The financing of tar sands companies by UBS and Credit Suisse A research paper prepared for Greenpeace Switzerland
The financing of tar sands companies by UBS and Credit Suisse A research paper prepared for Greenpeace Switzerland 5 March 2010 Jan Willem van Gelder Howard Law Profundo Radarweg 60 1043 NT Amsterdam The Netherlands Tel: +31-20-8208320 E-mail: profundo@profundo.nl Website: www.profundo.nl
Contents Summary... i Introduction... 1 Chapter 1 Main companies in Canadian tar sands... 2 1.1 Objective...2 1.2 Main tar sands companies...2 Chapter 2 Canadian Natural Resources... 6 2.1 Short company profile...6 2.2 Shareholders...6 2.3 Bank loans...7 2.4 Investment banking services...7 Chapter 3 Chevron... 8 3.1 Short company profile...8 3.2 Shareholders...8 3.3 Bank loans...8 3.4 Investment banking services...9 Chapter 4 Connacher Oil and Gas... 10 4.1 Short company profile...10 4.2 Shareholders...10 4.3 Bank loans...11 4.4 Investment banking services...11 Chapter 5 ConocoPhillips... 12 5.1 Short company profile...12 5.2 Shareholders...13 5.3 Bank loans...13 5.4 Investment banking services...13 Chapter 6 EnCana / Cenovus Energy... 15 6.1 Short company profile...15 6.2 Shareholders...16 6.3 Bank loans...16 6.4 Investment banking services...17 Chapter 7 ExxonMobil... 18 7.1 Short company profile...18
7.2 Shareholders...18 7.3 Bank loans...19 7.4 Investment banking services...19 Chapter 8 Husky Energy... 20 8.1 Short company profile...20 8.2 Shareholders...20 8.3 Bank loans...20 8.4 Investment banking services...20 Chapter 9 Marathon Oil... 21 9.1 Short company profile...21 9.2 Shareholders...21 9.3 Bank loans...22 9.4 Investment banking services...22 Chapter 10 MEG Energy... 23 10.1 Short company profile...23 10.2 Shareholders...23 10.3 Bank loans...23 10.4 Investment banking services...24 Chapter 11 Nexen... 25 11.1 Short company profile...25 11.2 Shareholders...25 11.3 Bank loans...26 11.4 Investment banking services...26 Chapter 12 OPTI Canada... 27 12.1 Short company profile...27 12.2 Shareholders...27 12.3 Bank loans...28 12.4 Investment banking services...28 Chapter 13 Petrobank Energy and Resources... 29 13.1 Short company profile...29 13.2 Shareholders...29 13.3 Bank loans...29 13.4 Investment banking services...29 Chapter 14 Petro-Canada... 30 14.1 Short company profile...30
14.2 Shareholders...30 14.3 Bank loans...30 14.4 Investment banking services...30 Chapter 15 Royal Dutch Shell... 32 15.1 Short company profile...32 15.2 Shareholders...32 15.3 Bank loans...32 15.4 Investment banking services...33 Chapter 16 Statoil... 34 16.1 Short company profile...34 16.2 Shareholders...34 16.3 Bank loans...34 16.4 Investment banking services...35 Chapter 17 Suncor Energy... 36 17.1 Short company profile...36 17.2 Shareholders...36 17.3 Bank loans...36 17.4 Investment banking services...36 Chapter 18 Syncrude... 37 18.1 Short company profile...37 18.2 Shareholders...37 18.3 Bank loans...37 18.4 Investment banking services...37 Chapter 19 Teck... 38 19.1 Short company profile...38 19.2 Shareholders...38 19.3 Bank loans...38 19.4 Investment banking services...39 Chapter 20 Total... 40 20.1 Short company profile...40 20.2 Shareholders...40 20.3 Bank loans...40 20.4 Investment banking services...40 Chapter 21 UTS Energy... 45 21.1 Short company profile...45
21.2 Shareholders...45 21.3 Bank loans...45 21.4 Investment banking services...45 Chapter 22 Value Creation Group... 46 22.1 Short company profile...46 22.2 Shareholders...46 22.3 Bank loans...46 22.4 Investment banking services...46 Appendix 1 References... 47
Summary This report aims to identify the role which the two Swiss banks, Credit Suisse and UBS, play in financing the most important oil and gas companies active in exploring and exploiting tar sands (also widely known as oil sands) reserves in Canada. Financial institutions can play a relevant role in the financing of the oil companies concerned, by providing loans, owning or managing a significant number of shares or by helping the companies to issues new shares or bonds. Based upon information from various sources, a selection of oil and gas companies was made, which were known to be involved in exploring and exploiting tar sands in Canada. The list is based upon the total current and/or potential output of all tar sands projects being developed by each of the companies. Companies with a total current/potential output of 40,000 barrels per day (of bitumen and/or bitumen products) or more were short listed. Some of the projects are run by joint ventures between two or more companies. In total we found 26 companies to be involved in tar sands projects with a total current/potential output of 40,000 barrels per day. For these companies we researched whether they have been financed by Credit Suisse or UBS in the form of shareholdings (via asset management divisions or directly), loans, project finance or the underwriting of shareor bond issuances since 2004. The results are shown in Table 1. Table 1 Overview of tar sands companies financing by CS and UBS Tar sands project companies Country Financing by Credit Suisse Canadian Natural Resources Canada Sh Sh, B Chevron United States Sh Sh Connacher Oil and Gas Canada B, L, S - ConocoPhillips United States Sh, B, L Sh, B Financing by UBS EnCana / Cenovus Energy Canada Sh, B, L Sh, B, L ExxonMobil United States Sh Sh Husky Energy Canada - Sh Marathon Oil United States Sh, B, L Sh MEG Energy Canada P, L, S - Murphy Oil United States - - Nexen Canada Sh Sh Nippon Oil Japan - - North West Upgrading Canada - - OPTI Canada Canada B, L, S, - Peace River Oil Canada - - Petrobank Energy and Resources Canada - S Petro-Canada* Canada Sh, S Sh, S Royal Dutch Shell Netherlands / UK Sh, B Sh, B, L Statoil Norway Sh, B, L B, L, S Suncor Energy Canada Sh Sh Sunshine Oilsands Canada - - Syncrude Canada - - -i-
