Exxon bid for Celtic raises LNG stakes in B.C.
A 'resource grab' as Exxon-controlled Imperial Oil studies West Coast exports
ExxonMobil Corp.’s $3-billion bid for Calgary-based natural gas producer Celtic Exploration Ltd. continues the jockeying underway along the B.C.-Alberta border for prime acreage that could potentially feed West Coast exports.
Exxon, the world’s largest energy company, agreed today to pay $24.50 per share for Celtic in a deal valued at roughly $3.1 billion including Celtic’s debt. The offer is subject to a $90 million termination fee and has unanimous approval from Celtic’s board. It represents a 35 per cent premium over Celtic’s closing share price on the Toronto Stock Exchange on Oct. 16.
In addition to Celtic’s current production of 72 million cubic feet per day of gas, plus 4,000 barrels per day of crude, condensate and natural gas liquids, Exxon picks up roughly 650,000 net acres in the Montney and Duvernay shale formations.
The deal adds a new and potentially significant entrant into Canada’s LNG sweepstakes.
Exxon-controlled Imperial Oil Ltd. is in the “early stages” of assessing the viability of an export scheme as a way to monetize existing assets in the company’s Horn River acreage, Andrew Swiger, a senior vice-president with the Irving, Texas-based company, said Sept. 20 in Banff.
In its bid for Celtic, Exxon is acquiring a company with estimated proved plus probable reserves of 128 million barrels of oil equivalent and a so-called reserve-life index – weighted 76 per cent toward natural gas – of 13 years.
That figure is a closely watched measure of future production potential.
It carries particular weight among export proponents in need of long-dated reserves to support LNG trains, says Bill Gwozd, vice-president of gas services at Ziff Energy Group.
Indeed, Exxon was rumored to have made a rival bid for Progress Energy Resources Corp. before it was sold to Malaysia’s Petronas, which is studying an export project of its own.
Progress has booked roughly 12 years’ worth of proven reserves, “so if you’re going to be a buyer, let’s say Petronas, here’s a good metric,” Gwozd said in a recent interview. “You’ve got good reserve life, you’ve got a strong exploration team; and they can add reserves.”
Neither Exxon nor its Canadian affiliate has formally proposed an export project.
At this point, the bid for Celtic “looks like more of a resource grab as opposed to setting up an asset to supply LNG in the future, although they do retain that option,” said Robert Fitzmartyn, an analyst at FirstEnergy Captial Corp., which advised Celtic on the transaction.
“It’s not as visible as maybe Shell buying Groundbirch in the Montney,” he said.