Goldboro LNG Buys Canadian Gas Assets
Pieridae Energy, developer of the 10mn metric tons/year Goldboro LNG project in the Canadian province of Nova Scotia, said August 24 it has agreed to acquire the assets of Canadian oil and gas producer Ikkuma Resources by way of a plan of arrangement.
The acquisition of Ikkuma is a key step in the execution of Pieridae’s strategic plans for the acquisition of natural gas reserves and resources in its integrated business model and is viewed by many as being one of the last pieces in the puzzle prior to a final investment decision on the US$10bn project.
“The purchase of Ikkuma begins the final steps to reaching the final investment decision which along with our other partners will ensure that Canada has the opportunity to export its resources to international markets,” Pieridae CEO Alfred Sorensen said. A construction permit from the Nova Scotia Utilities and Review Board and finalised agreements with contractors are expected by the end of August.
Under terms of the plan of arrangement, Ikkuma shareholders, for each of their shares tendered, will receive 0.1926 common shares of Pieridae Energy and 0.1 common shares of a spin-out company (ExploreCo) that will hold Ikkuma’s former crude oil and natural gas liquids assets.
The exchange ratio values the shares of Ikkuma at $0.86/share (excluding the value of ExploreCo shares), representing a premium of 188% to the August 23 closing price of $0.30/share for Ikkuma common shares on the TSX Venture Exchange.
At December 31, 2017 Ikkuma had net proved plus probable (2P) conventional natural gas reserves of 522bn ft3, 2P crude oil reserves of 1.4mn barrels and net 2P natural gas liquids reserves of 1.01mn barrels. Natural gas production in 1Q 2018 averaged 113mn ft3/day, up from 38mn ft3/day in 1Q 2017 but fell to about 100mn ft3/day in 2Q 2018 as production was shut-in due to low western Canadian prices.
Ikkuma said Pieridae will acquire its natural gas properties at metrics “significantly below” the cost of similar reserves and resources elsewhere in North America, which is expected to provide its Goldboro LNG project “one of its long-term competitive advantages for delivering liquefied natural gas to European and other markets.”
“The cost of acquisition represents less than 0.015% of the total cost of Pieridae’s proposed Goldboro LNG project and represents a significant step towards reaching the final investment decision in 2018,” the company said.
The plan of arrangement remains subject to court, Ikkuma shareholder and regulatory approvals, and is expected to close in 4Q 2018.