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Embers betting big on Alberta CBM Apache sells coalbed methane acreage in western Alberta to focus on liquids and deeper liquids-rich plays while gas is cheap By Gary Park For Petroleum News
Apache is selling oil and natural gas producing properties in western Alberta to privately-owned Ember Resources, which is focused exclusively on coalbed methane.
The C$220 million deal covers the Nevis, North Grant Lands and South Grant Lands in the region, with emphasis on the coal trend in the province’s Horseshow Canyon.
The assets comprise 621,000 (530,000 net) acres and more than 2,700 wells that had average net production of 67 million cubic feet per day and 237 barrels per day of liquids hydrocarbons in the second quarter.
Apache will retain a 100 percent working interest in horizons below the Cretaceous formation, such as the potential Duvernay and Nisku lands.
Ember Chief Executive Officer Doug Dafoe said the properties are a chance for his company to consolidate “our existing infrastructure and incremental production” and integrate about 500 future drilling locations into existing programs.
The deal raises Ember’s combined output to 110 million cubic feet per day, placing it second among Canada’s CBM producers behind Encana.
In 2011, Ember agreed to be acquired for C$125 million by an investor group led by the Brookfield Special Situations Groups and funds that are part of the ARC Financial group with participation by funds from the Kern Partners.
Dirk Lever, managing director of institutional equity research with AltaCorp Capital, said the backers of Ember have “effectively made a big bet on CBM recoveries in the future. They tried a financing some time ago and there was little interest so they took it private.”
Apache going to liquids Don Rawson, managing director of institutional research with AltaCorp, said the transaction indicates Apache has little confidence in the upside of shallow gas, or that there is any point in waiting for a turnaround in gas prices.
He said the sale is just a small part of a larger asset rationalization by Apache that the company hopes will generate US$4 billion by the end of 2013.
Rawson said Apache is concentrating on liquids and deeper liquids-rich plays, with emphasis on British Columbia’s Liard and Horn River basins, which they hope to monetize through LNG exports.
For Ember, the purchase is a chance to obtain a “predictable production profile” at a reasonable price and acquire CBM assets that fit the company’s production base.
Apache Chief Operating Officer Rod Eichler said his company’s objective is to build liquids production from a deep inventory of assets and generate attractive rates of return from its extensive remaining acreage in the Western Canada Sedimentary Basin.
He said Apache, as partner with Chevron in the Kitimat LNG project, hopes that role will see development of its unconventional resources in northern British Columbia.
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