Tar sands project companies Country Financing by Credit Suisse Teck Canada Sh Sh Total France Sh, B Sh, B UTS Energy Canada - S Value Creation Canada P - Financing by UBS *since 1 August 2009 part of Suncor Energy Key: Sh=shareholding, L=loan, P=project finance, B=bond issuance, S=share issuance Credit Suisse and UBS are involved in financing most (20 out of 26) of the main companies that are developing or investing in tar sands projects. Credit Suisse financed 18 of the companies and UBS financed 17 companies. For six companies we did not find direct financing by either of the two banks: Murphy Oil, Nippon Oil, North West Upgrading, Peace River Oil, Sunshine Oilsands and Syncrude. However, the last company, Syncrude, is a jointventure of seven large energy companies of which four do have financial relationships with the two banks. Although Credit Suisse and UBS are not the most important financiers of each individual company, their broad and varied involvement in the financing of the major tar sands companies qualifies the two Swiss banks as major financiers of this sector. In order to quantify the financial support given by Credit Suisse and UBS to the tar sands companies the relative amounts represented by shareholdings, loans and the underwriting of bond- and share issuances were calculated. A differentiation was made between two groups of companies: Dedicated tar sands companies: Companies for which tar sands development represents at least 50% of their operations. For those companies there is a greater degree of certainty that the financing will be used more or less directly for the exploitation of tar sands. Diversified oil and gas companies: Companies which have oil and gas operations in a number of different countries, besides investments in tar sands development in Canada. For these companies it is more difficult to calculate what proportion of the financing will be directed towards tar sands development. Table 2 provides an overview of the amount of support provided per company by Credit Suisse and UBS in the period since early 2004. The first part of the table provides information on the amount of financial support to ten dedicated tar sands companies, while the second part of the table provides information on the financial support given to ten diversified oil and gas companies. Table 2 Financial support to tar sands companies (2004 to end February 2010) Company name Bank Type of financial support Amount (US$ million) Dedicated tar sands companies Canadian Natural Resources Credit Suisse Shareholding 31 UBS Bond- or share issuance 21 UBS Shareholding 156 Connacher Oil and Gas Credit Suisse Bond- or share issuance 267 Credit Suisse Loan 14 Husky Energy UBS Shareholding 34 MEG Energy Credit Suisse Bond- or share issuance 350 -ii-
Company name Bank Type of financial support Amount (US$ million) Credit Suisse Loan 724 OPTI Canada Credit Suisse Bond- or share issuance 695 Credit Suisse Loan 150 Petrobank Energy and Resources UBS Bond- or share issuance 9 Petro-Canada Credit Suisse Bond- or share issuance 62 Credit Suisse Shareholding 23 UBS Bond- or share issuance 125 UBS Shareholding 82 Suncor Energy Credit Suisse Shareholding 49 UBS Shareholding 128 UTS Energy UBS Shareholding 17 Value Creation Credit Suisse Project loan 425 Total dedicated tar sands companies 3,362 Diversified oil & gas companies Chevron Credit Suisse Shareholding 622 UBS Shareholding 984 ConocoPhillips Credit Suisse Bond- or share issuance 1,109 Credit Suisse Loan 200 Credit Suisse Shareholding 413 UBS Bond- or share issuance 393 UBS Shareholding 228 EnCana / Cenovus Energy Credit Suisse Bond- or share issuance 93 Credit Suisse Loan 79 Credit Suisse Shareholding 18 UBS Bond- or share issuance 414 UBS Loan 162 UBS Shareholding 168 ExxonMobil / Imperial Oil Credit Suisse Shareholdings 989 UBS Shareholdings 1,537 Marathon Oil Credit Suisse Bond- or share issuance 63 Credit Suisse Loan 40 Credit Suisse Shareholding 80 UBS Shareholding 336 Nexen Credit Suisse Shareholding 10 UBS Shareholding 21 Royal Dutch Shell Credit Suisse Bond- or share issuance 1,500 Credit Suisse Shareholding 121 UBS Bond- or share issuance 1,690 UBS Loan 250 UBS Shareholding 828 -iii-
Company name Bank Type of financial support Amount (US$ million) Statoil Credit Suisse Bond- or share issuance 788 Credit Suisse Loan 60 Credit Suisse Shareholding 22 UBS Bond- or share issuance 785 UBS Loan 150 Teck Credit Suisse Shareholding 21 UBS Shareholding 259 Total Credit Suisse Bond- or share issuance 2,661 Credit Suisse Shareholding 122 UBS Bond- or share issuance 3,354 UBS Shareholding 844 Total diversified oil & gas companies 21,413 Total all companies 24,775 Since early 2004, Credit Suisse and UBS have provided financing for a total amount of US$ 24,775 million to the 20 companies with significant involvement in Canadian tar sands exploitation. In this period, Credit Suisse and UBS financed US$ 3,362 million of ten companies identified as being dedicated to tar sands development. Of this amount, around US$ 520 million was in shareholdings, US$ 1,313 million in loans and US$ 1,529 million in the underwriting of bondor share issuances. Among the dedicated tar sands companies Credit Suisse was involved in financing eight of the companies and also financed the largest share with a total amount of US$ 2,790 million. UBS financed six out of the ten companies and was responsible for financing a total amount of US$ 572 million. UBS, although not the largest financier of the dedicated tar sands companies, was the largest financer of the top tar sands company Suncor (including Petro-Canada) and Canadian Natural Resources, providing US$ 512 million, against US$ 165 million by Credit Suisse. UBS provided finance to the dedicated tar sands companies predominantly in the form of shareholdings (US$ 417 million), while Credit Suisse financed predominantly with the underwriting of bond- and share issuances (US$ 1,374 million) and loans (US$ 1,313 million). For ten diversified oil and gas companies involved in tar sands operations, Credit Suisse and UBS were responsible for the financing of US$ 21,413 million. For these companies UBS was responsible for a larger share of the financing with a total of US$ 12,402 million while Credit Suisse financed US$ 9,012 million. The two most significant diversified oil and gas companies in terms of tar sands capacity, Royal Dutch Shell and Total, are also the two companies that are the most heavily financed by Credit Suisse and UBS. Total received US$ 6,981 million of financing while Royal Dutch Shell received financing of US$ 4,389 million. For both companies UBS financed a larger share (US$ 6,966 million) than Credit Suisse (US$ 4,404 million). For both Royal Dutch Shell and Total the most important source of financing by Credit Suisse and UBS was via the underwriting of bond- and share issuances. -iv-
