Western Oil Sands plans $425 million 10-year notes, to price April 16

By Paul Deckelman

New York, April 8 - Western Oil Sands Inc. was heard by syndicate sources Monday to be planning to revive a reconfigured senior secured bond deal, which was originally to have been done late last summer.

At that time, the Calgary, Alberta-based energy operator had been shopping a US$465 million seven-year bond offering, but this was postponed in the wake of the turmoil in the financial markets surrounding the Sept. 11 terrorist attacks on the U.S.

That deal has now been reworked to a US$425 million issue of 10-year senior secured notes. It will be brought to market via joint book-running managers TD Securities and Salomon Smith Barney, with the roadshow scheduled to start Wednesday and pricing expected next Tuesday (April 16), syndicate sources said.

Standard & Poor's on Monday affirmed the BB+ rating which it had given to the originally proposed offering, while also affirming the company's corporate credit at BB+, with a positive outlook. Back in late August, Moody's Investors Service rated the original offering at Ba2.

Net proceeds from the bond issue will be used to fund Western Oil Sands' remaining portion of the capital expenditures required to complete development of the Athabasca Oil Sands drilling project in Alberta. Shell Canada Ltd. owns 60% of the joint venture, while Chevron Texaco Corp. and Western Oil Sands each have a 20% stake in the operation, which is expected to produce 155,000 barrels per day of bitumen and 190,000 barrels daily of upgraded crude oil output, following an expected ramp-up to full production in 2003. The project will initially develop a total of 1.7 billion barrels out of the 8.8 billion barrels of total reserves held by the joint venture, counting additional reserves on adjacent expansion sites. It has a reserve life index of 30 years, considered above average for the industry.

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