Birchcliff Energy Ltd. targets three-fold production increase
Company eyes 60,000 boe target amid merger and acquisition speculation
Birchcliff Energy Ltd., the Calgary-based natural gas producer backed in large measure by billionaire investor Seymour Schulich, is targeting a three-fold increase in production as west coast merger and acquisition speculation heats up.
The company aborted a sale last March amid weak gas prices after rejecting two non-binding offers from unnamed parties. It pumped 22,000 barrels of oil equivalent through the second quarter of 2012, and hopes to exit the year producing 26,000 boe.
“We figure we’ve got to get to about 60,000 boes” to attract interest from potential buyers, Jim Surbey, Birchcliff’s vice-president of corporate development, said on the sidelines of a Calgary conference this week. “That’s what our plan is. We think we’ve got the asset base and the team that can do it, so we’re working ahead.”
The plan comes as LNG proponents scramble to back-fill proposed export schemes with fresh reserves.
In a recent report, CIBC flagged potential exports of the chilled fuel as a “key” driver of future mergers and acquisitions. It ranks Birchcliff well behind industry peers Painted Pony, Celtic, Bonterra and Tourmaline as a “likely” takeout target, however, in part because weak gas prices are not favorable to sellers, but also because buyers are looking for companies with size.
“In our opinion, junior companies can no longer rely upon a corporate acquisition as a viable exit strategy, and must be prepared to grow either organically or via acquisition to the size of an intermediate producer,” the bank said in a Sept. 26 report.
Birchcliff is a founding member of the B.C. LNG Export Co-operative, which has permission to export up to 1.8 million tonnes of the super-cooled fuel annually over 20 years from Canada’s West Coast.
Surbey said the scheme faces its own set of challenges compared to rival projects, not least survival in a race dictated by multibillion-dollar budgets. “Unfortunately it’s a fairly small project at this stage. It’s not a world-scale type project, but it’s a start, and everything has to start somewhere,” he said.