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Canadian Natural acquires Petrovera partnership properties from EnCana
Don Whiteley Petroleum News contributing writer
Canadian Natural Resources Ltd. further solidified its Alberta/Saskatchewan heavy oil holdings Feb. 18 with a $701 million acquisition of producing properties held by EnCana Corp. through Petrovera Resources, a heavy oil partnership.
In return, EnCana has strengthened its balance sheet and generated additional capital to retire debt, while at the same time re-emphasizing its focus what it calls its core resource play strategy. EnCana first bought out ConocoPhillips Canada In a complicated transaction, EnCana first purchased the 46.7 percent Petrovera interest of its partner, ConocoPhillips Canada, and then sold the resulting 100 percent interest in Petrovera to Canadian Natural for a total of approximately US$535 (C$701) million before working capital adjustments.
Canadian Natural Resources immediately spun off some of those properties to an unnamed company for $234 million, for a net acquisition cost of $467 million. At the same time, Canadian Natural said it would consequently defer about $300 million of the company’s planned capital expenditures for this fiscal year.
“The Company has also reviewed its 2004 capital requirements for the Horizon Oil Sands Project and has established a budget of $200 to $400 million, reflecting an updated estimate of spending ranges for the year,” Canadian Natural said in a statement. “These changes result in total 2004 forecast capital expenditures now in a range of $2.75 to $2.95 billion as compared with the previous range of $2.5 to $2.9 billion.”
Net production from the working interests retained by Canadian Natural is about 27,500 barrels per day of heavy oil and 9 million cubic feet per day of natural gas, together with volumes associated with royalty interests of 1,200 barrels per day of heavy oil and 2 million cubic feet per day of natural gas.
“This acquisition fits Canadian Natural’s strategy of dominating its core areas and related infrastructure as all of the properties acquired by the company are located in its heavy oil core area,” the statement said.
EnCana is moving in a different direction: “This is another step forward in the sharpening of our focus on resource plays — large, low unit cost unconventional natural gas and oil reservoirs that deliver sustainable, long-life reserves and production growth. Our Petrovera interest was non-operated and among our higher operating cost properties,” said Randy Eresman, EnCana’s chief operating officer.
EnCana is focused on enhanced recovery projects at Suffield and Pelican Lake, plus being a low cost in-situ oil sands producer using steam-assisted gravity drainage technology at the company’s 100 percent owned Foster Creek and Christina Lake oil sands projects.
“As previously stated, our 2004 plans call for the divestment of approximately 25,000 barrels of oil equivalent per day, after royalties, of primarily conventional heavy oil production in Western Canada. The Petrovera sale represents a substantial portion of that objective. This divestiture was previously reflected in the company’s 2004 sales guidance,” said Eresman.
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