Obsidian terminates sale of Peace River Oil interest

The agreement providing for the sale of Obsidian Energy Ltd.’s 55% interest in the Peace River Oil Partnership to Highwood Oil Co. Ltd., Calgary, for $97 million (Can.) has been terminated.

The agreement providing for the sale of Obsidian Energy Ltd.’s 55% interest in the Peace River Oil Partnership to Highwood Oil Co. Ltd., Calgary, for $97 million (Can.) has been terminated as consent to the transfer of the company’s partnership units and consent of transfer of operatorship of the partnership from China Investment Corp. (CIC) were not obtained.

In 2010, CIC agreed to joint venture with the company—then Penn West—to develop the bitumen assets in Alberta. CIC gained 45% interest in the deal. At the time, the proved value of the assets was $1.2 billion (OGJ Online, May 26, 2019; June 1, 2010).

The Obsidian-Highwood agreement was reported in May. It comprised Obsidian’s 55% operated working interest in the partnership (8,000 boe/d gross production, 4,400 boe/d net production to Highwood, 89% oil and liquids) with a large drilling inventory in the conventional Bluesky and emerging Clearwater oil plays. The deal also was to include access to a 2D-3D seismic database license, and extensive egress and infrastructure in place, Highwood reported in its May 16 press statement.

A May statement by Obsidian said the deal was expected to close by the end of August following a waiver by its partner to exercise both the right of first refusal and the tag along provisions. At the time, the deal had received the advanced ruling certificate from the Competition Bureau of Canada.

In a statement released Aug. 28 reporting the deal’s termination, Obsidian said it plans to pursue “all other viable alternatives for the disposition of our interest in the partnership and continue to focus on our high-quality, light oil Cardium asset.”

Production from the Cardium was 20,289 boe/d in this year’s second quarter, a 5% increase compared to the year’s first quarter and a 10% increase versus second quarter 2018. The company has commenced Cardium Phase 2 with two rigs drilling in Willesden Green.

Contact Mikaila Adams at madams@endeavorb2b.com.

More in Companies