Alberta Oilsands Files Year End 2013 Results and Provides Corporate Update
May 1, 2014 (Source: FSC Wire) — NOT FOR DISSEMINATION IN THE U.S.A.
Alberta Oilsands Inc. (“AOS” or the “Company”) (TSXV:AOS) is pleased to announce that it has filed with Canadian securities authorities its audited financial statements and its management discussion and analysis as at and for the year ended December 31, 2013. Copies of the filed documents may be obtained through www.sedar.com. The Company is also pleased to provide a corporate update, including an update on its pursuit of compensation from the Government of Alberta (“GoA”) in connection with its Clearwater leases set to be cancelled upon receipt of compensation.
In 2013, the Company received separate notices from Alberta Energy that certain parts of its Clearwater leases would be cancelled. The first notice, received by the Company in March 2013, advised AOS that parts of six (6) of the Company’s Clearwater leases located in the Gipsy-Gordon Wildland Park Conservation Area, comprising 1,200 hectares or approximately 22% of the affected leases, would be cancelled under the Lower Athabasca Regional Plan (“LARP”). The cancellation of lease areas under LARP did not materially affect AOS’ proposed SAGD project at its Clearwater leases.
The second notice, received by the Company in October 2013, advised AOS that parts of four (4) of the Company’s Clearwater leases located within the Fort McMurray Urban Development Sub-Region (“UDSR”), comprising 4,341 hectares or approximately 65% of the affected leases would be cancelled. The cancellation of lease areas under UDSR materially affected AOS’ proposed SAGD project at Clearwater, for which the Company was waiting for final project approval from Energy Resources Conservation Board (now Alberta Energy Regulator).
Both cancellations under LARP and UDSR are subject to compensation provided under the Mineral Rights Compensation Regulation. The Company recently received compensation under the LARP cancellation and continues to pursue compensation under the UDSR cancellation.
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In August 2012, the Government of Alberta approved the LARP, a government initiative that identifies and sets resource and environmental management outcomes for air, land, water and biodiversity. The public policy of LARP is to guide future resource decisions while considering social and economic impacts.
In March 2013, the Company received notice from Alberta Energy that a portion of its Clearwater leases located in the Gipsy-Gordon Wildland Park Conservation Area would be cancelled. The decision by the GoA to cancel parts of leases in this area was made in consideration of the GoA’s policy direction under the LARP and was based on the incompatibility of oil sands exploration and development with the management intent of conservation areas as described in the LARP.
Unlike the lease areas within the UDSR (see “UDSR Cancellation” below), these cancelled lease areas within the LARP are not in proximity to the previously proposed Clearwater Phase 1 SAGD project area and are outside proposed development areas. As a result, these LARP cancellations had no significant impact on AOS’ development plans or the ERCB (AER) application process in respect of its previously proposed SAGD project at Clearwater. As the portions of the leases to be cancelled under LARP are in areas that AOS has previously deemed sterilized due to proximity to outcrops and water ways, no developmental expenditures were incurred by the Company in these areas.
In April 2014, the Company was notified by the GoA that parts of its leases in the LARP area had been cancelled and that AOS would be awarded $1.4 million in compensation with respect to the LARP cancellation, the monies which have now been received. The $1.4 million compensation received from the GoA is in-line with the Company’s expectation under the LARP cancellations.
The compensation for the cancellation of lease areas under the LARP consisted of approximately $1.1 million representing the cost of acquiring the cancelled areas of the lease, including annual license fees and application fees, plus approximately $300,000, representing interest allowance. As expected by the Company, since no development expenditures or reclamation costs were incurred by the Company in these cancelled LARP areas, the compensation amount consisted solely of license fees and interest.
The Company continues to pursue the settlement of its compensation claim in respect of its lease cancellations under the UDSR as further described below.
In August 2011, the GoA signed a Memorandum of Understanding with the Regional Municipality of Wood Buffalo (“RMWB”) to take steps to establish an Urban Development Sub Region. The UDSR is a provincially-designated area of Crown land surrounding the Fort McMurray Urban Service Area where future urban development will be the primary intended land use to accommodate population growth and urban expansion.
In July 2013, the GoA made a public announcement that leases in the UDSR not compatible with urban development, which includes all oil sands leases and incompatible surface dispositions, would be cancelled to make room for municipal expansion.
In October 2013, the Company received a notice from Alberta Energy that the Company’s Clearwater oil sands leases within the UDSR would be cancelled. Specifically, oil sands lease agreements 7407090336 and 7407070268 covering a total area of 1,920 hectares would be cancelled in their entirety; and portions of land representing a total area of 2,421 hectares under oil sands lease agreements 7407080532 and 7407070269 would also be cancelled.
