In a measure taken to help it move out of insolvency, Canadian Superior Energy Inc. said last week it has agreed to unload a 45% interest in gas development Block 5(c), located off the southeast coast of Trinidad, to Centrica plc for US$142.5 million in cash. Centrica said the gas -- processed into liquefied natural gas (LNG) -- could supply its customers in the UK, with additional optionality provided by Centrica's North American customer base and the opportunity to sell into other Atlantic Basin markets.
The deal is subject to pre-emption rights from the existing field partners and subject to approvals from the Trinidad Government and Canadian courts. The board of directors of Canadian Superior has approved the sale and intends to recommend the sale to the court. Closing is expected in August 2009. The block is operated by BG Group, which holds a 30% stake, and Challenger Energy Corp. with a 25% stake. The discovery, made in 2005, was estimated to hold up to 5 Tcf (see NGI, Aug. 18, 2008).
To date, successful exploratory drilling of Block 5(c) has identified significant contingent gas reserves, with recoverable reserves attributable to a 45% equity stake estimated at 650 Bcf, equivalent to around half of Centrica's current UK gas reserves. Centrica, the parent company of British Gas in the UK and Direct Energy in North America, said additional undrilled exploration opportunities could substantially increase the potential of the block.
Centrica, which has an existing position in Trinidad and Tobago through an equity interest in Block 2(ab), said the new acquisition would provide Centrica with a material gas position in Trinidad, which is close to existing gas pipeline infrastructure and LNG export facilities.
Subject to development plan approval, the first gas from Block 5(c) could be delivered in 2014, the company said. Centrica's initial estimates of development capital expenditure on the play is $658 million.
"Trinidad is one of the key export areas for Atlantic Basin LNG with substantial available reserves and infrastructure in place," said Centrica CEO Sam Laidlaw. "Gas produced from this block could help address our long-term structural hedge position by reducing our exposure to volatile wholesale gas prices, offering a potential future gas supply option for our British Gas customers in the UK and for our Direct Energy customers in North America."
Centrica noted that it has already taken delivery of six LNG cargoes into the United Kingdom within the last six months and has contracted another 10 cargoes for 2009 and 2010, utilizing Centrica's import capacity at the Isle of Grain regasification facility.
If completed, the sale could help shore up the books of embattled Canadian Superior. "The sale of 45% of Block 5(c) is a critical component of the company's restructuring," Canadian Superior's board of directors said. "Scotia Waterous, which was engaged by the Company to assist on the sale, undertook an extensive international marketing process in soliciting offers for up to 45% working interest in Block 5(c)."
In late April (see NGI, May 4) the founder of now-insolvent Canadian Superior said he and the company's CEO were asked to resign by the board of directors following a meeting about Block 5(c). Greg Noval, the founder and executive chairman, said he and CEO Mike Coolen had called a board meeting in April to recommend bids for the company's interest in Block 5(c). The investor group also has urged Noval's ouster partly because of his conflict of interest as a shareholder and as a senior executive at Challenger Energy.
At the time Noval said offers for Canadian Superior's stake in the Intrepid Block could help the company emerge more quickly from bankruptcy restructuring under Canada's Companies' Creditors Arrangement Act. However, the directors "chose not to even review or see the bids," Noval said.
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