Page 5 - NorthAmOil Week 26 2022

NorthAmOil COMMENTARY NorthAmOil

The acquisition comes
as Canada moves
closer to becoming an
exporter of LNG with
construction of the LNG
Canada terminal.

from both the owned assets and third parties. of the year. It then expects net debt to fall fur-
The facility has the capacity to process 165 ther still to CAD800mn ($621mn) by the end
mmcf (4.7 mcm) per day. of 2023.
The value of the assets has gone up thanks to In its statement, Whitecap said it predicted
the rise in commodity prices since the start of production from the assets to rise to 36,000
the year, especially following Russia’s invasion boepd in 2023, with condensate accounting for
of Ukraine and the market upheaval that fol- 27%, NGLs for 9% and gas for 64%. It cited a
lowed. This is a turnaround from 2020, when positive outlook for North American natural
the assets were related to a multi-billion-dol- gas, driven by increased exports and concerns
lar impairment charge taken by Imperial and over global energy security. The acquisition will
ExxonMobil. give the company a more “balanced” portfolio
and allow it to diversify its commodity revenue
Building up streams and gain “significant” long-term expo-
The acquisition significantly expands Whitecap’s sure to North American gas prices.
natural gas portfolio, increasing its Montney Indeed, this comes as construction continues
footprint by over 500% and consolidating cer- on the first major LNG export facility on the
tain working interests at Kakwa from an average British Columbia coast, the Shell-led LNG Can- The acquisition
of 66% to 100% on roughly 22,000 gross acres (89 ada, with the Montney play expected to serve as
square km). It also gives the company a presence a source of feedstock gas. Another West Coast significantly
in the Duvernay at Kaybob. facility, Woodfibre LNG, is advancing towards expands
This is the latest step in the company’s expan- a final investment decision (FID), while else-
sion after it doubled its output from an aver- where in Canada, on the East Coast, a shelved Whitecap’s
age of 69,000 boepd in 2020 to almost 133,000 export project looks increasingly likely to be
boepd in the first quarter of 2022. Whitecap’s revived. (See: Canada talks LNG options with natural gas
previous Montney acquisition, Kicking Horse Germany, page 8)
Oil & Gas, came in the first half of 2021. At the portfolio,
time, it doubled its Montney position to about What next? increasing its
76,000 net acres (308 square km), according to Against this backdrop it is not surprising that
energy analytics firm Enverus. some companies would be tempted to expand Montney footprint
The company also has oil-producing assets in their natural gas footprints. This comes even as
Saskatchewan and Alberta. volatile commodity prices make it potentially by over 500%.
Whitecap said it would fund the acquisition more difficult for sellers and buyers of acreage to
through existing credit facilities and a new four- agree on valuations.
year term loan, with the deal anticipated to close Indeed, the acquisition is seen by analysts as
before the end of the third quarter of this year. evidence that there are still willing buyers for
Upon closing, the company anticipates net debt large packages of assets. More consolidation
of CAD2.1bn ($1.6bn), which it then expects may yet follow as other companies potentially
to decrease to CAD1.5bn ($1.2bn) by the end also pivot more towards gas.™

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