Financing for Hydro Oil's portion in the Terra Nova project closed in July 1999. The project involves the exploitation of crude oil reserves of the Terra Nova oilfield, located 350km off the eastern coast of Canada. Terra Nova is the second largest oilfield to be discovered in Canada with estimated reserves of 580 million barrels. Production will start by the first quarter of 2001 and expected to run for a 14-year period with volumes peaking at 115,000 barrels a day.

The package represents the first oil production payment financed in the Rule 144a market. Financing includes a $250 million fixed rate bond run by Credit Suisse First Boston. Steven Greenwald, managing director in project finance at Credit Suisse First Boston New York says: ?It was one of the very few project financing in the market done for a member of a consortium with undivided interests. With no real guarantee on the completion of the project, proven reserves of crude oil or corporate guarantee of the debt from Husky Oil, the financing has been both innovative and challenging.?

The response from the rating agencies has been testimony of these efforts giving the package a Baa3/BBB rating. Danielle Infuso, business planning coordinator at Husky Oil in Calgary says: ?It took us less than six months to put the financing package together in a deal that had many variables open. The innovative structure made it a challenging experience and the successful completion of the financing was a matter of satisfaction for all parties involved.?

Sponsors of the Terra Nova project are Petro-Canada (29%), Mobil Canada (22%), Husky Oil (17.5%), Norsk Hydro Canada (15%), Murphy Oil (12%), Mosbacher (3.5%) and Chevron Canada Resources (1%). Petro-Canada is the operator. The total cost of the Terra Nova Project will be approximately $4.5 billion: $2 billion pre-production capital, $600 million post-production start up capital and $1.9 billion operating costs.