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Western Oil Sands Inc to pursue plan for
Kurdistan
27.10.2006
By SHIRLEY WON - Business |
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October 27, 2006
Western Oil Sands Inc. will push ahead with its
controversial strategy to explore for oil in the
semi-autonomous Kurdistan region of war-torn Iraq,
despite protests by some disgruntled shareholders.
"Western board's management firmly believes that
this Kurdistan initiative offers tremendous
long-term growth potential with limited upfront
capital," Western's chief executive officer Jim
Houck said yesterday during a conference call.
"The company is committed to working alongside the
government and the people of the region to develop
this large and potentially world-class asset," Mr.
Houck told analysts after Western released upbeat
third-quarter results. |
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Calgary-based Western spooked many investors on May
30 when it announced that the company -- a partner
in the Athabasca oil sands project in Alberta -- was
expanding to Kurdistan, a relatively stable northern
region in Iraq.
Salida Capital Corp., a large shareholder that
bought Western because it has a strong crude asset
in Canada, argues that the foray into Iraq has
soured confidence among investors, and has called
for a sale of the company.
In a letter to Western in September, Toronto-based
Salida also suggested other options, including the
sale of its oil sands stake and a spinout of its
Iraq assets. Converting the oil sands stake into an
income trust and spinning out holdings in Iraq and
its undeveloped oil sands leases is another
possibility, Salida said.
Salida president Gary Ostoich could not be reached
for comment yesterday.
Mr. Houck, who has been tight-lipped about some of
the shareholder unhappiness, added that Western is
now working with the Kurdistan government to ratify
their 10-year exploration and production-sharing
agreement.
"We expect the ratification process to result in a
finalization of the acreage and the work
commitments, and to also confirm and align our
contract with the draft petroleum law that was
recently published by the Kurdistan regional
government," Mr. Houck added.
Asked about the cash outlay so far for the Iraq
project, Western's chief financial officer Dave Dyck
said the company has spent about $20.8-million,
including $2.5-million for research and business
development.
The Western executives elaborated on their Kurdistan
strategy after reporting a 6-per-cent increase in
profit and record revenue for the third quarter.
A 12-per-cent rise in West Texas crude oil prices,
higher prices for heavy crude, lower natural gas
prices that reduced operating costs and no hedged
production were all factors that helped to boost the
bottom line, the company said.
Shares of Western, which took a beating after
unveiling its Kurdistan strategy, yesterday slipped
18 cents to close at $28.85 on the Toronto Stock
Exchange.
Q3
2006
2005
Profit (Loss)
$84.5-million $79.4-million
EPS
52¢
50¢
Revenue
$206.2-million $185.7-million
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