Providing coverage of Alaska and northern Canada's oil and gas industry
February 2016

Vol. 21, No. 6 Week of February 07, 2016

Murphy Oil shuffles Canadian assets


For Petroleum News

Arkansas-based Murphy Oil engaged in a Canadian two-step at the end of January, unloading two gas plants in British Columbia, while buying stakes in Alberta oil and gas assets.

It sold the two Tupper plants in northeastern British Columbia, which are capable of processing 320 million cubic feet per day, and associated pipelines for C$538 million to Enbridge.

The pipeline giant said the deal initially will be funded from available sources of liquidity, adding the deal had been anticipated in its long-term capital spending plan.

The plants are about 22 miles southwest of Dawson Creek, adjacent to an Enbridge gathering system and close to the Alliance pipeline that is 50 percent owned by Enbridge Income Fund and delivers gas from Western Canada to the Chicago area.

“This acquisition fits extremely well with Enbridge’s low-risk value proposition and supports our key priority of extending and diversifying growth,” said Gregory Harper, president of gas pipelines and processing.

“These assets, which are currently in operation, are underpinned by long-term contracts that generate highly predictable cash flows,” he said, adding the facilities also enhance Enbridge’s natural gas footprint in the Montney formation.

Athabasca Oil Corp. assets

Separately, Murphy struck a two-pronged deal to pay C$250 million for Athabasca Oil Corp. assets, giving a lift to a sluggish merger and acquisition sector.

It will gain a 70 percent stake in Athabasca’s Kaybob-region holdings in the Duvernay formation, which has large and mostly untapped reserves of liquids-rich gas, plus 30 percent in the same company’s Montney lands.

Murphy has also agreed to carry up to C$225 million of Athabasca’s costs over five years.

Total spending by the two companies in the regions is pegged at C$1 billion over the period, but that could be changed depending on market conditions.

Athabasca has been seeking a Duvernay partner since 2013, missing several deadlines in the process.

The transaction “materially progresses Athabasca’s strategic goal of transitioning the Duvernay play to commercial development over the mid-term,” said Athabasca Chief Executive Officer Ron Broen.

He welcomed the involvement of a “leading North American shale operator” with experience in the Texas Eagle Ford play whole retaining “tremendous upside in the Duvernay shale play.”

Murphy Chief Executive Officer Roger Jenkins said the joint venture complements his company’s unconventional businesses in the Eagle Ford and Montney, gaining “significant running room in an emerging light oil window.”

Athabasca has 180,000 acres of land in the Duvernay and 60,000 acres in the Montney, producing 6,900 barrels of oil equivalent per day (58 percent liquids) and 900 boe per day (44 percent liquids), respectively.

Athabasca said its overall December production averaged 15,200 boe per day, of which 7,400 boe per day came from its Hangingstone thermal oil sands operation.

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