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New National Oil Companies: 5 things to think about

Following recent discoveries of significant oil and gas reserves in regions with no or limited existing upstream oil and gas activities, many countries have reorganised, or are in the process of reorganising, their oil and gas regulatory regime in preparation for a ramp up in activity – from Cyprus in the East Mediterranean to Kenya, Tanzania and Mozambique in East Africa.

Part of this process of regulatory reform is likely to include a ‘new’ national oil company (“NOC” –  an oil company fully, or majority, owned by a national government) – either a newly established NOC or an existing NOC with greatly expanded roles and responsibilities. In light of this, here are 5 key things for governments and new NOCs to think about.

State participation

Before considering the role of the NOC, the objectives of state participation in oil and gas assets must be clearly identified. These fall under two broad headings:

  • commercial and fiscal objectives, where the aim of the state is to maximise the Government ‘take’, i.e. revenues (almost always either through a production sharing regime or a tax and royalty regime); and
  • other predominantly non-commercial objectives, which can be both symbolic, i.e. the exercise of state control over the disposal of the hydrocarbon resource, and more practical, e.g. the development of local skills and expertise and the promotion of local content in upstream operations.

The approach taken in relation to state participation will significantly influence the roles and responsibilities given to the NOC.

Role of the NOC

The government will need to determine the role it expects the NOC to play in the upstream sector. For example:

  • will the NOC take an interest in all upstream licences / production sharing contracts (“PSCs”)? If so, on what basis (as operator, or as a minority equity investor)?
  • will the NOC be responsible for managing interactions with international oil companies (“IOCs”) on behalf of the government (e.g. evaluating applications for licences / PSCs)?
  • will the NOC act as regulator in respect of the upstream oil and gas sector, or will there be a separate, arm’s length regulator?
  • will the NOC own any infrastructure (e.g. offshore and onshore pipelines that fall outside the licence / PSC area)?
  • what reporting obligations will the NOC have to the government?
  • will the NOC be responsible for marketing the government’s share of production?
  • will the NOC be able to pursue investment opportunities overseas?

In particular, whether the NOC has a minority investor role or an operator role will have a significant impact on the requirements of the NOC in relation to staffing and financing. As a minority investor the NOC’s interests tend to converge with those of the state (i.e. to encourage its partner to actively explore, while ensuring costs are controlled and a high standard of operations is maintained), whereas as an operator, the NOC will be required to have the capability to propose a development plan, raise money and manage a large project.

In addition, political and legal clarity regarding the NOC’s mandate, its source of financing, the activities it can undertake and the revenues it can generate is essential. In many cases it may be advisable for these to be set out in primary legislation, to promote certainty for investors.

Financing

Governments need to ensure that their strategy for state participation in the upstream sector is affordable. This is a particular consideration with new or young NOCs – sources of finance will be limited at the outset because there are little, or no, upstream revenues from production until commercial discoveries are made and developed. The NOC will therefore rely on government funding, including emergency borrowing in times of trouble (e.g. low oil price scenarios).

NOCs need clear revenue streams to meet day-to-day running costs and investment requirements as well as the ability to raise finance, with access to the capital and debt markets. Revenue streams for the NOC are often varied and unreliable. In addition, securing finance at the pre-discovery stage can be difficult. Even if the NOC is carried for its costs by IOCs pre-production, it will still need funding for staffing etc.

Governance

Good governance, transparency and accountability are extremely important. The government must ensure that the NOC has accountability to the state for its performance and its funding by monitoring the NOC’s costs, processes and performances through accounting and financial disclosure and risk management.

Staffing and training

NOCs need the appropriate level of staffing. As well as technical employees, secondary commercial roles as a minority investor may include managing service providers. If the NOC is operator it will also need accountants, marketers, economists and other administrative staff.

Staff will need appropriate skills and training. If, for example, the NOC is required to take on a greater role in the upstream sector, the NOC may not currently have the appropriate level of staff, in terms of numbers and capability. Training and capacity-building is very expensive, especially without proven reserves, so if this is necessary it needs to be taken into account at an early stage.