Introduction The objective of this report is to identify whether the Swiss financial institutions UBS and Credit Suisse are financing tar sands exploration companies in Canada. The research paper attempts to provide answers to the following questions: Which are the most relevant tar sands exploration companies that are operating in Canada, or are starting to operate here? Are the banks UBS and Credit Suisse financing the most relevant companies of the listed tar sands exploration companies, in the form of loans and other credits, investment banking services, investments in shares and bonds, and by other means? Chapter 1 explains the methodology behind the selection of the main tar sands companies and the research into the role of Credit Suisse and UBS in financing tar sands companies. This chapter also includes an overview of the top twenty companies, the business group those companies belong to, the oil sands projects they are developing and the production capacity (total current and future) of those projects. Chapter 2 to 22 describe the financing of each of the companies in separate chapters. In addition there is an introductory paragraph on the activities of each company in oil sands exploration and production and on its financing structure. The relevant role of Credit Suisse and/or UBS in the financing of the company is also given including the amount of financial support per shareholding or deal. A summary of the findings of this report can be found on the first pages of this report. -1-
Chapter 1 Main companies in Canadian tar sands 1.1 Objective This report aims to identify the most important most important oil and gas companies active in exploring and exploiting tar sands reserves in Alberta, Canada and to look at the role of the two Swiss banks, Credit Suisse and UBS, in financing those companies. 1.2 Main tar sands companies In order to identify the main companies and their activities in the Canadian tar sands several sources were consulted such as the website of the Pembina Institute 1, various organisations linked to the oil sands projects and the project companies and websites and annual reports of the main oil producing companies themselves. The principle factor to determine the most important oil sands companies was to look at the current output capacity and the potential for additional capacity in the future. An arbitrary production volume per day of 40,000 barrels (of bitumen and/or bitumen products) or more was used as a baseline for inclusion. Some companies are currently in the start-up phase and their current production is minimal. However, the potential for growth of these companies in tar sands output is such that it is relevant to consider their potential as well as their current impact. The shortlist of nineteen companies is summarized in Table 1. Table 1 Main tar sands projects and output capacities Rank Tar sands company (or joint venture) Participating companies 1 Suncor Energy Suncor Energy 2 Canadian Natural Resources Petro-Canada (since 1 August 2009 part of Suncor) Canadian Natural Resources 3 Syncrude Canadian Oil Sands Trust ConocoPhillips ExxonMobil Projects Fort Hills Sturgeon Fort Hills Lewis MacKay River Chard Meadow Creek Base and Millennium Voyageur Millennium & North Steepbank Voyageur South Firebag Horizon Primrose Horizon Birch Mountain Gregoire Lake Grouse Kirby Leismer Primrose/Wolf Lake Mildred Lake Aurora Current/ potential capacity (barrels per day) 3,123,500 2,434,500 1,696,000-2-
Rank Tar sands company (or joint venture) Participating companies Projects Current/ potential capacity (barrels per day) Murphy Oil Nexen Nippon Oil Petro-Canada 4 OPTI Canada/Nexen OPTI Canada Nexen Long Lake Long Lake South 1,211,000 5 Athabasca Oil Sands Project (AOSP) Royal Dutch Shell Chevron Marathon Oil Scotford Upgrader Jackpine Muskeg River Pierre River 6 Royal Dutch Shell Royal Dutch Shell Scotford Upgrader 2 Hilda Lake Peace River Orion 7 Total Total Strathcona Joslyn (Deer Creek) Joslyn 8 Value Creation Value Creation Technoeconomics 9 Cenovus Energy (formerly EnCana) Cenovus Energy ConocoPhillips Heartland Terre de Grace Borealis Christina Lake Foster Creek Pelican Lake 10 ExxonMobil ExxonMobil Cold Lake Kearl Lake 1,163,300 823,500 766,000 557,700 518,800 480,000 11 Peace River Oil Peace River Oil Bluesky Refining 370,000 12 UTS Energy UTS Energy Teck 13 North West Upgrading Fort Hills Equinox Frontier 370,000 North West Upgrading Upgrading Sturgeon 289,200 14 Husky Energy Husky Energy Sunrise McMullen Caribou Lake Tucker 15 Statoil Statoil Strathcona Kai Kos Dehseh 240,755 240,000 16 MEG Energy MEG Energy Christina Lake 210,000 17 Sunshine Oilsands Sunshine Oilsands Harper Thickwood West Ells Legend Lake 180,000 18 ConocoPhillips ConocoPhillips Surmont 110,000 19 Petrobank Energy and Resources 20 Connacher Oil and Gas Petrobank Energy and Resources White Sands May River 103,600 Connacher Oil and Gas Great Divide 44,000-3-
Sources: Website The Pembina Institute (www.pembina.org), Viewed in September 2009; Existing and proposed Canadian commercial oil sands projects, Strategy West, Calgary, August 2009; Various websites of oil sands companies. Based on the information in Table 1, we selected the following 26 tar sands companies for further research: Canadian Natural Resources - Canada Cenovus Energy (formerly EnCana) - Canada Chevron - United States Connacher Oil and Gas - Canada ConocoPhillips - United States ExxonMobil - United States Husky Energy - Canada Marathon Oil - United States MEG Energy - Canada Murphy Oil - United States Nexen - Canada Nippon Oil - Japan North West Upgrading - Canada OPTI Canada - Canada Peace River Oil - Canada Petro-Canada - Canada Petrobank Energy and Resources - Canada Royal Dutch Shell - United Kingdom / Netherlands Statoil - Norway Suncor Energy - Canada Sunshine Oilsands - Canada Syncrude - Canada Teck - Canada Total - France UTS Energy - Canada Value Creation - Canada For each of these 26 companies we researched whether there had been financing by Credit Suisse or UBS in the form of shareholdings, loans, project finance or the underwriting of share- or bond issuances since 2004. Information on the role of these two banks was gained from annual reports, stock exchange filings and other publications of the companies concerned. Additionally, archives and websites of trade magazines and the financial press (Euroweek, International Financing Review) were consulted as well as specialised financial databases (Thomson One, Bloomberg). The financing of each of the companies is described in a separate chapter, containing introductory paragraphs on the activities of the company in oil sands exploration and production and on its financing structure. Each chapter further contains an overview of relevant role of Credit Suisse and/or UBS in the financing of the company. For each relevant financing relationship the following information (when available) is presented: Name and country of origin of the financial institution; Type of financing activity; Amount; Date; -4-