In November 2013, the Company submitted an application for compensation under the Mineral Rights Compensation Regulation for its oil sands leases cancelled under the UDSR. As announced on November 28, 2013, the Company is seeking compensation in the amount of approximately $56 million, consisting of lease payments to the Crown, development costs and applicable interest.
Since January 2014, the Alberta Department of Energy has been reviewing the Company’s compensation application and in normal course, has been conducting an audit of AOS’ submitted compensation claim to verify that the amounts claimed as development allowance from 2006 to 2013 are being claimed in accordance with section 6 of the Mineral Rights Compensation Regulation. AOS has been working with the Alberta Department of Energy during this audit process by providing supporting documents for the development allowance claimed and has responded to all government queries. AOS and the Alberta Department of Energy have been working in a cooperative and expeditious manner to complete the audit process as soon as practicable and be in a position to confirm the timing and amount of compensation due to the Company as a result of the cancellations under the UDSR.
Unlike the lease cancellations under the LARP as described above, the cancellation of AOS’ leases at Clearwater under the UDSR materially affects the Company’s previously proposed SAGD project, as the designated site for the proposed project is located entirely within the cancelled UDSR area and the majority of the Company’s exploration expenditures were incurred within the cancelled UDSR area. In March 2014, the Alberta Energy Regulator notified AOS that it had closed the Company’s Clearwater SAGD application, citing that since the proposed project is within the UDSR, the proposed project will not proceed as oil sands exploration and development are incompatible with future municipal development within the UDSR.
On this basis, the Company is of the position that the cancellation of a portion of the Company’s leases within the UDSR area effectively cancels the Company’s proposed SAGD Clearwater project and therefore all expenditures incurred in respect of the exploration and development of AOS’ proposed Clearwater project should be compensated as per the Company’s compensation application submitted in November 2013.
AOS continues to progress a variety of initiatives as it relates to its existing Africa and Canadian oil sands assets. Africa progress includes working with local partners and host governments to progress initiatives in Zambia and Namibia, while its oil sands efforts have largely been focused on the Company’s UDSR claim.
In anticipation of the settlement with the Government of Alberta relating to the cancellation of the Company’s oil sands leases in the UDSR, the board of directors of AOS (“Board”) is in the process of reviewing the Company’s current business plan, as well as other alternatives to identify the best appropriate actions for the Company to maximize value for shareholders upon receipt of the compensation funds. This strategic review is identifying a variety of alternatives available to the Company with a view to enhancing shareholder value. This strategic review process could result in the declaration of a dividend, sale of a material portion of the Corporation’s assets, a consolidation of assets, a joint venture, farm-out, merger, business combination or a corporate reorganization, among other alternatives. At this time, the Company does not intend on committing to any new major investments until the appropriate reviews are completed and any required regulatory or shareholder approvals are obtained.
AOS’ directors and management are committed to maximizing value for its shareholders. Upon receiving funds from the government related to its UDSR claim, AOS will be a company with a very healthy balance sheet, which holds a portfolio of 100% owned oilsands assets, as well as a portfolio of Africa assets that the company owns with majority working interest. Additionally, as the Board evaluates the optimal strategy for the Company, particularly in-light of the anticipated in-flux of cash, the Board is receptive to receiving in-bound enquiries to the Company, that could lead to maximization of shareholder value, including the addition of a new executive team and directors. The Board is currently reviewing a variety of in-bound enquires to the Company, in anticipation of the receipt of funds from the GoA.
RESIGNATION OF BOARD MEMBER
In connection with the Board’s review of the Company’s strategy, the Board is also in the process of searching for executive/management to join the Company upon settlement of the compensation claim with the GoA, and execute any plans that may arise from the Board’s review of the Company’s strategy. In this regard, Binh Vu has resigned as a member of the Board of AOS to create a vacancy for a future board member aligned with the Company’s future strategy, which has yet to be finalized. In the meantime, Binh Vu will remain the interim Chief Executive Officer and will largely focus on the UDSR settlement process with the GoA until compensation is received by the Company, and new management has been appointed to implement the Company’s strategy, which is currently being considered and reviewed by the Board.
AMENDMENTS TO BY-LAWS, INCLUDING ADOPTION OF ADVANCE NOTICE PROVISIONS
Also in connection with the review of the Company’s strategy, the Board reviewed the Company’s by-laws, which had been adopted by the Board and shareholders almost ten years ago, and determined that the Company’s by-laws should be updated to, among other things, reflect the current provisions of the Business Corporations Act (Alberta) and certain corporate governance best practices. Accordingly, the Board has adopted new by-laws, which also had the effect of repealing the previous by-laws of the Company.
