ExxonMobil won government approval Feb. 20 to acquire an unconventional Canadian exploration company for C$3 billion, giving it 650,000 net acres in the Montney and Duvernay shales.
Exxon’s interest in Calgary-based Celtic Exploration Ltd. stretches back nearly a year to Feb. 23, 2012, when Exxon first explored working with Celtic. Those discussions ultimately evolved into the takeover bid, which is expected to be completed by Feb. 26.
For Exxon, the acquisition adds significant liquids-rich resources to its North American unconventional portfolio, Andrew Barry, president of ExxonMobil Canada, said in October.
“Our financial and technical strength will enable us to maximize resource value by leveraging the experience of ExxonMobil subsidiary XTO Energy, a leading U.S. oil and natural gas producer which has expertise in developing tight gas, shale oil and gas and coal bed methane.”
Celtic announced Feb. 20 that Canada’s Minister of Industry approved the acquisition by ExxonMobil Canada and said that no further regulatory approvals are required.
ExxonMobil Canada will acquire 545,000 net acres in the liquids-rich Montney shale, 104,000 net acres in the Duvernay shale and additional acreage in other areas of Alberta, the company said.
Celtic production on the acreage is 72 million cubic feet per day (MMcf/d) of natural gas and 4,000 barrels per day of crude, condensate and natural gas liquids.
Its assets, based on estimates by Celtic in December 2011, include an estimated more than 100 million oil equivalent barrels of proved plus probable reserves, of which 24% are crude, condensate and natural gas liquids and 76% natural gas.
Celtic Reserves
Celtic Reserves & Land Position (December 2011) | |
| Proved + Probable | 139.0 MMBOE |
| By Volume | 24% Oil and 76% Gas |
| By Revenue | 44% Oil and 56% Gas |
| Proved | 78.8 MMBOE |
| Proved Developed Producing | 34.7 MMBOE |
On Sept. 30, Celtic’s 2012 production guidance was 29,900 BOE per day. The company expected to bring significant production volumes on-stream in the fourth quarter wells from formations including the Duvernay, Dunvegan and Montney.
The bid for the company includes the amount to be paid for Celtic’s outstanding convertible debentures and includes Celtic’s bank debt and working capital obligations.
About 60 Celtic employees will have a chance to join ExxonMobil.
Celtic, which has a C$2.8 billion market cap, touts several advantages to its company. Those include a low-cost structure that enables it to add new production at lower finding development and acquisition costs and royalty and production expenses.
Celtic Production Outlook
| Production | 2011 | 2012 Forecast | 2012 Exit (E) |
| Oil ( b/d ) | 3,789 | 5,385 | 8,200 |
| Natural gas ( MMcf/d ) | 74.54 | 99.69 | 130.20 |
| Total ( BOE/d ) | 16,212 | 22,000 | 29,900 |
| Year-over-year change | -6% | 36% | N/A |
Celtic’s drilling activity is focused on liquids-rich natural gas plays, which allow it to participate in premium pricing for Condensate and NGLs, relative to natural gas.
Much of the Celtic’s land is undeveloped. But the company has a large inventory of future horizontal drilling locations, perhaps more than 3,500, on its Resthaven, Montney and Kaybob Duvernay resource plays.
Shareholders of Celtic Exploration will receive C$24.50 per share and half a share of a newly established company that will hold assets not included in the agreement with ExxonMobil Canada, Exxon said. The assets include acreage in the Inga area in British Columbia, the Grande Cache area in Alberta and interests in oil and gas properties located in Karr, Alberta.
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