Middle East oil company enters Canada

Abu Dhabi makes all-cash deal for Pogo’s Canadian assets, including major stake in Northwest Territories; Dominion pulls out of Canada

Gary Park

For Petroleum News

If all the foreign stakeholders in the Western Canadian energy sector, put this one in the surprise category — big-time.

Abu Dhabi National Energy Co. or TAQA has made an all-cash offer of US$2 billion for Northrock Resources, a wholly owned subsidiary of Houston-based Pogo Producing.

That makes TAQA the first Middle East oil company to enter Canada’s upstream sector.

With interests in the Northwest Territories, Alberta and Saskatchewan, Northrock produces 29,000 barrels of oil equivalent per day, 51 percent oil, from proven reserves of almost 118 million boe, 55 percent of them oil. That translates into a purchase price of US$55,000 per flowing boe.

Pogo acquired Northrock from Unocal Canada in fall 2005 for US$1.7 billion in a deal Pogo Chairman and Chief Executive Officer Paul Van Wagenen described as “truly a prize,” but a number of analysts suggested was over-priced given a lack of growth potential.

TAQA Chief Executive Officer Peter Barker-Homek said in a statement that Northrock, which has 2.6 million undeveloped acres, provides a “solid base for further investments and growth in Canada.”

He said the Northrock deal opens the way to further investment and expansion in Canada, indicating TAQA is ready to make acquisitions in the range of US$5 million to US$50 million, although nothing is in the works at this time.

Without delving into the details of that strategy, Barker-Homek did not rule out a stake in the oil sands, saying there is no way TAQA can ignore the resource so long as oil does not fall below US$45 per barrel.

TAQA acquired European assets earlier in year

So far this year alone it has acquired Talisman Energy’s non-operated interests in the Brae assets of the British North Sea and taken over BP Netherlands gas exploration and production assets.

But the entry of a Middle Eastern company to the Western Canada Sedimentary basin did not show up on any radar screens before now.

The focus has been almost exclusively on moves by companies from China, Japan, Korea, France, Norway and the Netherlands into the Alberta oil sands.

There was no indication from TAQA whether the bitumen deposits are on its shopping list, or might ever find a place there.

But its assets in the Northwest Territories include a 30 percent stake in 960,000 acres covering three exploration licenses in the Central Mackenzie Valley.

The five-company partnership, operated by Husky Energy, has made two discoveries in the areas, including the 2004 Summit Creek B-44 well which tested at combined rates of about 20 million cubic feet per day of gas and 6,000 bpd of oil from two intervals.

That was followed last year by the first Cretaceous hydrocarbon find in the Central Mackenzie Valley.

Including the Northrock deal, Pogo has sold about 900 billion cubic feet equivalent of proven reserves for US$2.6 billion as it tightens it focus to an onshore U.S. base with proven reserves of 1.3 trillion cfe concentrated in Texas and the Rockies region.

Dominion Resources bails out of Canada

Baytex Energy Trust is paying C$238 million for properties that produce about 4,500 barrels of oil equivalent, while Paramount gains production of 7,834 barrels per day for C$392 million.

The deal hikes Baytex’s total output to 38,500 bpd, diversifies its heavy oil portfolio by adding some gas assets and adds proved and probable reserves of 19.6 million boe for C$52,500 per flowing boe.

Paramount, in paying C$43,725 per flowing boe, will boost its output to 34,500 bpd, doubling its proved and probable reserves to 528 million boe.