Chasing Montney assets in BC

Gary Park

For Petroleum News

The Montney resource play of northeastern British Columbia was the driver for ExxonMobil’s C$3.1 billion takeover bid for Celtic Exploration and has sparked another acquisition, this time for Tourmaline Oil to enlarge its asset base in the liquids-rich play.

In a C$258 million all-share offer, Tourmaline is counting on bringing privately owned Huron Energy into its fold in December, doubling its British Columbia land holdings to 120,000 acres and adding to its horizontal drilling inventory in the Montney region.

The Huron assets include 5,500 barrels of oil equivalent per day (more than 90 percent natural gas) and 46.2 million boe of proved plus probable reserves as evaluated by GLJ Petroleum Consultants.

All directors, officers and certain shareholders have recommended that Huron shareholders vote their shares currently trading close to C$32 in favor of the deal.

For Tourmaline, the transaction reinforces its strongly held confidence in the resource plays of northern Alberta and British Columbia, especially the Duvernay play in Alberta’s Deep basin, where it spends two-thirds of its capital budget. Tourmaline’s second-quarter production was 51,000 boe per day (13 percent liquids) and its 2012 capital budget is set at C$410 million.

It is targeting output of 55,575 boe per day by the end of 2012.

Company Chief Executive Officer Mike Rose, a pioneer in the Duvernay, said that acquiring Huron is a “nice tuck-in to enhance our Montney position.”

He told investors recently that “we think that in the long run gas is absolutely the best place to be.”

“With a fragile economy in the U.S. it makes so much more sense to base it on gas at US$5 per million British thermal units compared to oil at $80-$100 per barrel,” he said.

Rose said he does not believe that the current U.S. rig count can sustain the current level of gas production and “it does appears to be starting to roll over, especially given the high decline nature of most of the new production.”