ConocoPhillips To Acquire Canadian Unconventionals in Montney Shale
The all-cash deal bucks a recent trend of international oil companies divesting of Canadian assets and adds 15,000 B/D of production to the buyer’s total.
ConocoPhillips announced this week that it is in the late stages of buying 140,000 net acres from Canadian independent Kelt Exploration for $375 million. The all-cash deal stands out since in recent years international oil companies and some US independents have steadily divested themselves of Canadian assets.
Bucking this trend, ConocoPhillips will upon closing increase its position in western Canada’s liquids-rich Montney Shale to 295,000 acres and add 15,000 B/D of Kelt’s production—just under half of the seller’s total production from Alberta and British Columbia. In 2019, ConocoPhillips reported about 63,000 B/D from its Canadian operations.
The buyer also says that it will gain 1,000 additional drilling locations with an estimated cost of supply in the mid-$30s. No major capital upgrades are planned for several years, but ConocoPhillips will assume around $30 million of debt owed by Kelt for field infrastructure.
“We have tracked and analyzed this adjacent acreage position for a long time,” said Matt Fox, the executive vice president and chief operating officer of ConocoPhillips, in a statement. “It represents a high-value extension of our existing Montney position, and we’re pleased to capture this opportunity at an attractive cost of supply that meets our criteria for resource additions.”
ConocoPhillips’s current Montney development only ramped up this year with the operator’s first multiwell pad. Fox said the early wells are “performing according to our projections and plans.” He added that lessons learned from drilling and completing in the US are being imported northward to improve recovery factors in the Montney. “We view the Montney as a very attractive long-term asset and today’s announcement gives us significant running room at a very attractive all-in cost.”
The companies expect the acquisition to be approved by regulators sometime in the third quarter of this year.