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New National Oil Companies: 5 things to think about

Legal impact of a possible referendum on independence for Iraq’s Kurdistan Region

On 7 June, officials in Iraq’s Kurdistan Regional Government (the KRG) announced plans to hold a referendum on independence for the northern Iraqi territory that is already semi-autonomous in practice. While holding such a referendum, let alone declaring independence, would have a range of local and international implications, this article focusses on how the process of declaring statehood might look, what impact it may have on the existing treaty-based, statutory and contractual framework for oil and gas developments in the Kurdistan Region and what purpose a referendum may serve in practice if statehood is not the KRG’s immediate goal.

Before considering these questions, it is worth noting that this is not the first time that the prospect of independence has been raised by the KRG. The President of the Kurdistan Region, Massoud Barzani, instructed members of the Kurdistan National Assembly (the KRG’s legislative arm) to begin preparations for such a vote in 2014. However, these plans were postponed following the capture of Mosul by Islamic State with the explanation that the defeat of Islamic State was the priority.

What are the main challenges to recognition as an independent state?

To be accepted as an independent state, the Kurdistan Region would have to exhibit the necessary characteristics of statehood. Article 1 of the Montevideo Convention sets out the most widely accepted formulation of the criteria of statehood in international law. It provides that the state should possess the following characteristics: a permanent population; a defined territory; a government; and the capacity to enter into relations with other states. Of these, the second and fourth may be the most challenging for the KRG.

Although fully delineated borders are not required, the greater the extent to which the approximate size and shape of the new state is uncertain, the greater the challenge a fledgling state may face in achieving recognition. This issue is particularly relevant to the Kurdistan Region. Since 2014, the Peshmerga have substantially expanded the territory controlled by KRG beyond the boundaries of the three Iraqi governorates formally constituting the Kurdistan Region under Iraq’s constitution. The KRG’s announcement contemplates the inclusion of many of these territories (Sinjar, Khaniqin, Makhmour and Kirkuk) within the scope of the referendum. Control over these territories is a sensitive topic, which was supposed to have been resolved by a referendum under Article 141 of Iraq’s constitution that has never been held, particularly in relation to Kirkuk (where both the KRG and Iraq’s federal government in Baghdad have asserted their authority to grant oil development rights).

These domestic tensions are reflected in regional ones between the Middle East’s big powers that surround the Kurdistan Region and are directly relevant to the KRG’s ability to demonstrate that it has the capacity to enter into relations with other states. While independence for the Kurdistan Region has some supporters, many other states (including all of its direct neighbours, all of whom are home to substantial Kurdish minorities) are fiercely opposed.

The Montevideo Convention’s criteria are not determinative and in reality a number of other legal and factual conditions would dictate the nature and circumstance of any Kurdish secession from Iraq. The extent to which a newly-declared independent Kurdish state would be recognised by major global powers would, of course, be of particular influence.

What would the impact be on international treaties signed by Iraq?

When a state breaks up, a “continuing state” remains a legally identical state despite changes in its territory, and continues automatically to exercise the same rights, obligations and powers under international law.  A “successor state” will not continue automatically to be bound in the same way.

It seems likely that the rest of Iraq would be the continuing state on Kurdish independence (so that its international law position remains unchanged), while a newly independent Kurdistan would be the successor state. The position of an independent Kurdistan in relation to international treaties would therefore likely to be as follows:

  • Treaties creating rights and obligations connected with territory would generally be considered to be automatically binding on an independent Kurdistan.
  • In respect of general treaties of a “law-making” nature to which any state can become a party as of right (including certain international human rights agreements, multilateral environmental agreements), an independent Kurdistan could (should it so wish) simply confirm unilaterally its intention to be bound by way of declaration to the depository of the treaty.
  • For treaties establishing international or inter-governmental organisations, or for other multilateral treaties with particular entry criteria, an independent Kurdistan would have to negotiate the terms of its membership.
  • Succession to bilateral “political” treaties (such as double taxation treaties and bilateral investment agreements) would require the agreement of the other state. This is usually done by way of an exchange of notes, but it can also be an opportunity for the other state to request re-negotiation. Given the level of foreign investment in the Kurdistan region of Iraq, the application or non-application of bilateral investment treaties should be of particular relevance.

There is also an argument to say that treaties which reflect generally accepted rules of international law bind a successor state by virtue of the concept of the acquired rights of the inhabitants of the state, although this position is less clear.

What would the impact be on applicable laws?

