Imperial Oil Ltd. IMO-T and ExxonMobil Canada XOM-N are divesting major co-owned shale oil and gas assets in the Montney and Duvernay areas of northwestern Alberta by selling them to Whitecap Resources Inc., based in Calgary. WCP-T for $1.7-billion.
Whitecap announced the acquisition of XTO Energy Canada on Tuesday evening. During an investor call Wednesday, executives said the move would add more than 2,000 drill slots and 600,000 acres of drilling rights to Whitecap’s portfolio, providing more than two decades of production inventory.
Net production from the assets is approximately 140 million cubic feet of natural gas per day, as well as approximately 9,000 barrels of crude oil, condensates and natural gas liquids.
The purchase of Whitecap expands the assets it already owns in the greater Kakwa region of Alberta and marks the company’s entry into the liquids-rich Duvernay area.
“This is truly a transformational acquisition for Whitecap,” company president and CEO Grant Fagerheim said on the call Wednesday.
“We have been pursuing a portion of these assets for some time now, and getting our hands on all of the assets significantly improves the sustainability and profitability of Whitecap Resources.”
With Russia’s invasion of Ukraine fueling global supply concerns, soaring commodity prices have driven up the value of oil and gas properties in North America.
Exxon and Imperial began marketing the assets earlier this year, hoping to capitalize on a rebound in oil and gas prices.
The price of West Texas Intermediate crude, an oil benchmark, was north of US$109 a barrel on Wednesday, up more than 43% year-to-date.
Although shares of Whitecap closed at $9.12 on the TSX on Wednesday, down about 6%, a National Bank of Canada research note late Tuesday said buying high-yielding assets and high-impact “provides Whitecap with a sustainable production base that can support continued debt reduction and capital repayment, while improving operational sustainability and efficiency.
“Whitecap continues to lead the conventional oil group in the [Western Canadian Sedimentary Basin] with strategic and sustainable acquisitions, positioning the Company to continue to drive long-term shareholder value creation through a capital return model, supported by a diverse, high-impact and sustainable production base and further compounded with tailwinds thanks to its new energy initiatives,” the note said.
A Bank of Nova Scotia research note said the sale is unlikely to be enough to move the needle for Exxon, but fits well within the company’s announced divestiture plans.
“While the sector is brimming with liquidity thanks to high commodity prices, we expect more asset transactions to take place going forward in the remainder of 2022,” the Scotiabank note said.
The Whitecap purchase also includes a shallow gas processing facility, which Mr. Fagerheim called a strategic purchase for the company, given that the facility can process third-party products.
“Through the acquisition, we continue to demonstrate our commitment to finding ways to improve Whitecap’s long-term sustainability while being mindful of our carbon footprint,” he said.
“Our team is chomping at the bit to take full control of these assets.”
Whitecap’s board also approved a 22% increase in the monthly dividend following the news.
With a Reuters report
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