Utilities chase Canada assets

Gary Park

For Petroleum News

Direct Energy Marketing, a natural gas retailer, believes the Western Canada Sedimentary basin is ripe for the picking as it continues to build on its asset base.

Following its latest acquisition, Direct Energy’s senior vice president of upstream gas, Wes Morningstar, said there is a current opportunity to acquire assets in Western Canada “at a price that allows us to return a nice value on the capital we are employing.”

The agreement involves the Canadian properties of TransGlobe Energy, including production of 1,450 barrels of oil equivalent per day (and a production base of 8.7 million boe, 75 percent of it natural gas), plus 50,000 acres with development potential, for C$56.7 million.

Direct Energy, a subsidiary of United Kingdom-based Centrica, operates in 10 Canadian provinces and 21 U.S. states.

When the TransGlobe deal closes on or about April 30, Direct Energy will boost its production by 20 percent to 112 million cubic feet equivalent per day and put it on the path to becoming “much bigger,” Morningstar said.

Since Centrica bought closely held Avalanche Energy for C$253.5 million in 2000, the company has added Rockyview Energy for C$113.3 million, gaining production of 2,700 barrels of oil equivalent per day, 97 percent natural gas.

TransGlobe said the selling price of C$39,100 per daily barrel of oil equivalent produced and C$14.87 per barrel of proven and probable reserves is “well in line with similar transactions in Western Canada over the past nine months.”

Direct Energy owns and operates about 3,600 natural gas wells in Alberta, three gas-fired electrical power plants in Texas and has renewable power purchase agreements totaling 813 megawatts in Texas.

The competition for gas-producing assets among utilities in Western Canada is stepping up, with Enmax, owned by the City of Calgary, buying Cordero Energy for C$218 million.

That package included production of almost 4,000 barrels of oil equivalent per day (more than 90 percent gas), 100,000 net undeveloped acres, 15.4 billion cubic feet of conventional gas reserves and 40.3 billion cubic feet of coalbed methane.

Enmax said the Cordero deal would be just one of several planned takeovers of gas producers.