Conoco's Canadian Play Continues
Conoco Inc.'s Canadian midstream arm, Conoco Canada Limited,
said last week it has acquired the bulk of Petro-Canada's natural
gas liquids (NGL) business, including the fifth largest natural gas
processing plant in North America, for an undisclosed sum. Closing
on the purchase is scheduled to be completed in the second quarter
"This addition to our portfolio increases Conoco's total net
natural gas liquids production in Canada, the U.S. and Trinidad by
65%, to 105 million b/d, and triples net processing capacity to 3.4
Bcf/d, while reducing per barrel overhead and operating costs by
24%," said Mike L. Johnson, vice president and general manager of
Conoco's natural gas and gas products business unit.
Through the deal, Conoco acquired 92% operating interest in
Petro-Canada's 2.4 Bcf/d Empress natural gas processing plant near
Medicine Hat, AB, the 580-mile Petroleum Transmission Company (PTC)
pipeline that extends from Empress to Winnipeg, six related
pipeline terminals and a storage facility. The Empress plant has an
NGL production capacity of 48,000 b/d.
Johnson said the Petro-Canada acquisition is Conoco's latest
effort to move away from a midstream business of scattered assets
in mature basins towards a more profitable business built on
centralized, large-scale gas processing systems.
In addition to acquiring the assets, Conoco will operate and
manage Petro-Canada's NGL wholesale supply and marketing
operations, and employ almost all of the 140 Petro-Canada
NGL-related employees in Calgary, the Empress plant, PTC pipeline
system and field offices in Tulsa and Sarnia, ON.
The acquisition includes major agreements for Conoco to provide
all NGL services for Petro-Canada's upstream operations in Western
Canada and for Petro-Canada's refineries in Edmonton, AB, Oakville,
ON and Montreal, PQ.
"This acquisition is a large step in our program to economically
upgrade our portfolio of North American natural gas processing and
natural gas liquids assets, and follows the recently announced sale
of midstream properties in Oklahoma and West Texas," said Rob
McKee, Conoco's executive vice president for global exploration
production. "The Petro-Canada acquisition augments our existing
Canadian assets that were recently expanded through an acquisition
of natural gas producing properties from Renaissance."
A rigorous rationalization program of gas gathering and processing assets during
the year resulted in the asset sales in Oklahoma. Conoco sold the assets to
Duke Energy last January (see NGI, Jan. 10).
The Renaissance Energy assets, purchased in late 1999, more than doubled Conoco
Canada's gas reserves and increased daily gas production by 60%.
For Petro-Canada, the transaction will result in an after-tax
gain of $95 million, most of which will be included in earnings for
the first quarter. The gain is subject to adjustments the company
said. "This asset sale continues our program of divesting non-core
assets," said Ron Brenneman, president of Petro-Canada. "In the
upstream, we are continuing to narrow the focus of our core
businesses to Grand Banks offshore oil development, oil sands and
natural gas in western Canada."
The Petro-Canada agreement also includes Conoco's purchase of
Petro-Canada's non-operating fractional interests in the Cochin
Pipeline and its associated storage, treating plants and terminals;
the Dow-operated Fort Saskatchewan propane-plus fractionator; and
the Rimbey Pipeline. Those interests are subject to other
Joe Fisher, Houston