Bellatrix expands joint-venture path

Bellatrix Exploration is continuing on the joint-venture path to develop resource plays in Western Canada, rebounding from the collapse of its initial foray into the field.

The mid-size Calgary-based company said it has entered into a definitive agreement for an asset sale and joint venture with South Korea’s Daewoo International Corp. and Devonian Natural Resources Private Equity Fund.

Daewoo, Korea’s largest trading company, is involved in wide-ranging activities, including the provision of services in foreign resource development.

Under the terms of the deal, Bellatrix is selling a joint 50 percent of the working interest share in its producing assets, plus a compressor station and gathering system and related land in the Baptiste area of west-central Alberta for gross consideration of C$52.5 million.

The assets produce about 268 barrels of oil equivalent per day (67 percent gas and 33 percent oil and liquids), 3,858 net acres of Cardium rights and 1,119 net acres of Mannville rights.

The joint venture encompasses a multi-year commitment to jointly develop the acreage in Ferrier and Willesden Green in west-central Alberta encompassing 70 gross wells with anticipated capital spending to the joint venture of C$200 million.

Certain conditions, including Korean government and regulatory approvals, are expected to be satisfied or waived by August 30, allowing closing to occur no later than September 16.

Bellatrix said it will continue to focus on growth by developing its core Cardium (with 692 net remaining locations) and Notikewin/Falher (with 4012 net locations) assets, representing estimated net remaining capital spending of C$4.34 billion, based on current costs.

As of June 30, Bellatrix held 202,000 net undeveloped acres in Alberta, British Columbia and Saskatchewan, with 1,700 net identified drilling locations and capital requirements of C$8.22 billion, or 40 years of drilling inventory based on current annual cash flow.

In June, a C$300 million joint venture with an unnamed Korean company fell through, but was quickly followed by a deal with private investment company Grafton Asset Management to accelerate development on its undeveloped land holdings, concentrating on the Willesden Green and Brazeau areas of west-central Alberta.

Grafton is committed to contributing C$100 million towards a C$122 million capital program to earn 54 percent of Bellatrix’s working interest in each well drilled until payout (capital plus an 8 percent return) when it will revert to 33 percent.

—Gary Park