In what was the biggest E&P deal of the week, fellow Canadian intermediate producers Pengrowth Energy and NAL Energy combined to form a company which will reportedly be worth $6.6 billion. The deal will see Pengrowth acquire NAL in an all-stock deal, which values NAL at an enterprise level of $1.9 billion including approximately $600 worth of debt. The transaction will be effected by NAL shareholders receiving 0.86 shares of Pengrowth for each share of NAL that they hold. Based on the market prices one day prior to the deal announcement, this represents a low premium of just 9.7%, implying a friendly takeover between the two former Canadian royalty trust companies.
Pengrowth will receive a highly developed Canadian asset base, weighted evenly between gas and liquids at a cost per proven boe of $29. The high valuation can be explained through the additional upside of NAL’s portfolio which includes over half a million acres of undeveloped land, $1.4 billion of accrued tax pools and 38 million boe of probable reserves.
US based Master Limited Co., QR Energy, acquired mature assets in the US mid-continent for $230 million. The assets hold 13 million boe of proven reserves which are 93% liquids and 98% developed but only have moderate production rates due to their level of maturity. This has led to a competitive cost per boe of proven reserve of $17.70 but a high cost per producing boe of $195,000, compared to the typical cost in the US of around $60,000.
Parallel Energy Trust acquired the remaining 41% interest in the liquids rich West Panhandle Field from Bravo Natural Gas LLC for $189 million. The cost per proven boe of reserves equated to just $10 as although the reserves are only 5% gas, the liquids are composed purely of less valuable condensates as opposed to oil.
Falkland Oil & Gas secured their long awaited deal for a rig this week as part of a farm-out agreement with an unspecified company. The deal will see Falkland Oil and Gas relinquish a 25% interest in its license area in return for the partner contributing 25% of both past and future costs, with the latter comprising of a two well exploration program during 2012. Falkland Oil and Gas' acreage is located in the South Basin which unlike the North Basin and its 1 billion boe oil in place Sea Lion discovery has yet to be drilled.
Shell and CNPC concluded a landmark deal in China that will see Shell take up a production sharing contract in 3,500 square kilometres in the Sichuan Basin. The deal marks the first ever PSC in the expanding shale gas industry in China, which the Government hopes will put a partial end to the country’s dependence on foreign resources. It has been estimated by the EIA that China may hold over 1,000 TCF of gas in its shale deposits although it has yet to be proven whether the resources can be extracted with the same ease as in the US plays.
In the midstream sector Williams Partners struck a $2.5 billion deal for private company Caiman Eastern Midstream LLC, a company specializing in the transportation and processing of gas from the Marcellus shale play. As part of the deal Williams Partners and Caiman Energy, will also partake in a joint venture to develop infrastructure in the Utica play. The Utica shale play is in its infancy but may be the next US shale play to take off if Chesapeake’s positive operating results so far, extends across the entire formation.
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