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U.S.-controlled assets up for grabs Marathon seeks buyers for Western Canadian properties; others put assets on block to seize advantage of high commodity prices and avoid shrinking exploration prospects Gary Park Petroleum News Calgary Correspondent
The U.S. buying binge in Canada’s oilpatch is showing signs of going into reverse, in keeping with analysts’ expectations.
Marathon Oil. Corp., the fourth-largest oil company in the United States, led the way March 31 by inviting bids on all of its conventional assets in the Western Canada Sedimentary Basin — a sale that could fetch up to C$700 million by some estimates for properties pumping 21,000 barrels of oil equivalent per day.
A Marathon spokesman said the assets no longer make a strategic fit with the Houston-based company’s business strategy. But the proceeds could be redeployed “into other opportunities that we might identify elsewhere,” he said.
Marathon did not specifically identify those alternatives, although it has plans, along with EnCana Corp., Norsk Hydro Canada Oil and Gas Inc and Murphy Oil Co. to drill a second deepwater exploratory well offshore Nova Scotia, possibly in 2004.
That well is a follow up to a deepwater discovery by the same partnership last year that Marathon is confident has reserves of 5 trillion to 15 trillion cubic feet.
Companies cleaning house However, like so many U.S. buyers who poured C$33 billion into buying Canadian properties in 2001, often at over-heated prices, Marathon is now eager to clean house of its non-core assets at a time when robust commodity prices might yield the best returns.
Among analysts there are predictions that C$3 billion worth of assets could land on the block in coming months, tempting the flourishing royalty trust sector and start-up juniors.
Prospective buyers are also strongly placed after raising about C$10 billion in equity on Canadian markets last year, the highest level in a decade by some calculations.
Further motivation to quit the Western Canada Sedimentary Basin comes from recent industry reports that the region’s gas production has peaked, while average proven finding and development costs soared to C$15.10 per barrel of oil equivalent in 2001, discouraging those who want to grow through the drill bit. Assets, companies, on market Other U.S.-controlled Canadian oil and gas producers with assets on the market include: Vintage Petroleum Canada Inc. 7,700 barrels of oil equivalent per day; Hunt 3,600 boepd; and ConocoPhillips Canada Ltd. 3,400 boepd in the Swan Hills region of northwestern Alberta. Murphy has unspecified assets on the market.
In addition, Canadian-owned Taurus Exploration is shopping 8,000 boepd and Upton Resources Inc. has put itself up for sale, offering 5,677 barrels per day of oil and 2.6 million cubic feet of gas.Tappitt Resources Ltd. and Lexxor Energy Inc., two juniors who are disappointed with their share values, have hired investment bankers to hunt out buyers or find other ways to boost their market worth.
One major deal was also announced March 31, with ARC Energy Trust snapping up Star Oil & Gas Ltd., which has operated as a private company in Alberta for 32 years. Star is a wholly owned unit of United Co. of Bristol, Va.
The C$710 million deal included assumed debt of C$185 million and will boost ARC’s proved reserves by 64 million barrels of oil equivalent and its production to 63,000 boepd from 42,500 boepd, while increase its land portfolio by 325,000 acres. In related transactions, ARC will sell some of the acquired producing properties and undeveloped land to unidentified third parties for C$78.2 million.
The Star properties are 75 percent weighted to gas from three major fields in northeastern British Columbia and southwestern Saskatchewan, two of the hottest plays in Canada.
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