Two companies will also explore alternatives to traditional NA pipeline gas market
By Oil & Gas Financial Journal staff
Canadian natural gas company Progress Energy Resources Corp. has agreed to sell 50% of its working interest in certain British Columbia shale assets to Malaysian national oil company, Petronas, for $1.1 billion (CDN$1.07 billion, RM3.32 billion).
As part of the binding framework agreement, the two companies will create a partnership to develop a portion of Progress' Montney shale assets in the Foothills of northeast British Columbia. The assets include the Altares, Lily, and Kahta properties (the North Montney Joint Venture).
The joint venture covers 150,000 gross working-interest acres of land with an estimated contingent gas resource of more than 15 trillion cubic feet. Currently, the acreage include five minimally producing wells. The assets will be operated by Progress.
Under the terms of the framework agreement, Petronas will pay 25% of the total consideration (CDN $267.5 million) in cash at closing and 75% of the total consideration in the form of a capital carry whereby Petronas will pay 75% of Progress' share of future capital expenditures in the North Montney Joint Venture over the next five years to a total of CDN $802.5 million.
As part of the acquisition, Petronas and Progress have agreed to establish an LNG Export joint venture, to be owned 80% and 20%, respectively, to conduct a feasibility study on the economic viability of an integrated LNG Export facility in Western Canada. Petronas would serve as operator and the two companies would jointly market the LNG.
In connection with the LNG Export Joint Venture, Petronas will provide a standby equity financing commitment of up to $600 million, for Progress' capital requirements arising from the North Montney and LNG Export joint ventures from which Progress can draw down at the time of a successful LNG final investment decision.
Closing of the transaction, expected in the third quarter of 2011, is subject to the execution of definitive agreements and receipt of regulatory approval. BMO Capital Markets acted as exclusive financial advisor to Progress on the transaction. Bank of America Merrill Lynch is the exclusive financial advisor to Petronas in the transaction.
