Calgary-based Bonavista Energy Trust, which struck a deal with EnCana Corp. to acquire 409,000 net acres in west-central Alberta, said the transaction would raise its current output by 22% and future production would be 60% weighted to natural gas.

EnCana agreed to sell the leasehold in west-central Alberta for $632 million in cash (see Daily GPI, July 17). Bonavista said the transaction is scheduled to close by Aug. 21.

The acreage to be sold currently produces about 60 MMcfe/d net, which includes 53.2 MMcf/d of gas, 2,150 b/d of natural gas liquids and 380 b/d of light oil. Bonavista officials hope to increase production and recoverable reserves by more than 50%.

“I think we’re at or near the bottom of the cycle” on gas prices,” Bonavista CEO Keith MacPhail said. “This is about the only time we could purchase a quality asset like this at a price like this. Do we need high gas prices to make a good deal? No. Would higher gas prices make it a great deal? Yes.”

EnCana was planning to sell up to $1 billion of assets across North America this year. Spokesman Alan Boras said the Bonavista sale “is a substantial portion of that.”

The properties to be acquired are situated on resource-rich, contiguous land, Bonavista noted, “of which approximately 156,000 (136,000 net) acres are undeveloped…The area is characterized as one of the most prolific multi-zone areas in Western Canada with over 12 different producing horizons and significant exposure to the recently emerging resource plays occurring in the Glauconite, Rock Creek, Cardium, Viking and Notikewin formations.

“While there is extensive exploration and development potential in many zones within the area, the primary development program will initially consist of drilling horizontal wells within the Glauconite and Rock Creek formations utilizing multi-stage fracture techniques paralleling Bonavista’s success in the area over the past year,” Bonavista said.

The trust already has identified 165 horizontal drilling locations on the new acreage. Finding and development costs were estimated at about C$10/boe, with onstream costs of about C$10,000/boe a day. “Eighty-nine percent of the production is operated, resulting in attractive operating costs of C$6.40/boe,” Bonavista noted.

According to the trust, the new assets would:

To finance the transaction Bonavista plans to use bank loans and raise about $300 million by issuing 23 million trust units at C$16.85/unit.

The trust was created when Bonavista Petroleum Ltd. was reorganized in July 2003. Current operations are focused within Alberta, Saskatchewan and northeastern British Columbia. Prior to the EnCana transaction, Bonavista estimated that output for 2009 would average 51,500-52,500 boe/d, 55% weighted to gas.

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