Natural gas companies stand on the precipice of greatness if LNG infrastructure and ports are developed.
The Liberal Party in British Columbia is hoping to lock down trillions in cubic feet of liquefied natural gas for export to Asia in the coming decade. The landscape of liquefied natural gas producers has emerged rapidly over the past 10 years in British Columbia, but will need access to Asia if growth and sustained revenues are to be achieved.
Montney Play Trend key to BC Natural Gas
Few regions have proven more promising for Canadian Natural Gas Companies than those operating in the Montney Play Trend of North East BC. While the staking rush has calmed down from its peak in 2010, reserves are still being proved up, with every estimate increasing in potential, dramatically.
The most recent estimate came out in late 2012, when the Alberta Energy Resources Conservation Board and Alberta Geological Survey (AGS) issued a joint study estimating the province’s shale formations.
In respect to the Montney Play Trend, the ERCB-AGS study estimated gas resources at 2,211 trillion cubic feet, Natural Gas Liquids at 28.9 billion barrels, and oil at 136.3 billion barrels.
At the time, the 5 biggest players dominating the exploration and production in the Montney shale formation were Shell Canada, Murphy Oil Company, Talisman Energy, Encana Corp. and Progress Energy.
Canada is by no means a large end user of natural gas and has been overwhelmed with supply in recent years. TSX energy investors have had no shortage of increasing dividends and gains in the energy sector, specifically when it comes to heavy oil, but as exports of natural gas to the US dry up, there can only be one replacement:Asia.
The Conference Board of Canada has cited a continuing plunge in exports to the United States with lower production the result of weak prices. The CBC believes net exports to the United States will fall to just one trillion cubic feet a year over the next 10 years, or less than one-third of what the industry exported in 2007. The price of natural gas recently hit a 10 year low in late 2012, but has been slowly rebounding.
Natural Gas – 10 Year Price Chart
Canada’s once lucrative export market to the US has been squeezed as unconventional drilling techniques have opened up vast resources of natural gas in various formations throughout the US.
The Conference Board believes Canada will recapture a large degree of the lost exports to the US through converting natural gas to liquid and exporting it to Asian countries via terminals on the northwest coast of BC.
In early June 2013, Rich Coleman, BC’s Minister of Energy and Mines, was appointed minister of the Liberal’s newly created Natural Gas Ministry.
Nine LNG Projects on the Docket
There have been nine LNG projects proposed for the northern B.C. coast to export natural gas from shale fields like Montney to consumers in Asia.
Majors such as Royal Dutch Shell PLC, Petronas and Chevron Corp. top the list. Chevron Corp. might be the first to commit, saying the earliest it will make a decision would be at the beginning of 2014. Chevron has proposed to build a $4.5-billion LNG plant it is co-developing with partner Apache Corp.
Premium Buyouts for Majors and Juniors in Montney Play Trend
In late December 2012, Malaysian state-owned energy firm Petronas completed a $6 billion takeover of Progress Energy Resources Corp. By late 2011, Progress had become the 5th most active player in theMontney Play behind Encana Corp.
Petronas is wholly owned by the Malaysian government and is responsible for the entire oil and gas industry in Malaysia. Fortune ranked Petronas as the 68th largest company in the world in 2012. It also ranks Petronas as the 12th most profitable company in the world and the most profitable in Asia.
Junior Natural Gas Company Cashes Out
Junior natural gas and oil company Monterey Explorations was bought out by Pengrowth Energy Trust in July of 2012 for $375 million.
Pengrowth Energy Trust (PGF:TSX) had been established up in the Montney play for years and paid big money for the junior natural gas producer. According to data from Canaccord Genuity and BMO Nesbitt Burns, Pengrowth paid well over $200,000 per flowing barrel for the natural gas producer – when the average for junior producers was $55,000 – $70,000 per flowing barrel.
For a company to pay almost 4 times the average is unheard of. Monterey was producing 1,700 boe/d at the time of the buyout. It was producing 20 million cubic feet of gas per day which was ready to go into a new 28 mmcf/d facility.
The seismic data must have spoken louder than current production rates for Pengrowth to invest so much so quickly.
At the end of the day, BC’s Montney play represents a relatively consistent and geographically extensive gas field with tremendous long-term potential. This is an area play Canadian energy investors would be wise to keep an eye on. As some of the best and brightest oil and natural gas companies prepare to deploy billions in development, both at Montney and at the proposed LNG ports on the north coast of BC, it could prove immensely profitable to well positioned companies in the region over the long term.
Pinnacle Digest, and its employees, are not investment advisors; and any reference to specific securities in the list referred to in this article does not constitute a recommendation thereof. THIS IS NOT INVESTMENT ADVICE. All statements in this article are to be checked and verified by the reader. Readers are encouraged to consult their investment advisors prior to making any investment decisions. The information in this article is of an impersonal nature and should not be construed as individualized advice or investment recommendations.
Pinnacle Digest does not endorse or recommend any of the referenced securities. At the time of publication and distribution of this article (4:00PM PST on September 14, 2013) neither PinnacleDigest.com, its employees or consultants owned shares in any of the mentioned companies in this article. This article is intended for informational and entertainment purposes only. The author of this article bears no liability for losses and/or damages arising from the use of this article. This article may contain technical or other inaccuracies, omissions, or typographical errors, for which PinnacleDigest.com and its parent company assumes no responsibility. We do not guarantee that any of the companies mentioned in this article or on PinnacleDigest.com will perform as we expect, and any comparisons we have made to other companies may not be valid or come into effect.
All statements in this article, other than statements of historical fact, should be considered forward-looking statements. These statements relate to future events or future performance. Much of this article is comprised of statements of projection. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements.
