Husky buys Talisman gas assets, properties in Alberta

Sept. 13, 2010
Husky Energy Inc. will acquire certain conventional west-central Alberta natural gas assets from Talisman Energy Inc., Calgary, for an estimated $450 million.

Husky Energy Inc. will acquire certain conventional west-central Alberta natural gas assets from Talisman Energy Inc., Calgary, for an estimated $450 million.

"It was a large group of conventional assets Talisman was putting up for sale as we continue to shift into shale gas in North America," a Talisman spokesperson said.

Calgary-based Husky said it signed a purchase agreement to acquire the assets, which will add to the firm's production and reserves and extend the optimum utilization of its Ram River gas plant.

The asset acquisition will provide Husky with more than 65 MMcfd of gas production, Husky said, adding that "the acquisition will contribute 37 MMboe of proven reserves and 11.7 MMboe probable reserves."

"This is an important acquisition that adds to our natural gas production and reserves in an area where we have significant gas gathering and processing infrastructure," said Husky Chief Executive Officer Asim Ghosh.

Husky said the Ram River gas plant processes "a significant portion" of the production that is being acquired, and over a 5-year period, further production from the acquired properties will be integrated into the plant.

The Ram River region, located in the foothills of central Alberta, is a core gas producing area for Husky, which currently produces 50 MMcfd.

The acquisition from Talisman adds 160,000 acres of land to Husky's holdings, including 122,000 undeveloped acres, and doubles the firm's current land holdings in the region.

Neither firm disclosed financial terms of the agreement, but analyst Randy Ollenberger of BMO Nesbitt Burns said it is likely worth $400-500 million.

In April, Talisman said it agreed to sell "a number of noncore assets in Canada with total proceeds of approximately $1.9 billion (Can.), through five separate transactions."

The transactions included 1 million net acres of land in the greater Peace River Arch, central Alberta Foothills, and greater Hinton areas in Alberta, as well as Talisman's Ontario properties.

"The assets are currently producing 42,500 boe/d (approximately 90% natural gas), with net proved reserves of 120 MMboe," Talisman said. It said that the sale equated to about $16/boe of proved reserves and seven times cash flow.

Talisman President and Chief Executive Officer John A. Manzoni described the assets as "excellent" but said they did not fit the company's plans.

"These sales are value accretive and will help us focus on, finance and build our growing, low-cost North American shale gas business," Manzoni said.

Recently Talisman increased its exploration holdings in Papua New Guinea by purchasing the stakes of two Australian companies—Cue Energy Resources Ltd. and Mosaic Oil Ltd.—in onshore retention lease PRL8 in the foreland region (OGJ Online, Sept. 1, 2010).

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