The bulk of law enacted by Iraq’s federal government is directly applicable in the Kurdistan Region. Where Iraqi law applies in the Kurdistan Region and there is a conflict between that legislation and a KRG law, the KRG law takes precedence, unless the law relates to an area within federal control under the Iraqi constitution. In practice, the law is the same or very similar in many areas, although there are some variations introduced through local implementing regulations. For example, the same Companies Law applies in the Kurdistan Region as the rest of Iraq but there are few restrictions in the Kurdistan Region on the transfer of shares and uses of Representative Offices.

On independence, the KRG would be required to introduce new legislation replacing the Iraqi laws that would no longer automatically apply. While we would expect this to be a fairly mechanical process in most areas, there is a risk that investors could find their position adversely affected by new legislation. That said, there are two factors mitigating this risk that international oil companies which are party to Production Sharing Contracts with the KRG benefit from.

The first of these is that the Kurdistan Oil Law already purports to repeal the application of all other existing Iraqi law, providing that:

no Federal legislation or other law, and no agreement, contract, memorandum of understanding or other Federal instrument shall have application to Petroleum Operations except with the express agreement of the Regional Government and pursuant to the provisions of this Law

In the context of petroleum laws, then, there may not be a large difference to the laws applicable in Kurdistan following independence, given that Iraqi Federal law is already expressly disapplied by Kurdish law.

The other positive is that the terms of the PSCs concluded with the KRG (which the Kurdish state should become a party to upon independence, on which see below) should also provide additional protection to investors against any adverse changes in law consequent upon succession, in the form of a stabilisation clause.

The KRG Model PSC provides at Article 43 that:

If, at any time after the Effective Date, there is any change in the legal, fiscal and/or economic framework under the Kurdistan Region Law or other Law applicable in the Kurdistan Region which detrimentally affects the Contractor, the terms and conditions of the Contract shall be altered so as to restore the Contractor to the same overall economic position as that which Contractor would have been in, had no such change in the legal, fiscal and/or economic framework occurred.

While the definitions of “Kurdistan Region Law” and “Kurdistan Region” are ultimately linked to the Kurdistan region of Iraq as recognised by the Constitution of Iraq, there would be a credible argument that the stabilisation clause would operate to prevent an adverse change in the law following independence, particularly in a situation where the laws currently in force in the KRG would continue to apply upon independence. It is important to note that stablisation provisions in some PSCs entered into more recently are more narrowly drawn so this analysis may not apply in all cases.

What would happen to existing PSCs with the KRG?

The international law doctrine of acquired rights is relevant to this question. At its simplest, the doctrine provides that private rights acquired under existing law do not cease on a change of sovereignty. In relation to property and investments in Kurdistan, this would mean that a new Kurdish state should become a party to agreements entered into with the KRG.

The principle has been consistently recognised by international tribunals and was discussed in particular in a number of cases before the Permanent Court of International Justice in the inter-war years.

There is, however, a considerable amount of uncertainty as to the extent to which the doctrine of acquired rights protects foreign nationals upon succession and some older cases do suggest that a new state may have a degree of discretion over which contractual rights and duties of the old state that it wished to respect.

It should also be noted here that there is no absolute rule to the doctrine and it does not mean that a new sovereign cannot alter or interfere with these rights. For example, expropriation of the property and investments of foreign nationals is permitted under international law, subject to certain conditions particularly with regard to compensation.

Under the doctrine of acquired rights, a party with rights under a contact with the KRG would continue to hold rights under the contract as against a new independent Kurdish state. There is a risk that the KRG could use a declaration of independence to reopen contractual provisions that it particularly objected to, which may be more relevant to some of the older and more generous PSCs, although we expect that the KRG would generally be anxious to assure investors that their contractual rights would continue to be respected.

What is really going on?

The KRG’s aspirations for independence should not be underestimated. However, the legal and, perhaps more importantly, the political hurdles it faces are significant. With this in mind, it is possible that the KRG’s short term purpose in calling a referendum on independence in the coming months is to strengthen the KRG’s hand in the negotiation of a new political settlement with Baghdad that may follow the recapture of Mosul. The two layers of government have, over the years, agreed several short-term compromises on the management of Iraq’s oil resources. The trend has generally been a movement towards increasing autonomy for the KRG. It is not unreasonable to expect that trend to continue. A solid deal could potentially unlock the Kurdistan Region’s production potential for existing and future investors, at least in the medium term. Whether that deal can be reached probably depends as much on the outcome of discussions about the position of Kirkuk (and who controls the local hydrocarbon reserves) as it does on the possibility of future independence for the Kurdistan Region.

