CPPIB buys Laricina stake, extends oil sands foray
2010-07-06
By Pav Jordan
TORONTO, July 6 (Reuters) - Canada Pension Plan Investment Board extended its foray into Canada's oil and gas sector on Tuesday, buying a 17.1 percent stake in closely held Calgary oil sands company Laricina Energy Ltd.
The CPPIB, which invests surplus cash from the national Canada Pension Plan, has some C$127 billion ($121 billion) in assets under management. The board paid C$250 million, or C$30 each, to acquire more than 8.3 million common shares of Laricina in a private placement.
'Laricina has an experienced and proven management team and has strong growth potential from its world class resource base,' said Andre Bourbonnais, senior vice-president for private investments at CPPIB. 'We are pleased to be making an investment that we believe will deliver attractive returns over the long term.'
The Alberta oil sands, the largest crude reserves outside the Middle East, are again attracting new investment as oil prices recover from recessionary lows and technology improves to extract the extra-heavy oil.
The investment is the second this year in the Canadian oil and gas sector by CPPIB, one of the world's largest private equity investors.
CPPIB was involved in three of the top five global private equity deals of 2009, including the largest leveraged buyout of the year -- the $4 billion acquisition by CPPIB and U.S. private equity firm TPG of IMS Health Inc, a prescription drug sales data provider.
In February, the pension fund administrator invested C$350 million in Calgary-based Progress Energy Resources Corp , also through a private placement, as the company acquired natural gas properties in northeast British Columbia.
Laricina was founded in 2005 by current Chief Executive Glen Schmidt after he sold Deer Creek Energy Ltd, which was planning an oil sands mining project, to French oil major Total SA for C$1.6 billion.
Along with its more conventional oil sands holdings, Laricina is planning a pilot project to tap Alberta's Grosmont formation, where tar-like bitumen is trapped in rock instead of sand. No one has yet been able tap the massive resource which, with an estimated 406 billion barrels in place, rivals the province's oil sands in size.
No commercial means have been established to tap the resource, although Laricina hopes to use steam-assisted gravity drainage to reach the Grosmont reserves.
So-called SAGD, common in the oil sands, pumps steam into one well to liquefy the bitumen, which then flows into a second well and is pumped to the surface.
Peters & Co acted as financial adviser to Laricina on the investment by CPPIB. Macquarie Capital Markets Canada Ltd. acted as financial adviser to CPPIB.
CPPIB will have the right to a seat on the Laricina board as a condition of its investment.
Concurrent with the CPPIB deal, Laricina entered into an agreement with a syndicate co-led by Peters & Co and RBC Capital Markets for a private placement of up to 1.7 million common shares for proceeds of about C$51 million.
($1=$1.05 Canadian)
(Additional Reporting by Scott Haggett; editing by Rob Wilson) Keywords: CPPIB/OILSANDS
(pav.jordan@thomsonreuters.com; 1 416 941 8163; Reuters Messaging: pawel.jordan.thomsonreuters.com@reuters.net)
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