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Saskatchewan in thick of deal-making
Gary Park For Petroleum News
The Canadian province of Saskatchewan received two more thumping votes of confidence in May for deals worth a combined C$2 billion.
Crescent Point Energy said it is investing another C$1.1 billion in the development of the Bakken and Lower Shaunavon oil plays and Nexen agreed to sell conventional heavy oil properties in west-central Saskatchewan for C$975 million in a transaction expected to have positive spinoffs for other asset sales.
Crescent Point’s transaction, if concluded as scheduled no later than July 2, will allow it to acquire the 79 percent of Shelter Bay Energy it doesn’t already own.
That includes current production of 7,400 barrels of oil equivalent per day, boosting Crescent Point’s expected 2010 output to 61,000 boe per day.
In addition, it will take control of 227,000 net acres of land in the two Saskatchewan plays, 500 net drilling locations, C$900 million in tax credits and 38.1 million boe of proved plus probable reserves.
Three acquisitions last year The deal follows three separate Bakken-focused acquisitions last year by Crescent Point for C$923 million as it battles for supremacy in the region with PetroBakken, a spinoff from Petrobank Energy and Resources.
The Bakken field, an extension of a field in North Dakota and Montana, holds an estimated 5.5 billion barrels of recoverable oil, while Lower Shaunavon is a deeper play that is attracting strong bidding competition in government sales.
The Nexen sale is to privately held Northern Blizzard Resources, which is backed by Natural Gas partners, which manages US$7.2 billion in funds that invest private capital in oil and gas production and oilfield service companies.
Natural Gas partners also manages US$350 million in two co-investment funds that invest in oil and gas property interests along with its portfolio companies.
The deal, due to close on June 30, includes 750 wells mostly on the Saskatchewan side of the border with Alberta at Lloydminster that currently produce 16,000 barrels per day, generating cash flow of C$130 million over the past four quarters.
Nexen is claiming a gain on the sale of C$700 million, achieving the company’s goal of C$1 billion in proceeds from the disposal of non-core assets, allowing it to concentrate on thermal bitumen and unconventional gas in Western Canada, offshore exploration and development in the British North Sea, off the west coast of Africa and in the deepwater Gulf of Mexico.
Foreign capital significant Analysts say the selling price of about C$60,000 per flowing barrel underscores strong interest in heavy oil assets, which is carrying stronger prices than natural gas and attracting strong buyer-interest from companies eager to build their production.
Foreign capital is predicted to drive deal-making in Canada this year, according to speakers at a PLS Dealmakers A&D Forum in Calgary May 20.
Mark McMurray, managing director with RBC Rundle, said the series of joint ventures involving Asian-based firms and operators in unconventional gas and oil properties in Western Canada will remain strong because of their capital-intensive nature.
He said the Canadian owners need partners to “carry an interest for a period of time” to accelerate development.
David Vetters, managing director of Macquarie Tristone Capital Advisors, predicted a majority of investment from Asian buyers is targeted at security of supply, with the focus on shale gas or oil sands.
Rod Sousa, managing director of Ross Smith Sousa, said joint ventures will happen because foreign companies have readier access to Canada than if they pursued outright takeovers that would need approval from competition regulators.
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