Purpose (if known); For loans: Maturity and interest rate. The information sources on which these data are based, are mentioned in endnotes. -5-
Chapter 2 Canadian Natural Resources 2.1 Short company profile Canadian Natural Resources (CNR) is a Canadian oil and gas production company active in Canada, in the North Sea off the coast of the United Kingdom, and off the coast of West Africa (Côte d Ivoire and Gabon). CNR is the second largest independent natural gas producer in Canada and has the largest undeveloped land base in the natural gas prone areas of Northeast British Columbia and Northwest Alberta. 2 The company is a major player in oil sands exploration and production in Alberta, Canada. Canada Natural Resources runs several oil sands projects in this region: The Horizon Oil Sands Project, located 70 km north of Fort McMurray in north-eastern Alberta. Canadian Natural owns and operates 46,500 hectares in this project which has a potential capacity of 1,651,000 barrels per day. 3 The Primrose / Wolf Lake oil sands project, located 55 km north of Bonnyville in northeastern Alberta and has a potential capacity of 528,500 barrels per day. 4 The Birch Mountain, Gregoire Lake, Grouse and Leismer projects with a total potential capacity of 210,000 barrels per day. 5 The company is also preparing a development plan for the Kirby Oil Sands project, located 85 km northeast of Lac la Biche in eastern Alberta. This project has a potential capacity of 45,000 barrels per day and is currently awaiting regulatory approval before commencement. 6 Figure 1. Canadian Natural Resources: oil sands assets Source: Website Canadian Natural Resources (www.cnrl.com), Viewed in March 2010. 2.2 Shareholders Shares of Canadian Natural Resources are quoted on the Toronto Stock Exchange and the New York Stock Exchange. 7 Table 2 summarizes the most recent data on shareholdings in Canadian Natural Resources managed by the asset management divisions of the researched banks. -6-
Table 2 Shareholdings in Canadian Natural Resources Bank Subsidiary Filing Date % of shares Value (US$ mln) Credit Suisse Credit Suisse Asset Management (US) 31 Dec 2009 0.07% 24.2 Credit Suisse Asset Management (Switz.) 31 Sep 2009 0.01% 3.5 Credit Suisse Securities (US) 31 Dec 2009 0.01% 3.5 Total Credit Suisse 0.09% 31.1 UBS UBS Global Asset Management (Americas) 31 Dec 2009 0.24% 83.1 UBS Global Asset Management (Canada) 31 Dec 2008 0.08% 27.7 UBS Global Asset Management (Switz.) 31 Dec 2009 0.06% 20.8 UBS Securities (US) 31 Dec 2009 0.05% 17.3 UBS Global Asset Management (UK) 31 Dec 2009 0.02% 6.9 Total UBS 0.45% 155.7 Source: Thomson ONE Banker financial database, Viewed 26 February 2010. 2.3 Bank loans No information was found on loans provided to Canadian Natural Resources by the researched banks. 2.4 Investment banking services The following information was found on investment banking services provided to Canadian Natural Resources since early 2004: In May 2003 Canadian Natural Resources filed a shelf registration statement with the American Securities and Exchange Commission (SEC). This statement allows the company to issue bonds on the American capital market for a total amount up to US$ 2 billion in an easy way. In November 2006 the amount under this statement has been raised to US$ 3 billion. In September 2007 the issue date has been extended until October 2009. 8 Under this programme the company has executed several issues, including: In November 2004 Canadian Natural Resources issued bonds with a total value of US$ 700 million. The issue is split into two tranches: US$ 350 million ten year bonds and US$ 350 million thirty year bonds. The proceedings were used to repay bank debts. UBS (Switzerland) was one of the twelve banks that underwrote this issue, underwriting US$ 21 million. 9-7-
Chapter 3 Chevron 3.1 Short company profile Chevron is a large, integrated American oil and gas company headquartered in California and active in approximately 180 countries and territories. 10 The company is active in oil sands exploration and production in Alberta, Canada. Chevron is involved in the Athabasca Oil Sands Project (AOSP) together with Royal Dutch Shell (see Chapter 15) and Marathon Oil (see Chapter 9). The AOSP Muskeg River Mine in Alberta has a potential capacity of 270,000 barrels per day, using a surface mining method. Other AOSP projects are Jackpine (300,000 barrels per day), Pierre River (200,000 barrels per day) and Scotford Upgrader (393,300 barrels per day). 11 The company also runs the Ells River Project in Alberta with a potential capacity of 85,000 barrels per day. Marathon Oil (see Chapter 9) owns a 20% share in this project. In the mean time the Chevron Technology Center in California is developing new methods to coax heavy oil from oil sands. 12 3.2 Shareholders The shares of Chevron are quoted on the New York Stock Exchange. Table 3 summarizes the most recent data on shareholdings in Chevron managed by the asset management divisions of the researched banks. Table 3 Shareholdings in Chevron Bank Subsidiary Filing Date % of shares Value (US$ mln) Credit Suisse Credit Suisse Securities (US) 31 Dec 2009 0.31% 448.5 Credit Suisse Asset Management (US) 31 Dec 2009 0.08% 115.8 Credit Suisse Asset Management 30 Sep 2009 0.04% 57.9 Total Credit Suisse 0.43% 622.2 UBS UBS Global Asset Management (Americas) 31 Dec 2009 0.28% 405.1 UBS Global Asset Management (Switz.) 31 Dec 2009 0.17% 246.0 UBS Securities (US) 31 Dec 2009 0.17% 246.0 UBS Global Asset Management (UK) 31 Dec 2009 0.06% 86.8 Total UBS 0.68% 983.9 Source: Thomson ONE Banker financial database, Viewed 26 February 2010. 3.3 Bank loans No information was found on the provision of loans to Chevron by the researched banks. -8-
