DBRS Comments on Athabasca Oil Closing the Dover Transaction

DBRS notes that Athabasca Oil Corporation (Athabasca or the Company; rated B, with a Stable trend) has today announced the closing of the sale of its 40% interest in the Dover oil sands project (the Dover Transaction) for net proceeds of $1.184 billion to Phoenix Energy Holdings Limited (Phoenix), a wholly owned subsidiary of PetroChina International Investment Limited. As part of the closing, Athabasca received $600 million in cash and three interest-bearing promissory notes (the Promissory Notes) totaling $584 million issued by Phoenix. The Promissory Notes are unconditional and secured by irrevocable standby letters of credit issued by HSBC Bank Canada (rated AA with a Stable trend by DBRS). $300 million of the Promissory Notes mature on March 2, 2015, followed by $150 million maturing on August 28, 2015, and $134 million maturing on August 29, 2016.

With the closing of the Dover Transaction, Athabasca is expected to provide a full strategic update in early September 2014 that includes revised guidance and capital plans. The Company is also expected to use the net proceeds for the continued development of its Duvernay and Hangingstone assets and to maintain balance sheet flexibility. DBRS notes that the Dover Transaction’s closing has materially strengthened the Company’s liquidity profile; however, as noted in the DBRS press release dated May 8, 2014, Athabasca’s current rating, which was first assigned in November 2012, assumes the successful completion of the Dover Transaction.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Oil and Gas Industry, which can be found on our website under Methodologies.