Fort McKay’s appeal: much ado about nothing?
The market doesn't seem to think the possibility of an appeal of AER's approval of Athabasca Oil's Dover project is much to worry about. How come?
When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at email@example.com
by Max Fawcett
As Alberta Venture senior editor Tim Querengesser reported on his blog on Friday, the Fort McKay First Nation has sought permission from the Court of Appeal of Alberta to appeal the Alberta Energy Regulator’s decision to approve the Dover project. That could be bad news for Athabasca Oil (TSE:ATH), given that a successful appeal – or even a lengthy delay – would interfere with its plan to exercise a $1.3 billion put option that it has with PetroChina on the project and use the funds for its capital program in 2014. RBC Dominion Securities analyst Mark Friesen suggested in a note that “without receipt of the option proceeds, the company would be unable to fund its 2014 capital program. Management has not articulated any alternative financing options for the 2014 capital budget.”
But if the market’s reaction is any indication, the company may not have much to worry about. Athabasca shares have barely budged over the last week, and have shown no signs of behaving any differently in today’s trading. Why? Because the Fort McKay First Nation may not have much of a case. “We believe the chance of a successful appeal are very very low, given that the nature of such an appeal is to challenge whether the regulator has jurisdiction to grant regulatory approvals,” FirstEnergy’s Michael Dunn said in a note last week. The company expects that the final approval process will continue, with the receipt of an Order in Council and approval from Alberta Environment coming before the end of 2013. For what it’s worth, FirstEnergy left its outperform rating and $11 price target on Athabasca’s shares intact.