Provident stirs trust M&As back to life

Gary Park

For Petroleum News

Canada’s energy trust sector hasn’t gone completely into hibernation while it waits for the federal government’s legislation on the removal of its preferential tax status.

Provident Energy Trust plunged into the M&A market, offering C$467 million, plus C$41 million of assumed debt, to acquire the northwestern Alberta assets of Capitol Energy Resources.

One of the few deals in recent months, it is keyed on Capitol’s oil holdings in the Rainbow and Peace River Arch region, which has yielded one of Western Canada’s best discoveries in years — a pool estimated to have 263 million barrels of original oil in place, which is being developed through horizontal drilling and waterflood technology.

An independent valuation puts Capitol’s proved and probable reserves at 30 million barrels of oil equivalent, increasing Provident’s holdings by 40 percent and boosting its production from 30,000 barrels of oil equivalent per day to 34,400 boe per day. The additional output is 75 percent oil.

The value of the deal per flowing barrel is calculated at C$103,750, at the high end of trust acquisitions over the past year, when averages have dropped to C$80,000 for gas-weighted assets, especially after the federal government turned the trust sector on its head.

Capitol Chief Executive Officer Mont Bowers said the timing is ideal for his company to turn its Montney C pool in northwestern Alberta over to Provident’s expertise in working long-life, low-decline assets.

Provident expects to build production from the pool to 7,000 boe per day by 2009 for a capital outlay of C$122 million.

The trust has its sights set on becoming an integrated North American energy business.

To that end, it spent C$476 million last summer to buy natural gas properties in Alberta from Samson Canada and C$697 million in 2005 to acquire gas processing assets from EnCana.

Through a wholly owned subsidiary it formed BreitBurn Energy Partners, which has production in southern California, Wyoming and west Texas.