Canada's Daylight Resources to buy Highpine

Canada’s Daylight Resources Trust is buying Highpine Oil & Gas Ltd. in a $530 million deal set to close by mid-October.

By OGJ editors
HOUSTON, Sept. 2
-- Canada’s Daylight Resources Trust is buying Highpine Oil & Gas Ltd. in a $530 million deal set to close by mid-October.

The acquisition is expected to hike Daylight’s reserves more than 40% to 108 million boe. Combined production of the two companies was 39,864 boe/d in the quarter ended June 30.

Daylight said the combined entity “will have the capacity to accelerate Daylight’s strategy of building an even more dominant position in its key growth areas of Elmworth and West Central Alberta, through acquisitions and an active drilling program, funded at a level more appropriate to the scale of opportunities already available in its inventory.

“Highpine’s Wapiti Montney and Brazeau Rock Creek prospects will complement Daylight’s diversified portfolio of opportunities.”

The transaction provides further financial flexibility as Daylight considers converting to a corporation in 2010 as it approaches the Canadian government’s planned implementation of the new SIFT tax regulations on Jan. 1, 2011.

Highpine’s lands outside of Pembina have a strong synergy with Daylight’s core West Central and Elmworth assets.

Daylight has proven up an exceptional resource play development in the Elmworth area with over 20 producing wells using horizontal and multistage fracturing technology in the Cadomin and uphole Cretaceous zones. Daylight estimates 1 tcf of gas resource potential in the play.

Using the same technologies in its West Central core area, including the Pine Creek and Kaybob assets, Daylight has begun developing the Bluesky and Montney zones, following up on recent industry success in the area.

Highpine’s lands in Ansell are adjacent to Daylight’s West Central Obed property, where the trust has been successful in developing a multizone stacked Cretaceous play. These lands are also on trend for potential horizontal Bluesky development.

Daylight is in the early stages of assessing a resource play opportunity in the Nikanassin zone at Elmworth (OGJ Online, July 14, 2009). In early 2009, two vertical wells encountered average Nikanassin sand thicknesses of more than 100 m each. Brought on line in March and April, initial rates were 2-3 MMcfd.

Daylight’s preliminary review of the geology of the Nikanassin zone indicates that it is present across all of its lands in Elmworth, where Daylight holds the Nikanassin rights in more than 64,000 acres. The quality and thickness of the Nikanassin will be delineated with more drilling across the property base, but gas in place in the two sections of land where Daylight has drilled indicate the presence of 100 bcf/sq mile.

The combined resource play opportunities expose Daylight to an unrisked 4 tcf of gas.

Daylight expects to drill a vertical delineation well and a horizontal well into the Nikanassin by the end of the 2009-10 winter. Highpine has over 40 net sections of land adjacent to Daylight’s Elmworth property that are prospective for the both the Montney and Nikanassin zones.

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