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Royal Dutch Shell Plc .com: Anadarko farewell fires up buyers’ market

From Petroleum News
By Gary Park

Company officials prefer single buyer for 340 million cf equivalent per day of gas and 1.6 tcf equivalent proved reserves

Lock-stock-and-barrel or piecemeal — that’s the question seizing the Canadian oil patch as Anadarko bids adieu to the Great White North.

In putting its wholly owned Western Canadian assets up for sale, with the prospect of covering 45 percent of the US$10 billion worth of divestitures needed to complete the blockbuster integration of Kerr-McGee and Western Gas Resources, Anadarko has offered properties that will have income trusts and junior E&Ps salivating yet likely to be left on the sidelines.

Several Anadarko officials have left no doubt they prefer to wrap up a deal in a single blow, arguing the sum of the whole is worth more than the parts.

At the same time, Anadarko said it has received “unsolicited expression of interest from multiple parties.”

On the table is production of 340 million cubic feet equivalent per day (85 percent natural gas) and proved reserves of 1.6 trillion cubic feet equivalent. (First quarter production averaged 54,700 barrels of oil equivalent per day, close to last year’s average 54,533 boe per day, which dropped sharply from 2004’s 77,000 boe per day.)

Some of the choice offerings include a multi-zone tight gas area in the Wild River/Cecilia play in northwestern Alberta, accounting for 30 percent of production; Adsett and Buckinghorse in northeastern British Columbia, where the company had 85 percent success from 40 exploratory wells last year; significant acreage in the Mackenzie Delta, including the Burnt Lake discoveries; and a carbon-dioxide-enhanced oil recovery pilot project in southern Alberta.

Prices have hit C$70,000-C$100,000 per flowing barrel

Sayer Energy Advisors has estimated trusts and conventional E&Ps have been paying about C$70,000 per flowing barrel for assets this year, while other sources say that figure has hit C$100,000.

That has generated speculation that the final deal would be worth C$3.5 billion to C$4.5 billion.

Anadarko Chief Executive Officer Jim Hackett is certain of one thing — “properties like ours are in high demand in Canada right now, attracting valuations significantly above those reflected in our stock price.”

Company mouthpieces have offered the usual assurances that the company’s departure does not reflect badly on Canada, saying it is just that Canada does not fit well in the overall corporate strategy.

However, analysts suggest Anadarko, which led the charge back to Canada at the turn of the century, drawn by a soft Canadian dollar and the hunger for natural gas production, has shown a dwindling interest in Canada in recent times.

Company unloaded 84 properties in 2004

A sign of Anadarko’s waning interest in Canada occurred in 2004 when it unloaded interests in 84 oil properties producing 22,200 boe per day in Alberta and British Columbia to Canadian Natural Resources for C$698 million and C$105 million to an unidentified buyer.

Whatever the reasoning, attention turns to likeliest buyers, with the betting concentrated on major natural gas players.

The list includes Canadian Natural, Talisman Energy, Devon Canada and EnCana, all experienced operators in northeastern British Columbia.

Others deemed to be in the running are Canadian Oil Sands Trust, Shell Canada, Nexen and ConocoPhillips, all hungry for gas production to support their oil sands ventures.

Off the sales list is Bear Head LNG, another wholly owned Anadarko unit that is struggling to put the pieces in place for its C$650 million regasification terminal on Cape Breton Island, Nova Scotia.

Construction has been stopped since March, pending a deal to secure LNG supplies, although Anadarko insists it remains committed to the venture.

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