3.4 Investment banking services No information was found on the provision of other investment banking services to Chevron by the researched banks. -9-
Chapter 4 Connacher Oil and Gas 4.1 Short company profile Connacher Oil and Gas is a Canadian oil and natural gas exploration, development and production company focused in particular on oilsands exploitation. Connacher also owns 22 percent of Petrolifera Petroleum, a Calgary-based crude oil, natural gas and natural gas liquids exploration, development and production company active in South America. Connacher explores conventional production facilities in Canada at Marten Creek, Randall, Latornal, Gilby and Three Hills, Alberta and at Battrum, Saskatchewan. Connacher also owns a heavy oil refinery at Great Falls in Montana in the United States. 13 Connacher s principal asset though is a 100% interest in approximately 39,700 hectares of oil sands leases in the Great Divide region near Fort McMurray, Alberta (Canada) with a potential capacity of 44,000 barrels per day. Production using a steam assisted gravity drainage method (SAGD) began in March 2008. 14 Figure 2. Connacher Oil and Gas: North American assets 4.2 Shareholders Source: Website Connacher Oil & Gas (www.connacheroil.com), Viewed in March 2010 Shares of Connacher Oil and Gas are quoted on the Toronto Stock Exchange. 15 No information was found if the asset management divisions of the researched banks manage shareholdings in Connacher Oil & Gas. -10-
4.3 Bank loans The following information was found on bank loans provided to Connacher Oil & Gas since early 2004: In December 2007 Connacher Oil and Gas secured a US$ 200 million five year revolving credit facility from an international banking syndicate. The facility is split into two tranches: a US$ 150 million tranche and a US$ 50 million tranche. The proceeds from the US$ 150 million tranche can be used to finance the development of Pod Two (Algar Project), which is Connacher s second oil sands project in the Great Divide area in Alberta, Canada. The proceeds from the C$ 50 million tranche can be used to finance refining and marketing activities in Montana (United States). Credit Suisse participated in the syndicate of nine banks underwriting US$ 14 million. 16 4.4 Investment banking services The following information was found on investment banking services provided to Connacher Oil & Gas since early 2004: In December 2007 Connacher Oil and Gas issued 10.25% eight year bonds for a total amount of US$ 600 million. The proceeds of this issue were used to repay the term loan from October 2006, to fund a one year debt service account and to finance the development of Pod Two (the Algar Project), Connacher s second oil sands project in the Great Divide area in Alberta, Canada. Credit Suisse was one of the three lead managers of the issuing syndicate of six banks and underwrote an estimated amount of US$ 150 million. 17 In May 2009 Connacher Oil and Gas issued shares for a total amount of C$ 172.6 million (US$ 153.9 million). The proceeds of this issue were to finance exploration activities and for general corporate purposes. Credit Suisse was one of two lead managers of the eight bank syndicate and underwrote an estimated amount of US$ 17 million. 18 In June 2009 Connacher Oil and Gas issued 11.75% five year bonds for a total amount of US$ 200 million. The proceeds of this issue were for general corporate purposes. Credit Suisse led the syndicate of three banks and underwrote an estimated amount of US$ 100 million. 19-11-
Chapter 5 ConocoPhillips 5.1 Short company profile ConocoPhillips is the third-largest integrated oil and gas producing company in the United States. The company is headquartered in Houston, Texas, has assets of US$150 billion and is active worldwide in oil and gas production and exploration in 30 countries, including, amongst others the United States, Canada, Ecuador, Peru, Australia, China, Indonesia, Singapore, Malaysia, Viet Nam, South Korea, Russia, Canada, Azerbaijan, Kazakhstan, Germany, Austria, Switzerland, Belgium, Saudi Arabia, Qatar, Nigeria, Algeria, Libya, the United Kingdom, Ireland, Trinidad, UAE, and Norway. 20 The company is active in oil sands exploration and production in Alberta, Canada. ConocoPhillips explores part of the Syncrude oil sands project in North Eastern Alberta, Mildred Lake and Aurora with a total potential capacity of 1,696,000 barrels per day. The company owns 9.0% in the Syncrude joint-venture (see Chapter 18). 21 The company started production in the Surmont project (with a total potential capacity of 110,000 barrels per day) in the Athabasca region at the end of 2007. Since January 2007 the company also has a 50/50 joint-venture for the development of the Foster Creek and Christina Lake properties with EnCana (Canada). Cenovus Energy, a company which was recently split off by EnCana, now operates both projects (see Chapter 6). ConocoPhillips also owns other possible oil sands exploration lands in the Athabasca region in Alberta that still have to be evaluated and eventually developed. 22 Figure 3. ConocoPhillips: tar sands operations Source: Website ConocoPhillips (www.conocophillips.com), Viewed in March 2010-12-
5.2 Shareholders The shares of ConocoPhillips are quoted on the New York Stock Exchange. 23 Table 4 summarizes the most recent data on shareholdings in ConocoPhillips managed by the asset management divisions of the researched banks. Table 4 Shareholdings in ConocoPhillips Bank Subsidiary Filing Date % of shares Value (US$ mln) Credit Suisse Credit Suisse Securities (US) 31 Dec 2009 0.41% 292.0 Credit Suisse Asset Management (US) 31 Dec 2009 0.15% 106.8 Credit Suisse Asset Management (Switzerland) 30 Sep 2009 0.01% 7.1 Credit Suisse Asset Management (UK) 31 Dec 2009 0.01% 7.1 Total Credit Suisse 0.58% 413.1 UBS UBS Securities (US) 31 Dec 2009 0.17% 121.1 UBS Global Asset Management (Switzerland) 31 Dec 2009 0.10% 71.2 UBS Global Asset Management (UK) 31 Dec 2009 0.03% 21.4 UBS Global Asset Management (Americas) 31 Dec 2009 0.02% 14.2 Total UBS 0.32% 227.9 Source: Thomson ONE Banker financial database, Viewed 26 February 2010. 5.3 Bank loans The following information was found on bank loans provided to ConocoPhillips since early 2004: In October 2008 ConocoPhillips secured a one year revolving credit facility totalling US$ 2.5 billion from an international banking syndicate. The facility replaced an existing US$ 2.5 billion revolving credit facilities that was maturing. The proceedings can be used for general corporate purposes. Credit Suisse was among the nine banks participating in the syndicate and underwrote an estimated amount of US$ 200 million. 24 5.4 Investment banking services The following information was found on investment banking services provided to ConocoPhillips since early 2004: -13-