The amended and restated by-laws include an advance notice requirement for shareholders who wish to nominate their own directors at an annual or special shareholders’ meeting. The advance notice requirement was added to the Company’s by-laws to facilitate an orderly and efficient director nomination process by ensuring that all shareholders receive adequate notice of director nominations and sufficient information in respect of all nominees so that the proposed nominees’ qualifications and suitability as directors can be evaluated and an informed vote cast for the election of directors. The requirement fixes deadlines for submitting director nominations to the Company prior to any annual or special meeting of shareholders where directors are to be elected, and sets forth the information that a shareholder must include in their nomination in order for it to be valid. In the case of an annual shareholders’ meeting, the deadlines for notice of a shareholders’ director nominations are not less than 30 days and not more than 65 days prior to the meeting; provided, however, if the first public notice of an annual shareholders’ meeting is given less than 50 days prior to the meeting date, shareholders must provide notice of their nominations by close of business on the 10th day following the announcement of the meeting. In the case of a special meeting (which is not also an annual meeting) called for the purpose of electing directors, shareholders must provide notice of their nominations by close of business on the 15th day following first public announcement of the special shareholders’ meeting.
The amended by-laws also include an enhanced quorum requirement for annual or special shareholders’ meetings called for the purpose of electing directors, where such meeting may result in persons who were members of the Board immediately prior to the meeting ceasing to constitute a majority of the Board following the meeting. The requirement was added to the Company’s by-laws to encourage greater participation by shareholders in the election of directors in circumstances that may result in a fundamental change to the governance and strategic direction of the Company and to ensure enfranchisement of shareholders (i.e., that all shareholders are treated equally and fairly in connection with any initiative to acquire control of the Company) by requiring participation of at least a majority of the outstanding Common Shares. In addition, another purpose of the enhanced quorum requirement is to complement the advance notice requirement in working to avoid the potentially negative and destabilizing impact that a stealth proxy fight can have on the Company in circumstances where a small group of shareholders attempt to acquire control of the Company without notice and without paying any premium for such control. If the potential change of control is only brought to the attention of the Company at a shareholders’ meeting or shortly before such meeting, shareholders who are not present or who are voting by proxy have no ability to evaluate and vote on such change of control in an informed manner.
The full text of the new by-law is available under the Company’s profile at www.sedar.com. The Company will seek shareholder ratification of the by-law at its next annual general meeting of shareholders. If the by-law is not confirmed at the meeting, the by-law will terminate and be of no further force and effect following the termination of the meeting. The by-law is also subject to the approval of the TSX Venture Exchange.
About Alberta Oilsands Inc.
Alberta Oilsands Inc. is engaged in the exploration and development of drill-defined domestic assets, and owns a portfolio of international assets. AOS holds bitumen leases in the Athabasca oil sands region of northeast Alberta. In addition, the Company’s Africa initiative is focused on active and known onshore and offshore basins on the East Africa Rift System and offshore Africa. The Company’s head office is located in Calgary, Alberta, Canada and its common shares are traded on the TSX Venture Exchange under the trading symbol AOS.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain statements included in this press release constitute forward-looking statements or information (“forward-looking statements”) under applicable securities legislation. Forward-looking statements or information typically contain statements with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “potential”, “propose”, or similar words suggesting future outcomes or statements regarding an outlook. Specific forward-looking statements in this press release include statements with respect to the timing and amount of compensation to be received from the Province of Alberta for the Clearwater property; the business of AOS; and the review of various options.
Forward looking statements involves significant known and unknown risks and uncertainties, some of which are beyond the control of AOS, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to, the Province of Alberta arriving at a different interpretation as to the amount of compensation payable to the Company, the impact of general economic conditions, industry conditions, volatility of commodity prices, environmental risks, competition from other industry participants and the lack of availability of qualified personnel or management. Additional risks and uncertainties affecting AOS and its business and affairs are described in further detail in the Company’s Annual Information Form for the year ended December 31, 2012. There can be no assurance that the review of various options will result in the Company pursuing any transaction or that a transaction, if pursued, will be completed.
Although AOS believes that the expectations in such forward-looking statements are reasonable, they are based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward-looking statements. As such, readers are cautioned not to place undue reliance on the forward-looking statements, as no assurance can be provided as to future results, levels of activity or achievements. The forward looking information included herein is made as of the date of this press release and AOS assumes no obligation to update or revise any forward looking information to reflect new events or circumstances, except as required by law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.
Raj Shah has professional experience working for over a half a dozen years at financial firms such as Merrill Lynch and First Allied Securities Inc., ... <Read more about Raj Shah>