CALGARY -- A $250-million land sale by UTS Energy Corp . did little to boost investor faith in the oil sands junior, whose fate continues to lie largely in the hands of others.
UTS said its sale of 13,000 hectares of oil sands leases to Imperial Oil Ltd. and Exxon Mobil Corp. will net the company about $200-million after tax, nearly double its cash stash to $440-million and provide fresh proof that the land holdings it has amassed have considerable worth.
"It's showing to the world we're well-financed, we've created value in the portfolio," UTS chief executive officer Will Roach said. "There really is a huge sense of frustration that the market doesn't recognize the value of the portfolio we've put together."
But investors did little to ease that frustration yesterday, providing only a slight lift to UTS shares. The reason: For UTS, an oil sands company with no current oil production, important decisions will be made not by its own management, but by the leadership of Suncor Energy Inc.
"The overhang for the company is still centred on what's going to happen at the Fort Hills project," said Chris Feltin, an analyst with Macquarie Capital Markets.
UTS owns a 20-per-cent stake in Fort Hills, a proposed multibillion-dollar oil sands mine. Teck Resources Ltd. owns another 20 per cent. But the majority belongs to Suncor, which took on 60 per cent of the project through its acquisition of Petro-Canada.
That merger has added significant uncertainty to the timing of the Fort Hills development plan, as Suncor works through a massive portfolio of projects, and decides which will go first.
While Fort Hills was seen as a priority for Petrocan, it may not be for Suncor, which has already begun - and then halted - construction on other oil sands projects. Suncor may shine more light on Fort Hills when it releases its capital plan later this month.
But for now, UTS is the inheritor of an uncertain future. Factoring in the value of its land sale, UTS is worth about $3 a share, FirstEnergy Capital Corp. analyst William Lacey has calculated. It traded yesterday at just above $2.
The firm's largest shareholder, West Face Capital, said the sale "underpins our sense of long-term value," and believes it will lift UTS shares over time.
UTS ENERGY (UTS-T)
Close: $2.10, up 6 cents.