Legal impact of a possible referendum on independence for Iraq’s Kurdistan Region

Extractives companies’ human rights records ranked in Benchmark study

Developments continue apace in human rights responsibilities for businesses. We are seeing persistent implementation of new reporting requirements across EU jurisdictions and beyond, judgments of national courts and international tribunals holding corporations to ever stricter account for their responsibilities in this area and UN negotiations continuing for a global treaty imposing binding international law obligations on businesses.  Staying ahead of the field in this area is crucial.

While the responsibilities imposed by the UN Guiding Principles on Business and Human Rights (the UNGPs) are not in themselves legally binding, governments’ expectations that companies will step up in this area have been made clear through National Action Plans, parliamentary enquiries and the introduction of “hard” legal requirements, such as under the Modern Slavery Act in the UK.

Now, the Corporate Human Rights Benchmark (CHRB) has ranked 98 of the largest publicly traded companies globally on 100 human rights indicators, focusing on the Extractives, Agricultural and Apparel industries.  These areas were specifically selected because of the high human rights risks they carry, the extent of previous work on the issue, and global economic significance.  41 Extractives companies featured.

The CHRB is a collaboration between investors and a number of business and human rights NGOs. It has emphasised this is a pilot assessment and welcomes input on the methodology used.  The study was compiled from publicly available information, with the selected companies also having the opportunity to submit information to the CHRB.  Companies were given scores for the measures they are taking across six themes, grounded in the framework of the UNGPs:

  • Governance and policy commitments.
  • Embedding respect and human rights due diligence.
  • Remedies and grievance mechanisms.
  • Performance: Company human rights practices.
  • Performance: Responses to serious allegations.
  • Transparency.

The selected companies were then banded according to their overall percentage score.  The performance-related criteria carried greater weight than the policy-based heads, with “Embedding respect and human rights due diligence” and “Company human rights practices” counting for 25% and 20% respectively.

Results skew significantly to the lower bands

There was a wide spread in the participants’ performance, with a small number of clear leaders emerging. No company scored above the 60-69% band, with only three companies falling within that band.  A further three scored 50-59% and 12 scored 40-49%.  48 companies fell within the 20-29% band.

Of the companies in the top band, two were in the Extractives sector; a further six Extractives companies fell within the 40-49% band; 19 scored 20-29% and five were found to trail at less than 19%.

The generally low scores across the three industries may be explained by the fact that the impact of some businesses’ human rights processes may still be filtering through. We should expect that in future years the authors of the survey will adopt a more stringent approach and subject low-scoring businesses to greater criticism.

Gap between policies and performance

On the whole, companies tended to perform more strongly on policy commitments, high-level governance arrangements and the early stages of due diligence. They performed less well on actions such as tracking responses to risks, assessing the effectiveness of their actions, remedying harms and undertaking specific practices linked to key industry risks.  There is often a mismatch between board level measures and their granular implementation, as well as between public responses to serious allegations and taking appropriate action.

Of the Extractives companies surveyed, only six companies scored were given a zero score for their policy commitments, whereas this was the case for 17 companies for “Embedding respect and human rights due diligence” and nine for “Company human rights practices”.

On the policy side, some Extractives companies scored points for emerging practices such as regular discussion at board level of the company’s human rights commitments, linking at least one board member’s incentives to aspects of the human rights policy, and committing not to interfere with activities of human rights defenders, even where their campaigns target the company.

In terms of implementation, some participants explained how human rights risks are integrated into their broader risk management systems, how they monitored their commitments across their global operations and business relationships, and how they had systems in place for identifying and engaging with those potentially affected by their operations.

Companies were also scored for their practices in relation to selected human rights specific to each industry. Those in which the Extractives participants featured included freedom of association and collective bargaining, health and safety, land acquisition, water and sanitation and the rights of indigenous people.

Conclusion

The significant interest in the CHRB since it began its work is unsurprising given it provides an opportunity to demonstrate commitment and progress in this area vis-à-vis competitors. The pilot methodology will be refined and ultimately the CHRB will be produced on an annual basis for the top 500 companies globally.  We expect it to contribute to the continued drive of companies across all sectors to proactively manage human rights risks in their own operations and through their expectations of their business partners.

