreement to sell its interest in the Joslyn oil sands lease for $500 million. The agreement is to sell its 15% working interest in the Joslyn oil sands lease ("Joslyn") to Occidental Petroleum Corporation for proceeds of $500 million which, including adjustments but before transaction costs, is estimated to be $510 million at closing. Enerplus plans to use the proceeds initially to reduce bank debt but expects to redeploy the funds towards accretive acquisitions and development opportunities. The transaction, which is subject to customary conditions, consents and regulatory approvals, is expected to close by the end of the third quarter of 2008. To read the entire news release, please click here.
Enerplus became involved in the oil sands in 2002 through acquisition of a 16% working interest in the Joslyn Lease from Deer Creek Energy Limited. In 2005, Deer Creek Energy Limited was acquired by Total, a wholly owned subsidiary of Total S.A., a major international oil and gas company with experience in the extraction and refining of heavy oil. Total is the operator of the Joslyn Project and intends to recover the bitumen located on the Joslyn Lease through a combination of phased SAGD and mining development. In 2006, Enerplus sold a 1% working interest in the Joslyn Project in exchange for equity in Laricina, a private oil sands company. As a result, Enerplus now has a 15% working interest in the Joslyn Project.
Joslyn Lease Area, Northern Alberta
In March of 2008, Enerplus announced that a strategic review of our portfolio of oil sands and conventional projects had resulted in the decision to consider options regarding the Joslyn lease. Our low risk, distribution-oriented business model necessitates a portfolio of assets that provide near-term cash flow, future growth potential and an appropriate balance of commodities. Managing the future capital requirements of the portfolio while maintaining financial flexibility is critical to the long-term success of Enerplus. While we believe that both Joslyn and Kirby provide attractive long-term potential, the operated nature of the Kirby project provides enhanced control over the timing and nature of our capital spending profile. In addition, there are more SAGD opportunities within Canada for future growth and SAGD is better suited to our technical competencies and business model.
The Joslyn Lease currently has two key mining areas (designated as the North Mine and South Mine) and a SAGD area with expansion potential. Enerplus expects the regulatory application for the North Mine to be approved in the second half of 2008. The extent of the South Mine development and the expansion potential for the SAGD project is currently being evaluated and Enerplus expects to finalize these plans with Total in 2008, along with an expanded joint operating agreement and Enerplus’ downstream marketing plans. Enerplus expects a regulatory application for the South Mine to be made once definitive lease development plans have been determined. As the lease development plans have not been finalized and significant engineering work is underway, Enerplus does not currently have estimates of the future capital requirements associated with the Joslyn Project. Enerplus expects to report capital spending estimates once the lease development plan is complete.
For further information on the Joslyn lease, please refer to our Annual Information Form.
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