Tuesday, May 10, 2011

Macquarie Tristone advises Suncor Energy on the sale of gas weighted assets in North Peace River Arch region. Package could be worth $115-$130 million. Suncor shifting focus to oil.

Suncor Energy Inc has engaged Macquarie Tristone to seek proposals for certain assets located in the North Peace River Arch region. Suncor’s Peace River Arch sale assets are focused in two separate areas:
  • Boundary Lake - Primarly gas and associated liquids from various stacked large OGIP Permian, Triassic and Cretaceous reservoirs; Vertical development upside potential
  • Parkland - Dominated by the large OGIP Parkland and Doe Wabamun gas fields; Stacked uphole Triassic and Cretaceous upside potential.

Suncor strongly favours a single bid for all assets but will consider offers on the individual areas identified. The highlights of the offering are as follows:
  • Total current production of approximately 3,208 BOE/d (92% Gas-weighted) primarily from Devonian Wabamun, Permian Belloy and Triassic Halfway formations
  • Reserves effective 31 Mar 2011: Proved reserves - 6,479 MBOE; Reserve Life Index of 5.5 years and NPV10- $79.5 million
  • Proved + Probable reserves - 8,791 MBOE, Reserve Life Index of 7.5 years and NPV10- $105 million.
  • Net Undeveloped acres: 8,052  acres
  • Includes operated gas plants at Boundary Lake (~80 MMcf/d capacity) and Parkland (30 MMcf/d capacity).
  • Proposals are due early to mid June 2011.

A quick analysis on the value of the package-
- The NPV model reports the value of the package could be $105 million.
- The industry metrics of $35,000-$40,000/flowing boe and $200-$250/acre values the package between $115-$130 million.
Based on both the valuation methodologies, the value of the package could be in the range of $105-$130 million.

Another gas weighted package from Suncor Energy worth $175 million is up for sale. The snapshot of the deal is as follows.

Suncor's 2011 outlook- Shift focus to OIL

Source: Suncor Energy- May 2011 Investor Presentation

Suncor's 2011 outlook is to divest natural gas weighted assets with production of 37,000 boe/d (worth $1.5 billion based on $40,000/ flowing boe) and increase the oil production from 50% to more than 90% after the targeted gas divestitures. Suncor joins the "Marathon Run" of shifting focus to OIL.

The following table shows the 2010 gas divestitures of Suncor Energy-

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