OPTI Canada Inc. has arrived in Alberta’s oil sands
The Calgary firm is forging ahead with integrated bitumen and heavy oil projects with partner Nexen Inc.
Following a partnership deal inked in 2001 with Nexen, Inc. and an outstanding run last year raising its 50 percent share of $3.5 billion to build the fourth integrated oil sands operation in Alberta, the company is, literally and figuratively, sitting pretty.
From his downtown Calgary office, OPTI president and CEO Sid Dykstra sits a stone’s throw from the picturesque Bow River, and within a square kilometre of the brain trust in the oil patch. He watches with an engineer’s eye as the behemoth that OPTI and Nexen are building north of Fort McMurray comes together; so far, engineering, procurement and initial construction are both on time and on budget.
No stranger to the oil patch, Dykstra was born and raised in Edmonton but has lived in Calgary for the past two decades. He holds a degree in chemical engineering from the University of Alberta and an MBA from Queen’s University. In the early 1990s he helped raise $5 million in blind pool financing to start a junior oil and gas company, Newport Petroleum, and less than a decade later it was sold for $750 million. He then became president of Hunt Oil Company of Canada. On the lighter side of things, in the mid-1980s he and a few friends created a board game called ‘The Oilman Game’. His claim to fame, he smiles, is that his signature is on one of the bills.
If Dykstra himself has strong credentials, when he joined OPTI in June 2001 it was essentially an unknown entity. The company had no cash flow, and an unproven track record. What it did have, in spades, was a promising new technology originally developed in California and initially funded by ORMAT Industries Limited, an Israeli power technology company. Based on that technology, Nexen signed a 50:50 joint venture agreement with OPTI in October, and they began introducing the OPTI advantage, as they called it, to the oil patch.
The message they took to the street was that they were building the first project in the Canadian oil sands to include a gasification plant which, combined with a patented process called OrCrude™, would be able to significantly reduce operating costs.
OPTI and Nexen received regulatory approval for the project in 2003. At that point, to fund its share, OPTI needed to raise a billion dollars in equity. A successful demonstration project at Cold Lake helped fuel word-of-mouth enthusiasm in the investment community, and as word of the promising new technology spread, Dykstra found himself leading the OPTI team through round after round of two-hour presentations to potential investors.
“It was a new process, and we had to educate people about it. We needed to get the endorsement of the technology and project from the financial community, and we got it. We had guys who never sit through two-hour meetings stay and listen through our presentation,” said Dykstra.
Results of the intensive fund raising campaign in 2004 included an impressive $301 million through the largest IPO in the Canadian energy industry in the last 10 years (and the third-largest in Canada in 2004); $700 million was obtained through what may be the largest private equity placement ever completed by a startup company in the Canadian oil and gas sector; and another $800 million was secured through a limited recourse project debt facility. Lead financial advisors were Canadian players TD Securities Inc., Scotia Capital Inc., and RBC Capital Markets.
In his office, Dykstra points to a large photo on the wall. Taken at the party celebrating the completion of OPTI’s IPO, the photo depicts a group of people smiling at the camera.
“The IPO was successful because we have good people in place. To make these things work you need a bunch of good people. Everyone working together to reach a common goal makes things happen.”
Even with the banks and financing in place, investors adopted a wait-and-see attitude. The initial IPO price for OPTI was set at $22. In May 2004, the investment banking firm Raymond James gave the company an outperform rating and set a target price of $24.50, up from $19.25 at the time. As of February 2005, the stock was still trading on the TSX in the $21 range.