Canadian LNG Developer Buys More Gas Assets
Canadian LNG developer Pieridae Energy said June 26 it has reached a C$190mn (US$145mn) agreement to acquire all of Shell Canada’s natural gas assets in the Foothills region of Alberta, more than doubling its production and reserves base and bringing closer a final investment decision (FID) on its C$10bn ($7.5bn) Goldboro LNG project in Nova Scotia.
The acquisition, expected to close in 3Q 2019, includes average production of 119mn ft3/day of conventional natural gas, 5,646 barrels/day of natural gas liquids and 3,161 b/d of condensate and light oil. Pieridae will also acquire three deep cut sour gas processing plants at Jumping Pound, Caroline and Waterton with a combined processing capacity of 750mn ft3/d, of which 420mn ft3/d is available.
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“We said we would acquire additional gas supplies for the LNG facility and we have done that,” Pieridae CEO Alfred Sorensen said. “Not only does this deal help us secure the remaining conventional natural gas supply needed for the first train of the Goldboro LNG project, it makes Pieridae a major player in the Alberta midstream and upstream industry.”
Sorensen suggested to NGW on the sidelines of the recent Global Petroleum Show in Calgary that a new supply deal for the first 5mn mt/yr train at Goldboro was close to being concluded.
With the added natural gas supply, Pieridae now expects to access up to US$1.5bn in credit support from the German government to develop the upstream assets as part of its Goldboro LNG project. All of the output from the first train was committed to German utility Uniper in 2013 under a 20-year purchase and sale agreement.
In 2018, Swiss utility Axpo signed a term sheet for what some sources said could be as much as 2.5mn mt/yr of Train 2 output, while Sorensen told NGW at the Global Petroleum Show that virtually all of the second train’s remaining capacity has been committed to parties which he was not in a position to identify.
The acquisition includes an estimated 257,400 net developed and undeveloped acres of land, proved developed and producing (PDP) reserves of 82.78mn barrels of oil equivalent (boe) and proved reserves of about 89.3mn boe, giving the company plenty of running room to develop additional production to meet the expected 900mn ft³/day of demand from Train 1. Pieridae’s existing reserves total about 60.1mn boe on a PDP basis and nearly 84mn boe on a proved basis.
“Existing production and new drilling inventory will provide significant new gas supply along with an extensive, well maintained, underutilised and sophisticated gas midstream system,” the company said. “The associated liquids will provide accretive net operating income and the associated gas will provide a large contribution to the 800mn ft3/day of conventional gas supply that is required for Train 1 of the Goldboro LNG facility.”
Pieridae’s Ikkuma Resources, acquired in December 2018, will supply the remaining 100mn ft3/day to Train 1.
Net annual operating income of the acquired assets has been estimated at about C$60mn, which Pieridae says it will grow through finding efficiencies in the field and expanding third party revenue, most likely by filling the available capacity of the processing plants.
The purchase will be effected by C$175mn of cash to be raised through the issuance of term debt and equity and the issuance of C$15mn worth of Pieridae common shares to Shell Canada, the Canadian subsidiary of Anglo-Dutch major Shell.
Pieridae continues to work with Kellogg Brown & Root (KBR) to review an amended version of the previously prepared front-end engineering and design (Feed) study for the project, and to conduct an open-book estimate necessary to finalise a lump-sum, turnkey engineering, procurement and construction contract with KBR. Pending that contract, the company expects to take a positive FID on Goldboro LNG by the end of this year.