Targets could include Painted Pony, Talisman Energy, Advantage Oil & Gas, and ARC Resources
International investors including ExxonMobil are favouring natural gas over oil sands acquisitions in Canada as the less-expensive way to supply Asian markets, according to a report.
Three of the five largest energy acquisitions announced by foreign buyers in Canada this year, valued at a combined $9.8 billion, were for natural gas assets, according to data compiled by Bloomberg.
The trend will continue next year as LNG developers move closer to commissioning projects, said Robert Mark, who helps oversee C$4.5 billion ($4.5 billion) at MacDougall, MacDougall & MacTier in Montreal.
“There’s a unique scramble in Canada to lock up gas assets for LNG,” he told Bloomberg. “Asian buyers look at that as a significant opportunity.”
A race to secure natural gas for planned LNG export on Canada’s West Coast by Shell, ExxonMobil and others has spurred interest in the fossil fuel among investors seeking to benefit from the price differences between Asia and North America. With at least five LNG projects valued at as much as $15 billion each proposed for British Columbia’s north-west coast, proponents are lining up supplies from reserves such as the Horn River and the Montney shale formations.
Foreign buyers of natural gas producers or assets this year include Tokyo-based Mitsubishi, Japan’s largest trading company; Irving, Texas-based ExxonMobil; and Malaysia's Petronas.
The premiums paid for those assets have reached as high as 97%, according to data compiled by Bloomberg.
Petronas boosted its first offer for Progress Energy Resources to C$22 a share, or 97% more than the Calgary-based company’s 20-day average before the initial proposal, the steepest premium on record in the oil and gas industry.
Petronas this week extended its C$5.16 billion offer for Progress after an initial regulatory rejection by the Canadian government on 19 October.
ExxonMobil, the world’s largest energy company by market value, agreed to pay C$2.86 billion for Calgary-based Celtic Exploration’s leases in Alberta’s gas-producing Duvernay and Montney formations on 17 October, its biggest Canadian acquisition.
Canada’s decision on Petronas’ bid will determine how many more foreign investors are lured to Canada, said John Stephenson, who helps manage C$2.7 billion at First Asset Investment Management in Toronto. He owns shares of natural gas producers including Painted Pony Petroleum and Crew Energy.
“It remains to be seen how many of these deals get done,” he told the news wire. “Up until this point, natural gas deals have been on the upswing.”
Producers with holdings in the Montney formation in north-eastern British Columbia, could see bids for assets or entire companies as LNG proponents secure gas reserves, said Gordon Currie, analyst at Salman Partners in Calgary.
“You need to have a lot of reserves tied up to support an LNG export facility so it’s entirely possible they would be out looking to tie up additional resources,” Currie told the news wire.
Targets could include Painted Pony, Talisman Energy, Advantage Oil & Gas, and ARC Resources, Currie said.
Among companies seeking partners to develop gas reserves in Canada are Encana, which is marketing a stake in its Duvernay shale acreage in Alberta and Cutbank Ridge acreage in British Columbia.
Oil sands projects will probably require C$23 billion this year in investments, according to the Canadian Association of Petroleum Producers. But foreign companies are holding off on oil sands purchases, said Wenran Jiang, a University of Alberta professor and adviser to the Alberta government on Asian investment.
Asian national energy companies and private investors are eyeing Western Canadian natural gas reserves as well as conventional oil deposits outside the oil sands to quench current supply shortages, Jiang said.
“Oil sands are too big in scale, in terms of advanced investment and the slow pace of return and scale of the infrastructure building,” Jiang told Bloomberg.
US energy companies ConocoPhillips, Marathon Oil and Murphy Oil said they are all considering divesting oil-sands assets amid industry concerns about project cost overruns and discounting of Canadian crude prices as export pipeline capacity is squeezed.
its great to think that aav could be taken out at a premium. wish it were so.
however, just today, the grand premier of can - is quoted in a reuters article as taking a hard line on fdi ...
(Reuters) - Prime Minister Stephen Harper, in some of his toughest remarks on foreign investment yet, signaled a willingness to block foreign purchases of Canadian companies if other countries are not open to Canadian investment.
sighhhh .... halloween surprise and continued interference. what a game.