Enerplus Resources Fund ( ERF ) will receive C$500-million from Occidental Petroleum Corp. ( OXY ) for its 15% interest in the Joslyn oil sands project. The proceeds will initially be alloted to reducing the company’s bank debt, but may eventually be used for acquisitions or development opportunities, according to Canaccord Adams analyst Kyle Preston, who noted that the trust announced plans to sell the stake on March 25. The deal is expected to close by the end of the third quarter.
Mr. Preston thinks Enerplus received fair value in the deal, maintaining his “buy” rating on the units and raising his price target to C$54 from C$52.
He noted that the asset was a non-commercial project and the sale has very little impact on Canacccord’s 2008 and 2009 production or cash flow forecasts for Enerplus. However, his net asset value estimate increases since he previously valued the Joslyn stake at C$340-million.
$81.14 (07/09/08)
