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|
 Company
Profile:
www.sunshineoilsands.com
Sunshine Oilsands Ltd., is
one of the largest non-partnered holders of oil sands leases by area in the
Athabasca oil sands region, which is located in the province of Alberta,
Canada. Since the Company’s incorporation on 22 February 2007, Sunshine has
secured over 464,897 hectares (1,148,785 acres) of oil sands leases (equal
to approximately 7% of all granted leases in this area).
The Company’s principal operations are the exploration, development and
production of its diverse portfolio of oil sands leases. Its principal
operating regions in the Athabasca area are at West Ells, Thickwood, Legend
Lake, Harper, Muskwa, Goffer, Pelican and Portage. Sunshine’s oil sands
leases are grouped into three main asset categories: clastics, carbonates
and conventional heavy oil.
Sunshine listed on the Hong Kong Stock Exchange on March 1, 2012, raising
approximately HK$4.5 billion (approximately $600 million CAD). The Hong Kong
Stock Exchange Stock Code for Sunshine Oilsands is 2012.
 John
Zahary, M.Phil P.Eng
President and
CEO
John Zahary, a
Professional Engineer with extensive senior management experience in the
upstream and integrated oil and gas industry, is Sunshine's President &
Chief Executive Officer.
Previously, Mr.
Zahary held senior positions at Harvest Operations, Osum Oil Sands, Viking
Energy, Petrovera Resources, PanCanadian Petroleum, Canadian Oil Sands, Gulf
Canada, Imperial Oil and Texaco Canada.
Mr. Zahary is a
member of Alberta Securities Commission Petroleum Advisory Committee and the
Chairman of the Western Canada Rhodes Scholarship Selection Committee as
well as other business and volunteer involvements. He has served in the past
as a Director and President of the Alberta Chamber of Resources, a Governor
of the Canadian Association of Petroleum Producers, and the Chairman of the
Petroleum Technology Research Centre.
Mr. Zahary holds a
B.Sc. in Mechanical Engineering from the University of Calgary and a M.Phil.
in Management from the University of Oxford.
Interview
conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, To be published –
July 16, 2012
CEOCFO:
What is the focus and strategy at Sunshine Oilsands?
Mr. Zahary:
Sunshine is an oilsands focused company. We have a very substantial asset
base with more than 60 billion barrels of oil on our lands – to put that in
context, the total reserves in the USA are currently about 20 billion
barrels. Within the oilsands focus, we produce all of our assets from
underground through wellbores. Included are clastic/sandstone reservoirs
that we will heat to produce, carbonate reservoirs that we will heat to
produce and reservoirs that we can produce without thermal stimulation. Our
strategy is to become a leading force in oilsands production leveraging off
our substantial asset base while doing it in a prudent and responsible
manner and providing attractive returns to investors.
CEOCFO:
Why does your experienced team like oilsands at this point in time?
Mr. Zahary:
With strong and growing demand for oil globally and with new oil deposits
becoming harder and more expensive to locate and develop, the supply-demand
situation looks very constructive for world oil prices. The very large
amount of oil in the oilsands and on Sunshine’s lands provides opportunity
for attractive returns in the business. Technology advancements that have
already occurred and ones that we and others are working on have made the
business profitable and should continue to provide that opportunity in the
future. We see great opportunity and are excited about the potential.
CEOCFO:
Do you have any impact on the land?
Mr. Zahary:
Our
impacts are relatively small because we are drilling wells. The wells reach
around underneath the ground, but it does not disturb a whole bunch of
surface land in order to drill those wells.
CEOCFO:
Would you tell us about the technological advances you are developing?
Mr. Zahary:
The
main way that we plan to produce our oil is trough the injection of heat.
We use technology is all aspects of our business. A part of that is how we
drill the wells and usually we drill them horizontally. We drill a vertical
well down to the formation and then horizontally through the formation, so
that we touch as much of the reservoir as we can. We use pumping
technologies that are technologically advanced, which allow to move this
heavy oil. We are using commercial products, but we are using them in a way
that is specialized with respect to our people’s expertise. Therefore, some
of it is how we touch the reservoir, which is typically through horizontal
wells. Some of it is how we pump the oil, typically through creative use of
commercial pumping technology. Then we have the mobilizing strategy, with
respect to how we produce the oil. There are two ways that you can mobilize
heavy oil that is under ground. One is through heat. We use steam often, but
we are looking at other ways, including a down whole electric heater that we
are installing, which we think very efficiently will get heat into the
formation. That is something that has not been done to any great length by
other companies. It is not the first time that it has been used, but it has
not been an exploited technology. Therefore, it is something that we are
investing in, to see if we can use creative ways to more efficiently produce
oil. The other thing that we are looking at is in addition to putting the
heat in to help liberate the oil, is that we would use solvents, such as
propane or butane, which are hydrocarbon liquids. They have a commercial
purpose as well, but they can be injected into the formation and help to
mobilize the heavy oil. That heavy oil then can be produced to the surface,
along with the solvents that we inject. That is an application that has not
been done very much in heavy oil production. Therefore, we are at the
forefront of looking for opportunities to employ that technology in heavy
oil reservoirs.
CEOCFO:
Would you tell us about your latest Reserves and Resources report?
