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NorthAmOil COMMENTARY NorthAmOil

ConocoPhillips expands in Montney

ConocoPhillips’ $375mn purchase of Montney shale acreage comes despite the headwinds

that North American shale drillers are currently experiencing

BRITISH SHALE drillers have been hesitant to buy new Ramping up
COLUMBIA acreage recently, but some properties are now ConocoPhillips only started production at its
starting to change hands, with deep-pocketed Montney assets in the first quarter of this year,
WHAT: majors leading the way. Last week, ConocoPhil- bringing a 14-well pad and associated infrastruc-
ConocoPhillips is buying lips announced that it was buying additional ture online. In last week’s statement, the com-
Montney acreage from acreage in Western Canada’s Montney shale play, pany noted that it continued to ramp up output
Kelt Exploration for where it recently started production, from Kelt from this pad.
$375mn. Exploration for around $375mn. “Our current Montney development is per-
The announcement came two days after forming according to our projections and plans,”
WHY: Chevron said it was buying US independent ConocoPhillips’ executive vice president and
The acquisition Noble Energy for $5bn in stock (See NorthAm- chief operating officer, Matt Fox, said. “We’re still
represents an extension Oil Week 29). Noble’s portfolio comprises a mix in the process of bringing our initial wells online,
of the company’s existing of domestic and international assets – notably and early results are encouraging: we have con-
Montney position and fits including shale assets in the Permian and Den- firmed the liquids-rich nature of the play and
its criteria for resource ver-Julesburg (DJ) basins – that are thought to also confirmed that transferring the drilling and
additions. have significant upside in terms of recoverable completion techniques we’re employing in the
resources. ConocoPhillips’ acquisition illustrates US Big 3 can add significant rate and recovery
WHAT NEXT: that Canadian shale assets are also still generat- potential to the play,” he added.
Production from ing interest. Now the company can target additional
ConocoPhillips’ Montney Some of Noble’s acreage in the Permian is Montney growth over the longer term thanks
acreage only started in adjacent to Chevron’s existing operations there, to the new acquisition, though ConocoPhillips
the first quarter of 2020 paving the way for future activity to benefit from noted that the economics of the transaction do
and will continue to ramp synergies across the assets. The same goes for the not assume any incremental capital investments
up. acreage Kelt is selling – in the liquids-rich Inga- will be made in the Montney in the next few
Fireweed asset Montney zone, which is directly years.
adjacent to ConocoPhillips’ existing position in “We view the Montney as a very attractive
the play, according to a July 22 statement. This long-term asset and today’s announcement gives
suggests that while producers are likely to be us significant running room at a very attractive
hesitant to make new acquisitions in the current all-in cost,” Fox said. His other comments indi-
market, certain types of assets may be favoured, cate that ConocoPhillips approached the pur-
including in cases where they will allow the buy- chase after carefully considering it for some time.
ers to build up their existing footprint with con- This is perhaps not surprising given that the deal
tiguous acreage. comes shortly after the company cut its budget

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