Oilsands junior Opti Canada's stock recedes after 34 per cent gain

By Lauren Krugel, The Canadian Press

CALGARY - Speculation over whether a Chinese player could be ready to snap up another small oilsands company could be stoking the recent volatility in Opti Canada Ltd.'s (TSX: OPC.TO) stock price, analysts said Thursday.

However, there is nothing to suggest such a deal is imminent, they cautioned.

Calgary-based Opti is a minority partner in the Long Lake oilsands project in Northern Alberta, with its larger partner, Nexen Inc. (TSX: NXY.TO), the operator.

Shares in Opti have been swinging wildly over the past few days.

After bouncing back and forth between a high of $2.57 and a low of $2.13 on the Toronto Stock Exchange Thursday, the shares finally finished flat at $2.25 on a volume of nearly 21 million shares.

A day earlier, Opti stock jumped nearly 34 per cent, on a similarly hefty volume. The company's average volume is about 3.2 million shares per day.

The Calgary-based oilsands company said in brief a statement Thursday it was not aware of any circumstances that would lead to the spike.

On Aug. 31, Chinese firm PetroChina made a nearly $2-billion investment in privately held Athabasca Oil Sands Corp. - the country's biggest foray into the oilsands to date.

"The size of it was an indication that the Chinese are very positive on oilsands," said Genuity Capital Markets analyst Philip Skolnick.

Opti tends to pop up from time to time as a potential takeover target, though no bid has materialized so far.

First Asset Investment Management portfolio manager John Stephenson said he heard rumblings on Wednesday that the Chinese might be checking out Opti, but that he could not find much to substantiate that rumour.

"Nonetheless I guess it's renewed speculation that maybe this is yet another one in the oilpatch to go," he said.

Stephenson doesn't rule out Opti as a potential takeout target by PetroChina or another state-owned outfit.

"It's bite sized. They can certainly acquire it," he said, noting the Chinese have so far shied away from larger transactions.

"They tend to like to get these stakes where they're getting a share in the company, or better yet offtake some of the product, which is what they want, because they need the oil."

However, Opti wouldn't necessarily top the list of possible targets, Stephenson said, because it doesn't have "the world's greatest reservoir."

Smaller oilsands names like Connacher Oil and Gas Ltd. (TSX: CLL.TO) and Oilsands Quest Inc. would be more likely candidates.

There are a few factors that might turn a would-be acquirer off purchasing Opti, like the amount of debt it owes and ongoing issues at Long Lake's water treatment plant, Genuity's Skolnick said.

"They've had some ramp up issues and that could cause some concern for a potential buyer," he said.

Nexen vice-president of investor relations Michael Harris said he was puzzled on Wednesday as to what was causing the run up in Opti's share price.

However, he was able to rule out anything having to do with the Long Lake project as a culprit.

"There's nothing new on the project. There's nothing there. We would definitely know that," he said.

Late last year, Nexen bought a 15 per cent stake of the $6-billion project from its smaller partner Opti for $735 million, raising its share of the project to nearly two thirds.

But there's no change to that arrangement on the horizon, Harris said.

"We're happy with that," he said in an interview. "We would have had the opportunity when we first went in if we wanted to get more. That would have been the time to do it," he said.

The Long Lake partners had earlier announced they planned to take Long Lake's water treatment plant down for maintenance this month.

The work has just begun, and Harris said it will probably be two or three weeks before production starts back up.

In addition to its operations in the oilsands, Calgary-based Nexen has operations in unconventional natural gas, the North Sea, Yemen, the Middle East and the Gulf of Mexico.