Mr. Zahary:
We
were very pleased to announce our updated reserve and resource report last
week. Following our successful winter drilling program and the ongoing
technical work to understand the potential of our assets, we engaged our
outside reserve engineers GLJ Petroleum Consultants and DeGolyer and
MacNaughton to update their assessment of the potential of our lands. They
assessed our updated reserves as 80 million barrels of proved (90% certainty
threshold) and 445 million barrels of proved + probable reserves (50%
certainty threshold) which was a significant increase from our report of
last year. In addition, they indicated an incremental best estimate
contingent resource of 5 billion barrels – while there is a range on that 5
billion barrels with a low estimate of 2 billion barrels, the high estimate
is 11.4 billion barrels. By that measure and inclusive of everything on a
high end estimate at this stage, that would put Sunshine’s opportunity
around 12 billion barrels. In terms of context, that is a massive resource.
It has increased substantially from the previous assessment reflecting the
ongoing work at the company and reflects the huge opportunity at sunshine
CEOCFO:
What is the plan for the rest of 2012 and 2013?
Mr. Zahary:
We
are very active on a number of fronts currently at Sunshine. At West Ells,
which is our first major thermal project, we are in the middle of
construction and development of the first project. That will be completed in
mid-2013. At the same time, we are progressing regulatory approval at
Thickwood and Legend Lake, our next two major projects – approval there is
expected before mid-2013. Those three project areas comprise about 10% of
our overall asset base. Thus while we are busy there, we are also active on
the other part of the asset base where we advance our planning and
technology work around delineation and development of the other substantial
assets. We are looking at other clastic/sandstone projects across our asset
base. We are also one of the largest owners of carbonate bitumen reservoir
in Canada and the world and as that technology advances, have a great
opportunity to participate in that production. On the financing/corporate
side, we continue to advance our financial strategy looking at putting in
place debt facilities to advance our projects and pursue discussions on
joint ventures that would see us accelerate and broaden the development of
our assets.
CEOCFO:
Will you continue to own your properties 100%?
Mr. Zahary:
In
conjunction with our recent equity financing, we also committed to explore
the opportunity of partnering and joint venturing with Sinopec and China
Investment Corporation. That work continues. In the meantime, other
companies seeing the potential of our massive asset base and the importance
of this source of oil to satisfy global demand in the years ahead have
approached us and we are discussing opportunity with them as well. That may
lead us to owning less than the 100% of our assets that we own now but do
think that the skills and experience of Sunshine personnel can and will
contribute significantly to the development of this resource base even if we
own less than 100%.
CEOCFO:
Why
the decision to list on the Hong Kong exchange?
Mr. Zahary:
Sunshine is a relatively young company but over the years of its existence
has established important relationships in China, Hong Kong and Asia
generally that has helped its growth. When the decision to raise incremental
capital and list the shares publicly was pursued earlier this year, it was
those existing and new relationships that led us to the decision to list in
Hong Kong. Hong Kong provides access to shifting capital markets globally
and allows us to access capital that might not be otherwise available to us.
At the same time, half of our current shareholding and about 80% of our
current shareholders live in Canada and the USA, so this remains and will
remain a very important constituency for us. We have been approached about
getting a listing in North America as well and that is something that we
will be considering further in the next time period.
CEOCFO:
What, if any, challenges are on your radar screen as the company moves
forward?
Mr. Zahary:
While we have assembled an impressive asset base and are positioned
advantageously as a high growth oil company, we recognize the importance of
executing our projects efficiently and effectively. Sunshine is relatively
young but our people have long and successful careers in executing this sort
of work, so we feel very comfortable on our ability to handle. Challenges
remain as we need to ensure that capital and operating costs do not increase
to the point where they challenge the economics of these projects and we are
actively working on initiatives to ensure that we deliver projects on time
and on budget.
CEOCFO:
How
does the world energy/macro economy play into your plans?
Mr. Zahary:
Oil
is a global economy. While energy and oil is core to the existence of our
way of life, price is affected by the global supply-demand situation. With
uncertainty in global economies, there has been some regional impacts on oil
demand, but overall demand continues to be strong as high growth out of
growing economies largely in Asia leads to growing global demand. We feel
confident that there will be room for Sunshine to expand to help satisfy
regional and global demand for oil. A further upside for Canadian oil
production will occur when the infrastructure challenges that make Canadian
oil sell at a discount to world oil are resolved in the months and years
ahead – that will expose Canadian oil companies and Canadian oil company
investors to current world oil prices which are higher than they now
experience.
CEOCFO:
What is the financial picture like for Sunshine Oilsands today?
Mr. Zahary:
With the capital raise done earlier this year, we currently have no debt and
have been building out our first project. We have plans in place to move
quickly toward 20,000 bpd of production without needing to access equity
capital markets and only needing a prudent amount of debt. Our financial
situation is strong and we plan to maintain a strong financial position.
CEOCFO:
Why
should investors pay attention to Sunshine Oilsands?
Mr. Zahary:
Sunshine has two very significant attributes – we are one of the largest
holders of oil rights and resources in Canada and we have a very strong
shareholder group. We combine that with a management team with deep
understanding of this sort of production and technology. The combination of
resource and access to capital provides opportunity for very attractive
return over time.
disclaimers
Any reproduction or further distribution of this
article without the express written consent of CEOCFOinterviews.com is prohibited. |
Energy
Oil Exploration
(HKSE STOCK CODE: 2012)
Sunshine Oilsands Ltd.
1020, 903 – 8 Avenue S.W.
Calgary Alberta Canada T2P 0P7
Phone: 403-984-1450
www.sunshineoilsands.com
HKSE-
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