In October 2006 ConocoPhillips issued bonds with a total value of US$ 2.1 billion. The issue was split into three tranches: a US$ 1.25 billion ten year bonds issue; a US$ 350 million six year bonds issue and a US$ 500 million thirty year bonds issue. The ten year bonds were issued by ConocoPhillips Canada Funding Company I, the six year and thirty year bonds were issued by ConocoPhillips Canada Funding Company II. Both companies are fully-owned subsidiaries of ConocoPhillips. The proceedings were used to repay debt and for general corporate purposes. UBS was one of the fifteen banks that underwrote this issue for an amount of US$ 273 million. 25 In May 2008 ConocoPhillips issued bonds with a total value of US$ 1.5 billion. The issue was split into three tranches: 4.40% five year bonds for proceeds of US$ 400 million; 5.20% ten-year bonds for proceeds of US$ 500 million and 5.90% thirty-years bonds for proceeds of US$ 600 million. The use of the proceeds was for refinancing debt and general corporate purposes. Credit Suisse and UBS, each underwriting US$ 43.7 million, were in the group of twelve co-managers of the deal. 26 In January 2009 ConocoPhillips issued bonds with a total value of US$ 6.0 billion. The issue was split into three tranches: 4.75% five year bonds for proceeds of US$ 1.50 billion; 5.75% ten-year bonds for proceeds of US$ 2.25 billion and 6.50% thirty-years bonds for proceeds of US$ 2.25 billion. The use of the proceeds was for refinancing debt and general corporate purposes. Credit Suisse, underwriting US$ 722.7 million, was one of the group of six bookrunners while UBS, underwriting US$ 45.9 million, was one of the twenty co-managers of the deal. 27 In May 2009 ConocoPhillips issued bonds with a total value of US$ 3.0 billion. The issue was split into three tranches: 4.60% six year bonds for proceeds of US$ 1.50 billion; 6.00% eleven-year bonds for proceeds of US$ 1.0 billion and 6.50% thirty-years bonds for proceeds of US$ 500 million. The use of the proceeds was for refinancing debt and general corporate purposes. Credit Suisse, underwriting US$ 342.6 million, was one of the group of seven bookrunners while UBS, underwriting US$ 30 million, was one of the seven co-managers of the deal. 28-14-
Chapter 6 EnCana / Cenovus Energy 6.1 Short company profile EnCana was a Canadian energy company focused on unconventional natural gas and oil sands developments. The company was mainly active in Canada and the United States. In November 2009, EnCana Corporation split into two entities: EnCana for the natural gas activities and Cenovus Energy for the oil assets. Cenovus and EnCana are now both listed on the stock exchanges of Toronto and New York. 29 Cenovus Energy is an integrated oil company headquartered in Calgary, Alberta. Its operations include enhanced oil projects and established natural gas and crude oil production in Alberta and Saskatchewan. 30 Cenovus operates four oil sands properties in the Athabasca region in north eastern Alberta, Canada: Borealis (potential capacity 100,000 barrels per day), Foster Creek (potential capacity 150,000 barrels per day), Christina Lake (potential capacity 248,800 barrels per day) and Pelican Lake (20.000 barrels per day). Cenovus Energy has also commenced with formal consultation with stakeholders regarding the exploitation of Narrows Lake (potential capacity of 130,000 barrels per day). Since January 2007 EnCana had a 50/50 joint venture with ConocoPhillips (see Chapter 5) for the development of the Foster Creek and Christina Lake properties. This joint-venture is now taken over by Cenovus. 31 The joint venture with ConocoPhillips also includes two oil refineries in the USA. 32 Figure 4. Cenovus Energy: Canadian operations Source: Website Cenovus Energy (www.cenovus.com), Viewed in March 2010-15-
Since the split of EnCana is relatively recent, we include the financings in the form of loans and the underwriting of share- and bond issuances provided by the researched banks to EnCana since early 2004 until November 2009. We can assume that at least part of these financings contributed to oil sands exploration and exploitation in this period. However, regarding shareholdings we focus on Cenovus Energy since all of EnCana s oil sands activities have now been brought under this entity. 33 6.2 Shareholders The shares of Cenovus Energy are quoted on the Toronto Stock Exchange and on the New York Stock Exchange. 34 Table 5 summarizes the most recent data on shareholdings in Cenovus Energy managed by the asset management divisions of the researched banks. Table 5 Shareholdings in Cenovus Energy Bank Subsidiary Filing Date % of shares Credit Suisse Value (US$ mln) Credit Suisse Asset Management (US) 31 Dec 2009 0.07% 12.9 Credit Suisse Securities (US) 31 Dec 2009 0.03% 5.5 Total Credit Suisse 0.10% 18.4 UBS UBS Global Asset Management (Americas) 31 Dec 2009 0.71% 130.7 UBS Global Asset Management (Switz.) 31 Dec 2009 0.12% 22.1 UBS Securities (US) 31 Dec 2009 0.06% 11.0 UBS Global Asset Management (UK) 31 Dec 2009 0.02% 3.7 Total UBS 0.91% 167.5 Source: Thomson ONE Banker financial database, Viewed 3 March 2010. 6.3 Bank loans The following information was found on bank loans provided to EnCana and/or Cenovus Energy since early 2004: In December 2007 EnCana extended an existing C$ 4.5 billion (US$ 3.9 billion) five-year revolving credit facility that was secured in October 2006. The maturity period was lengthened by a year to 2012. UBS, underwriting C$ 75 million (US$ 86.5 million), was one of the twenty-three participating banks in the syndicate. 35 In December 2007 EnCana secured a US$ 200 million five-year revolving credit facility. The proceeds of the facility were intended for project finance purposes. Credit Suisse was one of the nine banks participating in the syndicate and underwrote US$ 4.0 million. 36-16-
