Calgary-based Pengrowth Corp. plans to acquire the remaining Western Canadian assets of Murphy Oil Corp. for C$550 million, the companies announced Thursday. The transaction is expected to be completed in late May.
The properties are a diverse group of assets within the Western Canadian Sedimentary Basin, including interests in the west central and Peace River Arch areas (including McLeod, Deep Basin and Peace River Arch interests); southern Alberta (including interests in Countess, Princess and Twining/Three Hills); and heavy oil interests (including properties in Lindbergh, Tangleflags and Lloydminster areas).
Current production for the assets is approximately 15,500 boe/d before royalties (on the basis that 6 Mcf of natural gas are equivalent to 1 boe), comprised of 46 MMcf/d of natural gas, 1,550 bbls/d light/medium crude oil and natural gas liquids (NGLs) and 6,250 bbls/d of heavy oil. Following the acquisition, Pengrowth’s total production will increase 33%, from the current level of approximately 46,500 boe/d to 62,000 boe/d.
Total remaining recoverable reserves from the acquired properties are estimated to be 43.6 MMboe on a proved basis and 54.2 MMboe on a proved plus probable basis, based on an engineering appraisal by Sproule Associates Ltd. Sproule estimates that following the acquisition, the proportion of Pengrowth’s total remaining recoverable reserves represented by natural gas will increase to 40% from its current 37%.
Along with the reserves and production, Pengrowth will acquire approximately 219,000 acres of undeveloped land from Murphy.
Claiborne P. Deming, Murphy’s CEO, said the Pengrowth purchase would “conclude the sale of our Western Canada assets as the company can now redirect its focus and capital to higher growth and higher return frontier areas.” Murphy, which is headquartered in El Dorado, AR, announced last December that it would sell most of its conventional oil and gas properties in Western Canada to free up cash for projects in its growth areas (see NGI, Dec. 15, 2003).
For Pengrowth, the assets “will add a new dimension…through a broad portfolio of properties, which augment its current interests in the Western Canadian Sedimentary Basin and in the Sable producing gas fields located offshore Nova Scotia,” the company said.
Pengrowth expects the acquisition will be accretive for unitholders of Pengrowth Energy Trust based on production, reserves, and distributable cash on a per unit basis, adding approximately 6.9% to reserves per unit on a proved plus probable basis. Its estimated Reserve Life Index on a proved plus probable basis will be 10 years following the transaction.
Pengrowth plans to finance the transaction through cash on hand (provided in part through a recently completed C$200 million bought deal equity financing) and through committed interim debt financing for the transaction with its lead banker.
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