A C$100 million ($75 million) oil development is planned over the next two years by a new northeastern Alberta drilling partnership announced Monday between Headwater Exploration Inc. and Cenovus Energy Inc.

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The deal gives Headwater a working ownership from Cenovus of Marten Hills, a 295-square-mile prospect, with C$35 million ($26 million) in cash plus 50 million shares valued at C$65 million ($49 million).

Cenovus would obtain a 26% ownership in Headwater with two seats on the smaller Calgary firm’s board. Cenovus also retained a royalty share of Marten Hills production, currently 2,800 b/d.

The property is a rare corner of Alberta’s 54,054-square-mile oilsands region where crude flows naturally from wells without costly bitumen mining or thermal underground...