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Bellatrix lands JV deal Mid-size Canadian E&P company cuts C$240M deal with South Korea’s consortium-owned Troika Resources Private Equity Fund Gary Park For Petroleum News
Bellatrix Exploration, a mid-size Canadian exploration and production company, may have overcome a major setback by attracting an Asian investor to help accelerate development of its fast-expanding resource prospects in west-central Alberta.
Four months after an unidentified joint-venture partner from South Korea bowed out, Bellatrix has struck a C$240 million deal for the same assets with South Korea’s Troika Resources Private Equity Fund, owned by a consortium that includes KDB Ban, SK Energy and Samchully AMC.
The new arrangement falls only slightly short of a C$300 million partnership announced last January that was abandoned in June when the South Korean government-owned prospective partner missed a deadline for Korean government approval.
At the same time, Bellatrix said it hopes to complete a takeover of junior producer Angle Energy for C$576 million and reported a bought deal financing to sell shares worth C$175 million to help pay for the Angle and Troika deals.
Almost C$1 billions Chief Executive Officer Ray Smith described the deals worth almost C$1 billion as a “nice day’s business.”
Chris Theal, head of Calgary-based Kootenay Capital Management, said the Angle transaction “really does fit from an asset perspective.”
He also said Bellatrix has shown the ability to “sign up joint ventures to bring in third-party capital and accelerate development of their inventory.”
The company has negotiated three strategic joint ventures this year for a total of C$684 million — Grafton Energy for C$244 million, Daewoo E&P Canada and KIS Devonian Canada for C$200 million and Troika for C$240 million.
The immediate obvious benefit from the merged entity will be an initial capital budget for 2014 of C$500 million, focused on the Cardium and Lower Mannville are of west-central Alberta, targeting prospects on the Cardium, Notekwin and Duvernay plays.
Boost to production The deal will also boost Bellatrix production by about 10,000 barrels of oil equivalent per day to 33,000 boe per day (37 percent oil and natural gas liquids) and double its undeveloped land holdings to 400,000 net acres.
As well, it will give Bellatrix additional proved reserves of 32.7 million boe (54 percent oil and NGLs) for an outlay of C$15.90 per boe and increase its potential drilling locations to 2,100 from 1,600.
The deal also helps continue a recent surge of equity financings that have totaled C$1.4 billion in October and C$1.19 billion in August after a dearth of deal making in the first half of the year that forced two brokerages, Stonecap Securities and Stifel Canada, to close their doors in Calgary.
Steven Paget, an analyst with FirstEnergy Capital, said the renewed activity reflects a growing appetite among investors for income-generating returns to protect against market volatility and reduce their exposure to future cash flows and market valuations.
Other transactions Other transactions in October include a C$358 million takeover of privately held Black Shire Energy by Twin Butte Energy, while Tourmaline oil (C$193 million), Paramount Resources (C$60 million) and NuVista Energy(C$25.6 million) have all completed equity offerings of both common and flow-through shares.
But the junior sector is also finding itself squeezed by an Alberta government decision in May to raise security deposits for oil and gas operators to cover the cost of restoring land affected by wells, facilities and pipelines in case they go out of business.
A government fund that once held C$13 million from 88 companies has been expanded to C$297 million from 248 companies.
“Our cash reserves are gone, our bank lines are gone and all of a sudden the government has demanded an immediate C$1 million payment,” said Dale Brand, chief operating officer of Midlake Oil & Gas.
Kelley Bourassa, an insolvency attorney at the firm of Blake, Cassels & Graydon, said that although it is too early to tell whether junior companies will be forced into bankruptcy many are just realizing the impact of the security deposits.
Alberta Energy Minister Ken Hughes has promised to review the issue.
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