Murphy Announces Divestiture of Montney Midstream Assets with Partial Allocation of Proceeds to Strategic Kaybob Duvernay and Liquids Rich Montney Lands Joint Venture

Source Press Release
Company Murphy Oil CorporationAthabasca Oil CorporationEnbridge Inc. 
Tags Asset Deals, Deals, Pipelines/ tankers/ distribution, LNG & Gas Storage/Processing, Upstream Activities
Date January 27, 2016

Murphy Oil Corporation (NYSE: MUR) today announced that its Canadian subsidiary, Murphy Oil Company Ltd. ("MOCL"), has signed a definitive agreement with Enbridge G&P Limited Partnership, a subsidiary of  Enbridge Inc., ("Enbridge") to divest natural gas processing and sales pipeline assets that support Murphy's Montney natural gas fields in the Tupper and Tupper West areas of northeastern British Columbia. The transaction includes the sale of existing infrastructure capable of processing up to 320 million cubic feet per day. Total cash consideration to Murphy upon closing of the transaction will be C$538 million.

Enbridge will own and operate the natural gas processing plants and sales pipeline assets which include a twenty-year arrangement, customary fee structure and an opportunity for plant expansion ensuring flexibility for both parties. The transaction is subject to typical closing conditions and is anticipated to close promptly upon receipt of regulatory approval early in the second quarter 2016.

In a separate transaction, MOCL has signed a definitive agreement with affiliates of Athabasca Oil Corporation ("Athabasca") to acquire a 70 percent operated working interest (WI) of Athabasca's production, acreage, infrastructure and facilities in the Kaybob Duvernay lands, and a 30 percent non-operated WI of Athabasca's production, acreage, infrastructure and facilities in the liquids rich Montney lands in Alberta. Under the terms of the joint venture (JV)  the total consideration amounts to C$475 million, of which Murphy will pay approximately C$250 million in cash at closing and the remaining C$225 million in the form of a carry for a period of up to five years. The transaction is subject to regulatory approval and normal closing conditions, and is anticipated to close late in the first quarter 2016, with an effective date of January 1, 2016.

"The monetization of our Montney midstream assets enable Murphy to allocate a portion of the proceeds within Canada to enter into a third focus area in the North American unconventional shale business," stated Roger W. Jenkins, President and Chief Executive Officer of Murphy. "The Kaybob Duvernay and liquids rich Montney include light oil, natural gas condensate and rich natural gas production. Complementing our existing unconventional business in the Eagle Ford Shale and Montney, this strategic transaction exposes Murphy to a leading position in the active Kaybob Duvernay lands, while expanding our current Montney focus area into the liquids rich portion of the play. This transaction secures a sizable position that has significant running room with an active and well-positioned partner. In addition, recent offset well performance in the area suggests that the type curves are materially improving and that peers, including Athabasca, are achieving significant downward movement in well costs and enhancing returns in the plays. We believe that Murphy, operating 900 plus wells in North American unconventional plays, can improve on this trend of lower well costs and higher well performance. The terms of the deal allow for flexibility in capital spending and significant value creation with an oil and natural gas price recovery. On the midstream side, we are very pleased to be working with Enbridge who is a significant operator of midstream assets in North America."

Montney midstream divestiture and Kaybob Duvernay and liquids rich Montney lands JV opportunity highlights:

  • Directing a portion of the Canadian dollar proceeds from the Montney midstream divestiture towards a JV with Athabasca in the Kaybob Duvernay lands and liquids rich Montney lands
  • Recoverable resource of 200 - 350 million barrels of oil equivalent (MMBOE) net in Kaybob Duvernay and liquids rich Montney
  • Kaybob Duvernay (operated) - 70 percent WI in 230,000 gross acres (200,000 acres currently prospective) and associated midstream infrastructure; current gross production of 6,900 barrels of oil equivalent per day (Boe/d), with 58 percent liquids. Additional 247,000 acres gross of overlying conventional Montney rights
  • Liquids Rich Montney (non-op) - 30 percent WI in 60,000 gross acres (21,000 acres currently prospective) and associated midstream infrastructure; current gross production of 900 Boe/d, with 44 percent liquids
  • Carry commitment for up to five years, with flexibility for controlling the pace of development, and enhanced returns during an oil and natural gas price recovery 
  • Leveraging Murphy's operating strengths and core competencies in North American onshore unconventional assets
Source: EvaluateEnergy® ©2020 EvaluateEnergy Ltd