ExxonMobil will add to its liquids-rich North American unconventional portfolio as an affiliate of ExxonMobil Canada acquires Celtic Exploration Ltd.
Under the terms of the agreement, ExxonMobil Canada will acquire 545,000 net acres in the liquids-rich Montney shale, 104,000 net acres in the Duvernay shale and additional acreage in other areas of Alberta.
Current production of the acreage to be acquired is 72 million cubic feet per day of natural gas and 4,000 barrels per day of crude, condensate and natural gas liquids. The assets were estimated by Calgary-based Celtic Exploration at December 31, 2011 to include an estimated 128 million oil equivalent barrels of proved plus probable reserves, of which 24% are crude, condensate and natural gas liquids and 76% natural gas.
Approximately 60 employees at Celtic Exploration will be given the opportunity to transition to ExxonMobil employment.
Shareholders of Celtic Exploration will receive C$24.50 per share and half a share of a newly established company which will hold assets not included in the agreement with ExxonMobil Canada. These assets include acreage in the Inga area in British Columbia, the Grande Cache area in Alberta and interests in oil and gas properties located in Karr, Alberta.
The agreement is subject to approval by Celtic Exploration’s shareholders and Canadian regulatory authorities.
“Our financial and technical strength will enable us to maximize resource value by leveraging the experience of ExxonMobil subsidiary XTO Energy, a leading US oil and natural gas producer which has expertise in developing tight gas, shale oil and gas and coal bed methane,” said Andrew Barry, president of ExxonMobil Canada.
ExxonMobil Canada operates the Sable project in Nova Scotia and is lead owner of the Hibernia project in Newfoundland and Labrador, where it is developing the Hebron project. ExxonMobil Canada has additional assets in Western and Northern Canada.
The $3.1 billion acquisition, including debt, ties in well with existing assets, said Global Hunter Securities analysts in a note to investors following the announcement.
“We believe this acquisition would fit well with a strategy of eventually supplying an LNG project on Canada's west coast. With five projects already proposed there, XOM could be setting up for the sixth or planning to buy its way into an existing proposal.”
ExxonMobil’s Canadian affiliate, Imperial Oil Limited, is not a party to the transaction, but may elect to participate at a later date through its existing agreement with ExxonMobil Canada that provides for up to equal participation in new Canadian upstream opportunities.