Extractives companies’ human rights records ranked in Benchmark study

Significant Developments in Canadian Energy – For the Month of March 2017

Oil Sands / Unconventional

  • March 29, 2017 – Cenovus Energy Inc. (“Cenovus”) agreed to acquire ConocoPhillips’s 50% interest in the FCCL Partnership, which is the companies’ jointly owned oilsands venture operated by Cenovus. Cenovus is also purchasing the majority of ConocoPhillips’s Deep Basin conventional assets in Alberta and British Columbia. These assets have a combined 2017 forecast production of approximately 298,000 boe per day. Total consideration for the purchase is $17.7 billion, including $14.1 billion in cash and 208 million Cenovus common shares.
  • March 9, 2017 – Canadian Natural Resources Limited (“CNRL”) announced an agreement, subject to regulatory approvals, to acquire 70% of the Athabasca Oil Sands Project including 70% of the Scotford upgrader, as well as additional working interests in other producing and non-producing oilsands leases. CNRL has agreed with Shell Canada Limited and certain subsidiaries to acquire its 60% working interest in the Athabasca Oil Sands Project. CNRL and Shell have also agreed with Marathon Oil Corporation to jointly acquire its 20% share in Athabasca Oil Sands Project and related oilsands investments.

Conventional

  • March 24, 2017 – Total Energy Services Inc. (“Total Energy”) acquired a majority of the outstanding common shares of Savanna Energy Services Corp. (“Savanna”). Western Energy Services Corp. stated that Total Energy has taken up 51.6 % of the shares of Savanna under its hostile take-over bid.
  • March 24, 2017 – Pengrowth Energy Corporation entered into an agreement for the sale of its non-producing Montney lands at Bernadet in northeast British Columbia for cash consideration of $92 million. The Bernadet asset encompasses 36.6 sections (100% working interest) of land with no associated production.
  • March 22, 2017 – Trican Well Service Ltd. (“Trican”) and Canyon Services Group Inc. (“Canyon”) have entered into an arrangement agreement pursuant to which Trican has agreed to acquire all of the issued and outstanding common shares of Canyon on the basis of 1.70 common shares of Trican for each outstanding Canyon share. The consideration to be received by Canyon shareholders reflects a value of $6.63 per Canyon share based on the closing price of Trican shares on the Toronto Stock Exchange on March 21, 2017. The aggregate transaction value is approximately $637 million, including the assumption of approximately $40 million in Canyon debt. Upon completion of the transaction, existing holders of Trican shares and Canyon shares will collectively own approximately 56 % and 44 % of the combined company, respectively.
  • March 21, 2017 – Journey Energy Inc. (“Journey”) has entered into a purchase and sale agreement with an undisclosed private company to acquire interests in Central Alberta for an aggregate purchase price of approximately $35.6 million, comprised of $29.6 million of cash and 2.1 million common shares of Journey. The acquisition consists of approximately 2,000 boe per day of high working interest liquids-rich gas production.
  • March 20, 2017 – Pengrowth Energy Corporation announced it has entered into an agreement for the sale of a portion of its Swan Hills assets in north-central Alberta for total cash consideration of $180 million, subject to customary adjustments.
  • March 17, 2017 – Blackbird Energy Inc. (“Blackbird”) entered into a binding agreement with Knowledge Energy Inc. for the acquisition of two gross sections (two net) of Montney rights for total consideration of 1.92 million Blackbird common shares.
  • March 16, 2017 – Total Energy Services Inc. purchased, through the facilities of the Toronto Stock Exchange, 35,000 Savanna Energy Services Corp. shares.
  • March 16, 2017 – Painted Pony Petroleum Ltd. (“Painted Pony”) entered into a share purchase agreement to acquire all of the issued and outstanding shares of UGR Blair Creek Ltd., a privately held 100% controlled subsidiary of Unconventional Resources Canada LP (“URC”), a portfolio investment held in certain private equity funds advised by ARC Financial Corp. and EnCap Investments LP. Pursuant to the agreement, total consideration of 41 million common shares of Painted Pony will be issued to URC. Based on the price per Painted Pony share in respect of the offering of $5.60, total share consideration is $229.6 million.
  • March 9, 2017 – Enerplus Corporation announced agreements to sell Canadian properties located in Alberta and southwest Saskatchewan for aggregate proceeds of $67.3 million, before closing adjustments. The properties to be divested include the majority of Enerplus’s shallow gas assets, as well as its Brooks waterflood property.
  • March 9, 2017 – Northern Petroleum PLC signed an agreement to acquire production wells and facilities located in Alberta in the same area as the company’s existing Rainbow assets. The company will acquire 75% of the assets with its joint venture partner, High Power Petroleum LLC acquiring the remaining 25%.

