Canada’s Spartan Delta Sees Q2 Profit
Canada’s Spartan Delta, which in June embarked on a strategy of acquiring under-valued assets by purchasing gas-focused producer Bellatrix Exploration for C$108.8mn (US$82.5mn), said August 20 it had net income of C$47.4mn in Q2 2020.
A year ago, operating as Return Energy, the company reported a second quarter loss of C$820,000.
The Bellatrix acquisition brought an immediate C$53mn gain, largely reflecting the $200mn of replacement value attached to infrastructure acquired in the transaction. In addition, Spartan raised gross proceeds of C$64mn through non-brokered equity private placements of 32mn common shares.
At the end of the quarter, the company had net debt of C$26.2mn and total assets of more than C$339mn, leaving it “well-positioned to confront the challenges of the current business environment [with] sufficient financial flexibility to take advantage of future opportunities.”
Natural gas production averaged 37.1mn ft3/day in Q2, compared with Return Energy’s Q2 2019 production of 1.2mn ft3/day. Reserves acquired from Bellatrix included 1,215bn ft3 of proved plus probable gas reserves.
Unlike many of its peers, Spartan is banking on a resurgence of the natural gas market in the Western Canadian Sedimentary Basin, and has linked all of its existing gas production to the Aeco hub in Alberta.
“Combined supply declines in Alberta of (more than) 800mn ft3/day, (increased) Alberta gas egress (and) increasing Western Canadian Sedimentary Basin gas demand paints an attractive story for Aeco versus other markets,” the company says in its current investor presentation deck.
Additional upside is expected from coal-to-gas switching in Alberta, which is projected to add incremental demand of 600mn ft3/day over the next two years, and supply declines in the US Rockies region, which are forecast to reach 3bn ft3/day.