Osum Oil Sands Corp. has approved the start of the Phase 2B expansion at its Orion thermal project.

In conjunction with this, Osum, through its wholly-owned subsidiary Osum Production Corp., sold a four per cent gross overriding royalty interest on its Orion project for cash proceeds of $92.5 million, before transaction costs. The sale has an effective date of Sept. 1, 2017.

The Phase 2B expansion will be funded from a portion of the proceeds of the sale of the royalty interest. The royalty interest covers current and any future expansions of the Orion project.

TD Securities Inc. acted as Osum's exclusive financial advisor on the sale.

Orion is currently producing 7,500 – 8,000 bbls per day of bitumen from the Clearwater formation in the Cold Lake oilsands region. The just completed Phase 2A expansion is expected to add 1,500 bbls per day of production over the next 12 months.

The Phase 2B expansion is projected to be completed in mid-2018 and is expected to increase production progressively through mid-2019 by an additional 3,000 bbls per day. The Orion project has regulatory approval for production of up to 20,000 bbls per day.

“We are on a clear path for positive growth over the next two years,” said Steve Spence, president and CEO of Osum. “The sale of the royalty enables us to accelerate our staged expansion strategy, moving us closer to our goal of producing 20,000 barrels per day from Orion. By taking a measured approach to adding capacity, we are building an oil sands business that is robust, and can grow sustainably in a moderate oil price environment.”

Concurrent with the royalty sale process, Osum engaged GLJ Petroleum Consultants as an independent qualified reserve evaluator to conduct a reserves and resource assessment in accordance with definitions, standards and procedures contained in the Canadian Oil and Gas Evaluation Handbook, taking into account new well data and project performance since GLJ’s last update on December 31, 2016.

This has resulted in volume increases of more than 25 per cent in the company’s gross proved reserves and five per cent in gross proved plus probable reserves. The GLJ Report has an effective date of Sept. 1, 2017.

The company’s 1P gross reserves at Sept. 1 are 60.14 million bbls, while gross proved plus probable reserves were 537.41 million bbls.