Midstream

  • March 13, 2017 – The federal government approved NOVA Gas Transmission Ltd.’s Towerbirch Expansion Project subject to 24 binding conditions. The $439-million project will involve the construction of two new pipeline sections totalling approximately 87 kilometres along with associated facilities in northwest Alberta and northeast British Columbia.

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Significant Developments in Canadian Energy – For the Month of March 2017

Significant Developments in Canadian Energy – For the Month of February 2017

Conventional

  • February 13, 2017 – Alberta celebrated the 70th anniversary of the discovery of oil at Leduc #1, which is considered by many to be the start of the modern oil and gas industry in the province. The Government of Alberta marked the anniversary with a special presentation at the Leduc #1 Energy Discovery Centre. Attendees included Marg McCuaig-Boyd, Alberta’s Minister of Energy, Mark Scholz, President of the Canadian Association of Oilwell Drilling Contractors (CADOC), and Tim Hawkins, President of the Leduc/Devon Oilfield Historical Society. The discovery followed years of failures exploratory throughout the province, with Imperial Oil, the well’s proponent, having drilled 133 dry holes previously.
  • February 9, 2017 – Clearview Resources Ltd. closed an acquisition of assets in the Wilson Creek area of Alberta for $11.36, effective Dec. 1, 2016. Following the acquisition, Clearview’s production will be approximately 900 boe per day (roughly 50 percent oil and liquids and 50 percent gas).
  • February 1, 2017 – Alberta Investment Management Corporation (AIMCo) entered into a financing arrangement with Razor Energy Corp. AIMCo has committed a non-revolving term loan facility for a principal amount of $30 million on a four-year term, with an interest rate of 10 per cent payable semi-annually. A portion of the proceeds of the facility were used by Razor to fund the purchase price of the acquisition of certain producing oil and gas interests in the Swan Hills area of Alberta, with the remainder to be used to fund its development program and for general corporate purposes. In consideration of AIMCo providing the facility, Razor issued approximately 10.05 per cent of its outstanding common shares to AIMCO.

Oil Sands / Unconventional

  • February 13, 2017 – Malaysia’s state-owned oil company Petroliam Nasional Bhd (PETRONAS) may consider relocating its Canadian LNG export terminal project if required by Canadian government authorities, according to media reports quoting chairman Mohamad Sidek Hassan. The reports also indicated that PETRONAS has identified a potential new location for the plant to reduce costs and address environmental concerns.

Midstream / Downstream

  • February 23, 2017 – Enbridge Inc. and Spectra Energy Corp. announced that the previously announced merger of the two companies has received all required regulatory clearances under the merger agreement, including from the Canadian Competition Bureau. The transaction closed on February 27, 2017. The merged company will have an enterprise value of approximately CDN$166 billion, with an extensive, North America-wide portfolio of crude oil, liquids and natural gas pipelines, a large portfolio of strong, regulated gas distribution utilities and a growing renewable power generation position.
  • February 16, 2017 – Pembina Pipeline Corporation announced that it had entered into a 20-year infrastructure development and service agreement with Chevron Canada Limited. The agreement includes an area of dedication by Chevron, in excess of 10 gross operated townships (over 230,000 acres), located in Kaybob region of the Duvernay resource play near Fox Creek, Alberta. Under the agreement and subject to Chevron sanctioning development in the region, Chevron has the right to require Pembina to construct, own and operate gas gathering pipelines and processing facilities, liquids stabilization facilities and other supporting infrastructure for the area of dedication, together with Pembina providing long-term service for Chevron on its pipelines and fractionation facilities.
  • February 15, 2017 – Keyera Corp. announced plans for two new projects. First, a new NGL gathering pipeline system (Keylink) that will provide producers in west-central Alberta with a pipeline alternative for transporting NGLs from a number of Keyera gas plants. The estimated cost will be $147-million with an in-service date of mid-2018. Second, Keyera announced a project to expand the liquids handling capacity at the Simonette gas plant to meet customers’ growing needs. The project is expercted to cost $100 million with an in-service date of mid-2018.
  • February 13, 2017 – Gibson Energy Inc. entered into an agreement to sell its industrial propane business for cash consideration of $412 million to Superior Plus LP, which is to be completed through a series of transactions. Pursuant to an option purchase agreement and subject to the fulfilment of customary conditions, Gibson and Superior are obligated to complete the initial transaction pursuant to which Superior will pay non-refundable cash consideration of $412 million and Gibsons will grant an irrevocable option to Superior to acquire 100 per cent of the partnership units and shares of its Canwest and Stittco businesses.
  • February 2, 2017 – Suncor Energy Inc. closed the previously announced sale of its Petro-Canada Lubricants Inc. (PCLI) business to a subsidiary of HollyFrontier Corporation for gross proceeds of $1.125 billion, subject to customary closing adjustments.
Significant Developments in Canadian Energy – For the Month of February 2017

