Bellatrix Exploration Ltd., Calgary, signed a $300 million (Can.) joint venture agreement with a company based in Seoul, South Korea, to jointly develop Bellatrix’s undeveloped Cardium holdings in west-central Alberta. The name of the South Korean firm was not disclosed.
Terms call for the partner to pay $150 million to the JV, which plans to drill 83 Cardium wells.
This is not the first time South Korean companies have invested in Canadian oil and gas. Last year, TransCanada Corp. formed a partnership with Korea Gas Corp., Mitsubishi Corp., and PetroChina Co. Ltd. to construct a $4 billion pipeline line from northeastern British Columbia to a LNG terminal at Kitimat. Korea National Oil Corp. in late 2009 bought Harvest Energy Trust for $1.7 billion.
Finalization of the Bellatrix JV, subject to certain closing conditions, is expected by Apr. 30. The effective date is Apr. 1, and the partner may elect to invest in Cardium wells already drilled earlier this year.
The partner will earn 33% of Bellatrix’s working interest in the Cardium wells until recovery of its investment plus an 8% return on investment. After payout, expected within 7 years, the partner’s share reverts to 20% working interest.
Bellatrix will be required to guarantee return of the partner’s capital investment of up to $30 million if payout is not achieved within 7 years.
As a result of the JV, Bellatrix boosted its net capital expenditure plan for 2013 to $230-240 million compared with a previously announced $180 million budget.
Bellatrix anticipates a 2013 exit rate of 30,000-31,000 boe/d. On Dec. 14, 2012, Bellatrix acquired an additional 11 gross and net sections of highly prospective Cardium and Notikewin-Falher assets in the Ferrier area of west central Alberta. This acquisition is expected to yield 37 net drilling locations in the Cardium, 9 net locations in the Notikewin-Falher, and 66 net locations in the Duvernay formation.
Bellatrix continues to focus on its core Cardium and Notikewin-Falher assets.
On Dec. 31, 2012, Bellatrix had 206,638 net undeveloped acres and had identified more than 1,700 net opportunities with estimated capital requirements of $8.17 billion based on current costs. The firm believes inventory would take more than 40 years to develop based upon its current cash flow.