The NEXEN takeover deal by Chinese national oil company CNOOC has barely closed when news of a Joint Venture agreement between Encana and PetroChina hit the market. PetroChina’s Canadian subsidiary will invest $2.18 billion for a 49.9 per cent interest in Encana’s Duvernay shale acreage.
There are no red lines around Joint Venture agreements in the patch – the door is still wide open for foreign capital. So if you can’t buy them, JV with them!
The emerging Duvernay unconventional liquids rich gas play could hold an estimated 11.3 billion barrels of natural gas liquids, plus 440 trillion cubic feet of natural gas and 61 billion barrels of crude oil according to Alberta’s Energy Resources Conservation Board.
The liquids in questions are Condensate; a very a light oil that sells at or above the price of oil. It is in high demand in Alberta since it is used to dilute heavy oil & bitumen making them less gooey and easier to pipeline.
The JV agreement covers roughly 445,000 acres in the Duvernay shale for a whopping $9,800/acre! It’s no surprise Yoho Resources YO.V 1.17 [+0.01] was in the top 5 gainers on Friday. Yoho holds 21 net sections at Kaybob where Encana has a block of land. Yoho is currently trading slightly above the value of its Duvernay land based on the above transaction metrics!
That’s $132M in Duvernay acreage when the enterprise value is around $160M based on $2.80/share….leaving Montney land, production and reserves practically worthless!
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Have a great Weekend!