Page 10 - NorthAmOil Week 30

NorthAmOil COMMENTARY NorthAmOil

ConocoPhillips’
Canadian operations

for 2020 and only recently started to restore offtake improvements at its Montney operations,
some of the production it curtailed earlier this the assets increase its exposure to the core of the
year in response to the market downturn. liquids-rich portion of the play.
“We have tracked and analysed this adjacent In addition to the $375mn price tag, the
acreage position for a long time,” said Fox. “It transaction – which is due to close in the third
represents a high-value extension of our existing quarter of 2020 – includes the assumption of
Montney position, and we’re pleased to capture roughly $30mn worth of financing obligations
this opportunity at an attractive cost of supply for associated infrastructure.
that meets our criteria for resource additions.
The transaction provides operating scale and Riding out the storm
flexibility to create significant value for share- The Montney is primarily known for being a gas
holders by applying our drilling and completion play, and indeed its development has been linked
techniques on this asset and optimising our to launching LNG exports from Canada’s West
future overall Montney development plans.” Coast. However, Canada’s LNG industry has
The move comes after ConocoPhillips pre- been slow to emerge and only one major export
viously bolstered its Montney footprint in 2018, terminal – the Royal Dutch Shell-led LNG Can-
buying about 35,000 net acres (142 square km) ada – is currently under construction.
for $120mn to bring its assets in the play to With major demand from new liquefaction With both oil
140,000 net acres (567 square km). plants not yet materialising, producers in the
region are having to weigh their options for and gas still
Montney boost how to proceed in an increasingly challenging vulnerable to
The Kelt assets consist of a further 140,000 net market.
acres and the deal will now bring ConocoPhil- For Kelt, selling some of its non-core assets demand shocks,
lips’ total Montney footprint to 295,000 net acres has presented a way forward. The company
(1,194 square km) with a 100% working inter- said in its own statement last week that the deal a diversified
est. The acquisition also adds over 1bn barrels presented “an opportunity to bring forward the
of oil equivalent (boe) of what ConocoPhillips value of certain assets and at the same time put asset mix that
describes as “high-value resource”. Depending the company in a position of increased finan- includes both
on the pace of development, the company esti- cial strength during an uncertain economic
mates that the acquisition cost is around $2-4 per environment”. could be seen as
barrel on a West Texas Intermediate (WTI) cost For ConocoPhillips, meanwhile, seeking
of supply basis. additional scale turned out to be a more attrac- prudent.
The assets have production of roughly tive option.
15,000 barrels of oil equivalent per day (boepd), In addition, with both oil and gas still vulner-
and will add around 1,000 well locations, able to demand shocks, a diversified asset mix
which are described by ConocoPhillips as that includes both could be seen as prudent.
“high-quality”. Once again, this is illustrated by both Cono-
As well as the added scale, which the com- coPhillips’ acquisition and by the shale acreage
pany hopes will help drive supply chain and that Chevron will acquire from Noble.™

P10 www. NEWSBASE .com Week 30 30•July•2020