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Sunshine Oilsands gets even cloudier

Two abrupt resignations at the top signal even more trouble for the capital-starved oil sands company. Also, which natural gas producers are enjoying the early start to winter the most

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 mfawcett@albertaventure.com

Dec 11, 2013

by Max Fawcett

Talk about burying the lede. At the bottom of a news release announcing the closing of a recent financing, Sunshine Oilsands revealed that president and CEO John Zahary and CFO Robert Pearce were leaving the company – immediately. But, the release said, investors shouldn’t be worried. “There are no disagreements with the board of directors relating to the resignations that need to be brought to the attention of the shareholders,” it said. David Sealock, the company’s executive vice-president of operations, will apparently take over control of the company for the time being.

As the Calgary Herald’s Dan Healing reported yesterday, not everyone agrees with that interpretation. In a note, RBC Dominion Securities analyst Mark Friesen suggested that the resignations were an indication that all is not well at the struggling company. “We view the announced management changes as further indication of the current financial, operational and performance related issues facing the company. We expect the stock to come under increasing pressure.” And while the private placement that the press release announcing the departure of Zahary and Pearce was nominally about added $24.9 million to the company’s coffers, that’s not going to keep the wolves away for long.

The news is substantially better for natural gas producers, who are enjoying the current cold snap in Alberta more than most. That’s because it reflects a broader continental trend towards colder weather, particularly in key demand markets like Chicago, New York and Boston, that’s driving up natural gas prices. In a note today, AltaCorp Capital thinks that could be good news for gas-weighted producers and their bottom lines. “With the strong linear relationship between heating degree days and gas storage withdrawals, temperatures that are expected to trend below average throughout the balance of 2013, and natural gas storage levels that have recently crossed below the five-year average, we expect the supportive environment for natural gas prices to remain, at least in the short term. Recent weakness in the Canadian dollar has also provided further support to our Canadian producers.” They like Painted Pony Petroleum (TSE:PPY), Arc Resources (TSE:ARX), Pine Cliff Energy (TSE:PNE) and Yoho Resources (TSE:YO), given their recent weakness and leverage to rising gas prices.

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