Centrica reaches agreement to acquire additional Canadian gas assets
Centrica plc today announced that its North American subsidiary, Direct Energy, has reached an agreement with Suncor Energy (TSX: SU, NYSE: SU), to acquire its natural gas assets in the Wildcat Hills region of Alberta, for a cash consideration of C$375 million (£229 million).
This acquisition will provide Direct Energy with 241 billion cubic feet equivalent (bcfe) of additional natural gas reserves, an increase of approximately 60%, and an incremental 80 million cubic feet per day (mmcfe) of natural gas production. This will enable Direct Energy to achieve significant economies of scale and operational efficiencies, resulting in lower unit costs of production and greater returns across its combined gas portfolio.
The transaction will enable Direct Energy to meet around 35 per cent of its customers’ gas demand through its own sources of production. This is in line with Centrica’s strategy to build a more integrated North American business with leading positions in deregulated markets.
The assets are located 35 km northwest of Calgary, adding to Direct Energy’s existing acreage positions in central and southern Alberta and consist of 97 producing wells, associated infrastructure and 42,000 net acres of undeveloped land. Further gas development opportunities may also exist by leveraging the unconventional reservoir gas exploitation expertise Centrica has in both Canada, and in the UK following the acquisition of Venture.
Sam Laidlaw, Chief Executive of Centrica, said: “This transaction represents a further step in the delivery of Centrica’s strategy for North America to build a larger, more vertically integrated energy business through acquiring assets with attractive returns. We will continue to explore opportunities to secure further strategic gas and power assets in North America to enhance the scale of the business, and support Direct Energy’s expanding retail energy businesses.”
The transaction is subject to regulatory approval and pre-emption rights on some of the assets. The deal is expected to close during the fourth quarter of 2010.
1) The acquisition will be made through Centrica plc’s wholly owned subsidiary Direct Energy Marketing Limited.
2) Direct Energy’s estimated net proven and probable gas and oil reserves at the end of 2009 were 400 bcfe.
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