Significant Developments in Canadian Energy – For the Month of December 2016

Conventional

  • December 15, 2016 – Athabasca Oil Corporation entered into agreements with Statoil ASA and its wholly owned subsidiary Statoil Canada Ltd. to acquire their Canadian thermal oil assets for consideration of $435 million cash, 100 million common shares and contingent value payments triggered at oil prices above US$65 per bbl WTI.
  • December 14, 2016 – Toro Oil & Gas Ltd. entered into a definitive agreement with Steelhead Petroleum Ltd., pursuant to which Steelhead will acquire all of the outstanding common shares and common share purchase warrants of Toro Oil & Gas Ltd. for approximately $44.1 million in cash.
  • December 12, 2016 – Delphi Energy Corp. announced that it closed its strategic agreement with its existing working interest industry partner to accelerate the development of Delphi’s liquids-rich Deep Basin natural gas play at Bigstone in northwest Alberta. Delphi Energy Corp. received approximately $31.3 million in cash for the partner’s equalization of certain working interests and the partner also paid $10.9 million to Delphi for the partner’s carried obligation of the joint drilling program.
  •  December 9, 2016 – The Court of Queen’s Bench of Alberta granted an approval and vesting order for the previously announced purchase and sale of substantially all of the assets and business of Lightstream Resources Ltd. by Ridgeback Resources Inc. for the full amount of the claims outstanding in respect of the company’s 9.875% second lien secured notes due 2019 and debt in priority to the secured notes.
  • December 9, 2016 – ARC Resources Ltd. closed the previously-announced sale of its Saskatchewan assets and operations to Spartan Energy Corp. for total cash consideration of $700 million, subject to customary post-closing adjustments. The effective date of the transaction is October 1, 2016.
  • December 8, 2016 – Spartan Energy Corp. closed its previously announced bought deal public offering, including the exercise in full of the over-allotment option, for aggregate gross proceeds of approximately $287.6 million. Prior to the completion of the prospectus offering, Spartan closed a non-brokered private placement offering for aggregate gross proceeds of $255 million. The aggregate gross proceeds from the prospectus offering and the private placement are approximately $542.6 million.
  • December 6, 2016 – Marquee Energy Ltd. announced the completion of the previously announced acquisition of Marquee Energy Ltd. by Alberta Oilsands Inc. by way of a plan of arrangement and the subsequent completion of the short-form vertical amalgamation to form the “new” Marquee Energy Ltd.
  • December 6, 2016 – Pine Cliff Energy Ltd. closed its previously announced disposition of non-core oil assets for $31.4 million, prior to any closing adjustments, consisting of $26.6 million in cash and $4.8 million in TSX-listed common shares of the purchaser. The disposed assets include approximately 500 boe per day of production weighted 94% to oil located in the Viking area of central Alberta.
  • December 5, 2016 – TransGlobe Energy Corporation entered into a definitive agreement to acquire Cardium light oil and Mannville liquid-rich gas assets in the Harmattan area of west-central Alberta for total consideration of $80 million.
  • December 5, 2016 – Bellatrix Exploration Ltd. entered into an agreement with a TSX-listed issuer to sell certain non-core assets in the Harmattan area of Alberta for $80 million, subject to customary closing adjustments. The transaction is expected to close prior to December 31, 2016, with an effective date of December 1, 2016. The $80 million purchase price will be payable $65 million in cash and $15 million in a vendor take back loan bearing interest at 10% per annum and secured by a first lien charge against the assets being sold.
  • December 2, 2016 – PrairieSky Royalty Ltd. completed four separate acquisition transactions for aggregate consideration of $117.3 million, representing approximately 460 boe per day of royalty production and over 100,000 acres of mineral title and royalty lands.
  • December 2, 2016 – BlackPearl Resources Inc. completed the sale of a gross overriding royalty interest on its Onion Lake property for $55 million. Under the terms of the agreement BlackPearl sold an approximate 1.75% royalty on production from substantially all of its Onion Lake lands.

