A wholly owned subsidiary of Vancouver-based International Petroleum Corp. (IPC), the non-Norwegian spinoff of Lundin Petroleum AB, has agreed to acquire Cenovus Energy Inc.’s interests in the Suffield and Alderson conventional oil and gas areas of southern Alberta for $512 million (Can.).
IPC will have 100% operatorship and 98.8% working interest of the assets, which comprise a contiguous position of 800,000 net acres of shallow natural gas rights and 100,000 net acres of oil rights.
The properties in 2017 are forecast to produce 6,900 b/d of oil and 102 MMcfd of gas, or a combined 24,000 boe/d.
IPC says the assets have low production costs and future development potential from a combination of low-risk development drilling, well stimulation, and enhanced oil recovery opportunities.
The deal, expected to close in the fourth quarter, includes a deferred purchase price adjustment of as much as $36 million. Under the terms of a 2-year commitment that begins Jan. 1, 2018, IPC will make payments to Cenovus for each month in which the average daily price of West Texas Intermediate is above $55/bbl or the price of Henry Hub natural gas is above $3.50/MMbtu.
IPC expects to fully fund the purchase through debt financing. The firm also has received commitments for new credit facilities of $325 million (Can.) for the Suffield and Alderson assets and for an increased reserve-based lending facility of $200 million (US) for its existing international assets.
Evolving spinoffs
IPC reemerged earlier this year after Lundin split off its exploration and production assets in Malaysia, France, and the Netherlands (OGJ Online, Apr. 11, 2017). Those assets comprise existing proved and probable reserves of 29.4 million boe and a forecast net production for 2017 of 9,000-11,000 boe/d.
The original IPC was formed by Adolf Lundin in the 1980s and developed assets in Malaysia.
Meanwhile, Calgary-based Cenovus, itself an offshoot of Encana Corp. since 2009, said it will use net proceeds from the Suffield and Alderson sale as well as its $975-million (Can.) Greater Pelican Lake asset sale announced earlier this month to reduce the company’s $3.6 billion asset-sale bridge facility (OGJ Online, Sept. 5, 2017).
“The successful execution of our planned divestiture program this year will further focus our asset base and should leave us well positioned to drive additional shareholder value from our core assets in the oil sands and Deep basin,” commented Brian Ferguson, Cenovus president and chief executive officer.
Cenovus earlier this year acquired ConocoPhillips’s 50% interest in the companies’ jointly owned Foster Creek Christina Lake oil sands partnership as well as the majority of the Houston independent’s Deep basin conventional assets in Alberta and British Columbia for $13.3 billion (US) (OGJ Online, Mar. 30, 2017).
Cenovus said it also plans to reach sale agreements in the fourth quarter for its Palliser assets in southern Alberta and Weyburn carbon-dioxide EOR operation in Saskatchewan.
Contact Matt Zborowski at [email protected].
