Progress Energy Announces Strategic Partnership with PETRONAS to Develop Montney Shale Assets

abarrelfullabarrelfull wrote on 03 Jun 2011 05:34
Tags: canada montney petronas progress shale

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Progress Energy Resources Corp. (“Progress” or the “Company”) (TSX: PRQ) announced today it has executed a binding framework agreement to create a strategic partnership with the Malaysian national oil company, PETRONAS, to develop a portion of Progress’ Montney shale assets in the Foothills of northeast British Columbia (the “Transaction”). Progress will sell 50 percent of its working interest in its Altares, Lily and Kahta properties (the “North Montney Joint Venture”) to PETRONAS for CDN$1.07 billion. The agreement also reflects the desire by both parties to explore additional opportunities to develop liquefied natural gas (LNG) export capacity in British Columbia.

“This is a breakthrough transaction for Progress: the partnership we are launching will enable us to accelerate our growth strategy,” said Michael Culbert, President and Chief Executive Officer of Progress.

“We are very pleased to form this long-term partnership with PETRONAS. They share our belief that our North Montney shale assets are a world-class resource that deserves significant investment. We look forward to benefitting from PETRONAS’ significant global expertise including their leadership in developing infrastructure and accessing LNG markets. As well as enhancing Progress shareholder value, this partnership will also generate substantial economic benefits for local communities and the province of British Columbia, while leveraging the environmental benefits of Canada’s abundant and clean-burning natural gas resources globally.”

Under the terms of the framework agreement, PETRONAS will pay 25 percent of the total consideration (CDN$267.5 million) in cash at closing and 75 percent of the total consideration in the form of a capital carry whereby PETRONAS will pay 75 percent of Progress’ share of future capital expenditures in the North Montney Joint Venture over the next five years to a total of CDN$802.5 million. The Transaction provides Progress with the capital required to accelerate the development of its unconventional assets and unlock the value underlying the Company’s vast Montney land holdings.

In addition to the above Transaction, PETRONAS and Progress will establish an LNG export joint venture (the “LNG Export Joint Venture”) to be 80 percent and 20 percent owned, respectively. The LNG Export Joint Venture will launch a feasibility study to evaluate building and operating a new LNG export facility on the West Coast of British Columbia. PETRONAS would be the operator of this facility, and PETRONAS and Progress would jointly market the LNG utilizing PETRONAS’ well-established and extensive network of customers in the largest LNG markets globally.

“Canada is poised to take a larger role on the world’s energy stage. Developing new export options for Canadian natural gas producers is a logical step in connecting our vast resources with growing Asian demand for environmentally responsible energy sources like natural gas,” said Mr. Culbert. “We look forward to working with West Coast British Columbia communities as we pursue this opportunity to build a new facility that will add value to British Columbia’s natural resources while creating considerable long-term local economic benefits.”

In connection with the LNG Export Joint Venture, PETRONAS will provide a standby equity financing commitment of up to $600 million, for Progress’ capital requirements arising from the North Montney and LNG Export joint ventures from which Progress can draw down at the time of a successful LNG final investment decision.

The North Montney Joint Venture comprises 149,910 working interest acres in which PETRONAS will acquire a 50 percent interest and Progress will be the operator. The North Montney Joint Venture lands represent approximately 20 percent of Progress’ rights in its northeast British Columbia Foothills land holdings, which total approximately 700,000 net acres. Progress holds approximately 900,000 net acres of Montney rights over its entire British Columbia and Alberta land base, making it one of the largest Montney land rights holders. The joint venture properties include five wells with minimal production at this time.

The closing of the transaction is subject to the execution of definitive agreements and receipt of regulatory approval.

BMO Capital Markets acted as exclusive financial advisor to Progress on this transaction.


PETRONAS is the national oil and gas company of Malaysia. Incorporated in 1974 the company, ranked among the most profitable among the Fortune Global 500 entities, is engaged in the oil, gas and petrochemicals industries with strategic business assets and interests in more than 30
countries. It is one of the world’s leading LNG companies and is fully involved in every value chain of the LNG business, from liquefaction and shipping to re-gasification and trading. Apart from its Malaysian production facility, currently one of the world’s largest, PETRONAS also owns interests in LNG assets in Australia, Egypt and the United Kingdom.

About Progress Energy

Progress is a Calgary, Canada-based energy company focused on exploration, development and production of large, unconventional natural gas resources in northeast British Columbia and northwest Alberta. Throughout its history, Progress has a solid track record of growing reserves, production and the underlying value of the Company for its shareholders. Common shares of Progress are listed on the Toronto Stock Exchange under the symbol PRQ.

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