Peter Kennedy, Stockhouse
Athabasca Oil Corp. (TSX: T.ATH, Stock Forum) shares tumbled again Tuesday after the company announced a reduced capital spending budget as its waits for government approval of a key Alberta oilsands project that is currently at the centre of a legal dispute with First Nations who are opposed to its development.
Athabasca shares were down 3.5% to $6.34, on active volume of 3.3 million shares, after the company said it will cut its spending budget next year by 42% to $460 million. At current levels, the stock is down from over $11 in March.
Athabasca said in a press release it hopes to receive government approval for the Dover Commercial Project, at which time it has the opportunity to exercise a $1.32 billion put option with joint venture partner PetroChina Co. Ltd.
But development at the Dover Project appears uncertain after the Fort McKay First Nation recently initiated legal action in the Alberta Court of Appeal. The aim is to create a buffer zone on property leased by the Dover Project, and block development of part of the project’s bitumen reserves.
The buffer zone would include the planned north section of the Dover Project, which is estimated to host at least one third of the 4.1 billion barrels of bitumen which are expected to be extracted from the Dover site over a 65-year lifespan.
The Alberta Court of Appeal recently granted the Fort McKay First Nation the right to challenge the Alberta Energy Regulator's decsion to approve the project on constitutional grounds.
Published reports say that if the court rules in favour of Fort McKay First Nation, it could boost the efforts of other First Nations who are challenging projects being developed by the likes of Royal Dutch Shell (NYSE: RDS.B, Stock Forum) and Teck Resources Ltd. (TSX: TCK.B, Stock Forum).
The Dover Project, located in northeastern Alberta in a First Nations hunting camp is currently held 40% by Athabasca Oil and 60% by PetroChina, which is expected to take full ownership, but only when the project clears all the necessary regulatory hurdles.
Meanwhile, Athabasca said its $460 million budget in 2014 will be comprised of $348 million for Thermal Oil, and $106 million for Light Oil. The balance is earmarked for corporate activities, the company said.
“We will only undertake new project commitments when we have the necessary funding to complete them,’’ said Athabasca CEO Sveinung Svarte in a statement.