In September 2009 EnCana secured a C$ 2.5 billion (US$ 2.4 billion) credit facility from an international banking syndicate. The facility was consisted of two tranches. The first tranche was a C$ 2.0 billion (US$ 1.9 billion) three year revolving credit facility and the second tranche was a C$ 500 million (US$ 468 million) one year revolving facility. The use of the proceeds was to back the splitting of EnCana into two business entities (EnCana and Cenovus Energy). Credit Suisse and UBS both participated in the syndicate of nineteen banks each underwriting an estimated US$ 75 million. 37 6.4 Investment banking services The following information was found on investment banking services provided to Encana and/or Cenovus Energy since early 2004: In August 2004 EnCana issued bonds with a total value of US$ 1 billion. The issue is split into two tranches: US$ 250 million five year bonds and US$ 750 million thirty year bonds. The proceedings were used to repay bank debts. Credit Suisse and UBS were among the twenty-one banks participating in the syndicate. Both banks underwrote this issue for US$ 20 million each. 38 In August 2007 EnCana issued thirty year bonds with a total value of US$ 500 million. The proceedings were used to repay existing debts. Credit Suisse and UBS were among the seventeen banks participating in the syndicate. Both banks underwrote this issue for US$ 22.5 million each. 39 In November 2007 EnCana issued bonds for total proceeds of US$ 1.5 billion in two tranches. The first tranche was for 5.90% ten year bonds for proceeds of US$ 700 million. The second tranche was for 6.50% thirty year bonds for proceeds of US$ 800 million. The proceeds of the issue were for refinancing of debt, acquisition and general corporate purposes. UBS was joint leader of the deal and underwrote US$ 361.8 million. Credit Suisse was one of the eighteen banks participating in the issue and underwrote US$ 30 million. 40 In April 2009 EnCana issued 6.50% ten-year bonds for total proceeds of US$ 500 million. The proceeds were intended for debt refinancing and for general corporate purposes. Credit Suisse, underwriting US$ 20 million and UBS, underwriting US$ 10 million were among the sixteen participating banks. 41 In September 2009 Cenovus Energy (in advance of the announced split of EnCana in November 2009) issued bonds for total proceeds of US$ 3.5 billion. The issuance consisted of three tranches. The first tranche was for 4.500% five year bonds for proceeds of US$ 800 million. The second tranche was for 5.700% ten year bonds for proceeds of US$ 1.3 billion and the third tranche was for 6.750% thirty year bonds for proceeds of US$ 1.4 billion. The use of the proceeds was for general corporate purposes. Credit Suisse was one of the eleven banks participating in the syndicate and underwrote an estimated US$ 100 million. 42-17-
Chapter 7 ExxonMobil 7.1 Short company profile The American company ExxonMobil is the world s largest publicly traded international oil and gas company and the world s largest refiner of petroleum products. ExxonMobil is the parent company of the oil and petroleum subsidiaries Esso, Exxon and Mobil. ExxonMobil is active in Canadian oil sands through its subsidiary Imperial Oil, which is 69.6% owned by ExxonMobil. Imperial Oil runs the Cold Lake project with a potential capacity of 170,000 barrels per day and the Kearl Lake project with a potential capacity of 310,000 barrels per day. 43 7.2 Shareholders The shares of ExxonMobil are quoted on the New York Stock Exchange while the shares of Imperial Oil are quoted on the Toronto Stock Exchange. Table 6 summarizes the most recent data on shareholdings in ExxonMobil managed by the asset management divisions of the researched banks. Table 6 Shareholdings in ExxonMobil Bank Subsidiary Filing Date % of shares Value (US$ mln) Credit Suisse Credit Suisse Securities (US) 31 Dec 2009 0.25% 762.2 Credit Suisse Asset Management(US) 31 Dec 2009 0.06% 182.9 Credit Suisse Asset Management (Switz.) 30 Sep 2009 0.01% 30.5 Total Credit Suisse 0.32% 975.6 UBS UBS Global Asset Management (Americas) 31 Dec 2009 0.16% 487.8 UBS Securities (US) 31 Dec 2009 0.15% 457.3 UBS Global Asset Management (Switz.) 31 Dec 2009 0.13% 396.3 UBS Global Asset Management (UK) 31 Dec 2009 0.05% 152.4 UBS O'Connor (US) 31 Dec 2009 0.01% 30.5 Total UBS 0.50% 1,524.4 Source: Thomson ONE Banker financial database, Viewed 26 February 2010. Imperial Oil is 69.6% owned by ExxonMobil, the other 30.4% is free float. Table 7 summarizes the most recent data on shareholdings in Imperial Oil managed by the asset management divisions of the researched banks. Table 7 Shareholdings in Imperial Oil Bank Subsidiary Filing Date % of shares Value (US$ mln) Credit Suisse Credit Suisse Asset Management 30 Sep 2009 0.01% 1.7 Credit Suisse Asset Management (US) 31 Dec 2009 0.03% 9.8 Credit Suisse Securities (USA) 31 Dec 2009 0.00% 1.5-18-
Bank Subsidiary Filing Date % of shares Value (US$ mln) Total Credit Suisse 0.04% 13.0 UBS UBS Global Asset Management (Switzerland) 31 Dec 2009 0.02% 7.1 UBS Global Asset Management (UK) 31 Dec 2009 0.01% 2.8 UBS Securities 31 Dec 2009 0.01% 3.3 Total UBS 0.04% 13.2 Source: Thomson ONE Banker financial database, Viewed 4 March 2010. 7.3 Bank loans No information was found on the provision of loans to ExxonMobil or Imperial Oil by the researched banks. 7.4 Investment banking services No information was found on the provision of investment banking services to ExxonMobil or Imperial Oil by the researched banks. -19-
