Junior/Midcap Producers – $384 Million Alberta Land Sale Highlighted By Kaybob Area Land Grab

admin — Thu, 17 Dec 2009 18:16:58 +0000

Alberta’s December 16th land sale results were released. Province-wide, a total of 184,138 hectares (720 sections) of land were sold at average prices of $2,084/hectare, yielding a total “bonus” of $384 million. The size of this auction makes it the largest Alberta sale on record in the past four years (since December 2005, when natural gas peaked at over $9.60/mmbtu). The sale was primarily focused on the Kaybob (including Pine Creek, Cecilia and Fir) area, where $335 million of the total sale was allocated (as outlined in our focus area in Exhibit 1). At Kaybob, over 430 sections were sold at prices averaging about $770,000 per section, a sum substantially higher than the previous 6-year area average of $226,000. While not all lands had Montney mineral rights associated, the highest bids received were generally for Montney lands. Given recent industry success in the area through the implementation of horizontal drilling, RBC CM’s expectation is that a large portion of the sale was targeting Montney potential. Most lands also included rights deeper than the Montney, which some operators have identified as prospective shales. The majority of lands in the Kaybob area were purchased anonymously under broker. Given the sheer dollar value of the land purchased, the acquirer of these lands is most likely a large well-capitalized producer or a combination of several smaller mid-cap producers. RBC CM continues to believe that the Kaybob Montney play is top-decile when compared to all other Canadian natural gas plays. Within the junior/midcap universe, Celtic Exploration (CLT) and Orleans Energy (OEX) are both active in the Kaybob area. Other area operators include Trilogy Energy Trust, BP, Taqa, Conoco, CNRL and Tourmaline.

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Junior/Midcap Producers – $384 Million Alberta Land Sale Highlighted By Kaybob Area Land Grab