Western Oil's Iraq foray backed

CALGARY -- A Wall Street money manager is defending Western Oil Sands Inc.'s controversial foray into Iraq, telling the company in a weekend letter that its move is bold and unique.

"We admire your boldness and keen investment intellect," Edmund Luzine, president of Adirondack Capital Management Inc., stated in a Sept. 23 letter to Western's chairman, Guy Turcotte. Adirondack serves as an adviser to two hedge funds that hold a small stake in Calgary-based Western.

Last week, Salida Capital Corp., a large Western shareholder based in Toronto, called on the oil sands company to hire a financial adviser, with an eye to putting the firm up for sale.

Western stock has fallen in the past year, while some other oil sands assets have appreciated. Salida argued the decision to invest in Iraq -- made in May -- has soured confidence among shareholders.

Stocks of Western and other oil companies were hit hard yesterday as the price of crude bounced around $60 (U.S.). Western shares closed at $27.81 (Canadian) on the Toronto Stock Exchange, down 87 cents or 3 per cent.

Mr. Luzine founded Adirondack in 1999 and said in his letter that he served with a U.S. Army Special Operations unit in Iraq in 2003. In the letter, he said he was "shocked" to read of Salida's discontent on globeandmail.com last week.

Salida said in its letter that it bought stock in Western because it has a strong crude asset in a stable country. In late May, Western said it would spend at least $45-million (U.S.) to explore for oil and natural gas in Iraq in the next several years.

Salida suggested the Iraq asset would make more sense as a standalone publicly traded entity, saying there could be "exciting upside."

Western didn't return a call for comment.