Canada: Progress Energy and PETRONAS Close Montney Shale, LNG Deal

Progress Energy Resources Corp. announced that it has closed the previously announced transaction to create a strategic partnership with the Malaysian national oil and gas company, PETRONAS, to develop a portion of Progress’ Montney shale assets in the Foothills of northeast British Columbia. Under the Transaction, PETRONAS acquired 50 percent of Progress’ working interest in the Altares, Lily and Kahta properties (the “North Montney Joint Venture”).

“Both parties have worked diligently and cooperatively towards the completion of the agreements that form the basis of our strategic partnership,” said Michael Culbert, President and Chief Executive Officer of Progress. “We will now move forward on building a strong gas production growth profile from the North Montney Joint Venture assets as well as initiating the feasibility study for the development of an LNG export facility on the west coast of British Columbia.”

PETRONAS is paying a total consideration of CDN$1.07 billion of which 25 percent of the total consideration (CDN$267.5 million) has been paid in cash upon closing and 75 percent of the total consideration will be paid in the form of a capital funding commitment whereby PETRONAS will pay 75 percent of Progress’ share of future capital expenditures in the North Montney Joint Venture to a total of CDN$802.5 million.

PETRONAS and Progress have also established an LNG export joint venture which is 80 percent and 20 percent owned, respectively. The LNG Export Joint Venture will launch a feasibility study immediately to evaluate the potential of the LNG export facility on the west coast of British Columbia. PETRONAS will be leading the development of the LNG export facility, and PETRONAS and Progress will jointly market the LNG utilizing PETRONAS’ well-established and extensive network of customers in LNG markets globally.

In connection with the LNG Export Joint Venture, at the time of a successful LNG Export investment decision, PETRONAS will provide a standby equity financing commitment of up to $600 million, for Progress’ capital requirements of the North Montney Joint Venture to supply gas for the LNG Export Joint Venture, subject to receipt of all regulatory approvals.

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Source: Progress Energy Resources, August 3, 2011;