Chapter 8 Husky Energy 8.1 Short company profile Husky Energy is a Canadian integrated energy company. The company is mainly active in Canada. The company is also active in the United States and is developing projects in China, Indonesia and Greenland. 44 Husky Energy operates several oil sands projects in Alberta (Canada): Husky Energy s first oil sands project, the Tucker project in the Cold Lake region (30km northwest of Cold Lake) is in production since November 2006 and has a potential capacity of 30,000 barrels per day. 45 Husky s second project is the Sunrise oil sands project in the Athabasca region (60km northeast of Fort McMurray) with a potential capacity of 200,000 barrels per day. In December 2007 Husky Energy signed a 50/50 joint venture with the British energy company BP, creating an integrated oil sands business. The joint venture includes Husky s Sunrise oil sands deposit and BP s Toledo refinery in Ohio (United States). Initial production is expected in 2010-2012. 46 Two other leases hold potential for oil sands development: the Saleski properties in the Athabasca region and the Caribou Lake (potential capacity 10,000 barrels per day) properties in the Cold Lake region. Apart from these projects Husky Energy also owns some smaller land holdings in the Peace River area. 47 8.2 Shareholders The shares of Husky Energy are quoted on the Toronto Stock Exchange. 48 Table 8 summarizes the most recent data on shareholdings in Husky Energy managed by the asset management divisions of the researched banks. Table 8 Shareholdings in Husky Energy Bank Subsidiary Filing Date % of shares Value (US$ mln) UBS UBS Global Asset Management (Canada) 31 Dec 2008 0.13% 27.6 UBS Global Asset Management (Switzerland) 31 Jul 2009 0.03% 6.4 Total UBS 0.16% 33.9 Source: Thomson ONE Banker financial database, Viewed 26 February 2010. 8.3 Bank loans No information was found on the provision of bank loans to Husky Energy by the researched banks. 8.4 Investment banking services No information was found on the provision of investment banking services to Husky Energy by the researched banks. -20-
Chapter 9 Marathon Oil 9.1 Short company profile Marathon Oil is the fourth-largest integrated oil and gas producing company in the United States. The company is active in oil and gas production and exploration in the United States, Angola, Canada, Equatorial Guinea, Indonesia, Libya, Norway and the United Kingdom. Marathon is the fourth largest United States-based integrated oil company and the nation's fifth largest refiner. 49 The company is active in oil sands exploration and production in Canada since the acquisition of the Canadian company Western Oil Sands in October 2007. Western Oil Sands holds a 20% interest in the Athabasca Oil Sands Project, which encompasses the Muskeg River Mine (potential capacity of 270,000 barrels per day), the Scotford Upgrader (393,300 barrels per day), Jackpine (300,000 barrels per day) and Pierre River (200,000 barrels per day). All facilities are situated in Alberta, Canada. Other companies owning shares of the Athabasca Oil Sands Project are Shell Canada for 60% (see Chapter 15) and Chevron Canada for 20% (see Chapter 3). 50 In 2006 Western Oil Sands also gained a 20% interest in the Ells River project (potential capacity 85,000 barrels per day) of Chevron (see Chapter 3) in the same region. 51 9.2 Shareholders The shares of Marathon Oil are quoted on the New York Stock Exchange. 52 Table 9 summarizes the most recent data on shareholdings in Marathon Oil managed by the asset management divisions of the researched banks. Table 9 Shareholdings in Marathon Oil Bank Subsidiary Filing Date % of shares Total (US$ mln) Credit Suisse Credit Suisse Securities (USA) 31 Dec 2009 0.29% 61.2 Credit Suisse Asset Management (US) 31 Dec 2009 0.07% 14.8 Credit Suisse Asset Management (Switzerland) 31 Sep 2009 0.01% 2.1 Credit Suisse Investments Australia 31-Mar-2009 0.01% 2.1 Total Credit Suisse 0.38% 80.2 UBS UBS Global Asset Management (Americas) 31 Dec 2009 0.86% 181.5 UBS Global Asset Management (Switzerland) 31 Dec 2009 0.39% 82.3 UBS Securities (US) 31 Dec 2009 0.19% 40.1 UBS Global Asset Management (UK) 31 Dec 2009 0.14% 29.5 UBS Global Asset Management (Canada) 30-Jun-2009 0.01% 2.1 Total UBS 1.59% 335.5 Source: Thomson ONE Banker financial database, Viewed 26 February 2010. -21-
9.3 Bank loans The following information was found on bank loans provided to Marathon Oil since early 2004: In May 2004 Marathon Oil secured a new US$ 1.5 billion five-year revolving credit facility from an international banking syndicate, while its subsidiary Marathon Ashland Petroleum secured a US$ 500 million five-year revolving credit facility from the same international banking syndicate. The syndicates were arranged by Bank of America (United States). 28 banks participated in the syndicate. 53 In May 2006 the existing US$ 1.5 billion five-year revolving credit agreement of Marathon Oil was amended, expanding the size of the credit facility to US$ 2.0 billion and extending the termination date to May 2011. At the same time the Marathon Ashland Petroleum facility was terminated. Twenty-nine banks participated in the new syndicate including Credit Suisse that underwrote US$ 40 million. 54 In May 2007 the termination date was again extended to May 2012. 55 9.4 Investment banking services The following information was found on investment banking services provided to Marathon Oil since early 2004: In July 2007 Marathon Oil issued a shelf registration statement under which the company can issue an indeterminate amount of debt and equity securities. 56 In September 2007 Marathon Oil issued bonds for a total amount of US$ 1.5 billion. The issue was divided in two tranches: a US$ 750 million ten year bonds issue and a US$ 750 million thirty year bonds issue. The proceeds of this issue were used to partly finance the C$ 6.5 billion (US$ 6.2 billion) acquisition of Western Oil Sands. Credit Suisse was among the twenty banks in the syndicate and it underwrote US$ 23.3 million of this issue. 57 In March 2008 Marathon Oil issued 5.90% eleven year bonds for total proceeds of US$ 1.0 billion. The use of the proceeds was for refinancing of debt and general corporate purposes. Credit Suisse was one of the twenty-two banks in the syndicate and it underwrote US$ 15 million of the issue. 58 In February 2009 Marathon Oil issued bonds for a total amount of US$ 1.5 billion. The issue was divided in two tranches: 6.50% five year bonds for proceeds of US$ 700 million and 7.50% ten year bonds for proceeds of US$ 800 million. The use of the proceeds was for refinancing of debt and general corporate purposes. Credit Suisse was one of the twenty banks in the syndicate and it underwrote US$ 24.8 million of the issue. 59-22-