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Alberta gives go-ahead to Dover oil sands project

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Athabasca Oil Corp. (ATH-T) is closer to getting the crucial funding it needs to ramp up asset development after the Alberta cabinet approved the Dover oil sands project.

The Order in Council giving the go-ahead to Dover removes a great deal of uncertainty over Athabasca's plan to sell its $1.3-billion interest in the project to PetroChina Co. Ltd., which already owns 60 percent.

Cabinet approval - announced Thursday - was critical to Athabasca being able to sell its stake in Dover, north of Fort McMurray, Alta. The company had been borrowing money in the interim. The cash from the sale will allow it to proceed with development of other projects, particularly in the rich Duvernay formation.

The Dover project must still clear a few other hurdles - including final clearance from Alberta environmental authorities - but no difficulties are anticipated.

Athabasca has been caught up in delays over Dover for more than a year, not least a set-to over Dover with the Fort McKay First Nation.

Last month, the Fort McKay First Nation struck a pact with Brion Energy Corp. - a joint venture between Athabasca and the Canadian subsidiary of PetroChina - and agreed to remove its objections to the project over the size of a buffer zone between Dover and an expanse of reserve land.

"The approval process has been long but we have achieved the expected outcome," said Athabasca president and chief executive officer Sveinung Svarte.

"We now look forward to finalizing the approvals for the project, including receipt of the Alberta Environment approval."

The Dover project is slated to produce 250,000 barrels of bitumen per day.

National Bank Financial analyst Matthew Taylor said in a research note Thursday that environmental approval is expected to take two to four weeks.

"Following this [Athabasca] will immediately exercise its $1.3-billion put with PetroChina and we forecast receipt of proceeds in early Q3. With line of sight to receiving put proceeds this alleviates near term financing concerns," he said.

"The company is on a positive trajectory to unlocking deep value inherent within the asset base."

Athabasca provides excellent exposure to the Duvernay shale play "at an attractive implied price," he added.

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