Unconventional

  • December 15, 2016 – PrairieSky Royalty Ltd. entered into a definitive agreement with Pengrowth Energy Corporation to acquire a 4% gross overriding royalty on current and future phases of its Lindbergh SAGD thermal oil project, as well as seismic over certain lands in British Columbia and Alberta, for total cash consideration of $250 million.

Midstream

  • December 21, 2016 – Alberta Investment Management Corporation on behalf of certain of its clients, agreed to acquire an ownership stake in Howard Energy Partners from EnLink Midstream Partners, LP. The investment, representing an ownership stake of approximately 28% of Howard Energy Partners, makes the Alberta Investment Management Corporation the second largest unitholder in the company. The transaction is expected to close during the first quarter of 2017, subject to customary closing conditions.
  • December 20, 2016 – Tidewater Midstream and Infrastructure Ltd. acquired from a vendor the remaining approximate 37% working interest in the Brazeau River Complex gas plant and the remaining approximate 60% working interest in 105 kilometres of gas gathering pipelines directly connected to the BRC in addition to the remaining working interests for 100% ownership in the previously announced three proven natural gas storage reservoirs that are also directly connected to the BRC for a purchase price of $30 million in cash.
  • December 16, 2016 – Spectra Energy Corp. announced that during a special stockholder meeting, Spectra Energy stockholders voted to approve the previously announced combination of Spectra Energy with Enbridge Inc. in a stock-for-stock merger transaction. Enbridge shareholders also approved the required resolutions in connection with the merger transaction between Enbridge and Spectra at its special meeting of shareholders.
  • December 2, 2016 – Enbridge Inc. together with Enbridge Income Fund Holdings Inc. announced that it closed the previously announced sale of its South Prairie Region assets to Tundra Energy Marketing Limited for $1.075 billion in cash.
Significant Developments in Canadian Energy – For the Month of December 2016

Significant Developments in Canadian Energy – For the Month of November 2016

Conventional

  • November 29, 2016 – Raging River Exploration Inc. closed a Viking consolidation transaction. The company acquired approximately 620 boe per day — 97 per cent light oil — of production and 24 net sections of land prospective for Viking light oil, for total cash consideration of approximately CDN$58 million subject, to customary adjustments. In a separate release, Northern Blizzard Resources Inc. said it completed the sale of Viking light-oil assets in the Coleville area of Saskatchewan for cash consideration of CDN$58 million, subject to customary adjustments.
  • November 23, 2016 – Lightstream Resources Ltd. announced that sale procedures under the Companies’ Creditors Arrangement Act (CCAA) have concluded and that the credit bid submitted by the ad hoc committee of holders of approximately 91.5 per cent of the company’s 9.875 per cent second lien secured notes due 2019 is the successful bid. In accordance with the sale procedures, the company will seek to implement the credit bid by finalizing the terms of the definitive agreements and applying to the Court of Queen’s Bench of Alberta for an approval and vesting order anticipated to be heard on Dec. 8, 2016.
  • November 23, 2016 – Baytex Energy Corp. entered into an agreement to acquire heavy oil assets located in the Peace River area of northern Alberta for cash consideration of CDN$65 million, subject to customary adjustments. The assets add approximately 3,000 boe per day of production and more than double Baytex’s land base in the area. The acquisition will be funded through a concurrent $100 million bought deal financing.
  • November 18, 2016 – Spartan Energy Corp. entered into an agreement with ARC Resources Ltd. to acquire assets in southeast Saskatchewan for cash consideration of CDN$700 million, subject to customary adjustments. The acquisition will be funded through Spartan’s pro forma credit facility and through committed concurrent equity financings totalling CDN$505 million.
  • November 11, 2016 – ConocoPhillips announced plans to divest of US$5 billion to US$8 billion in assets, which will include assets in Western Canada. “These will be primarily North American gas assets, including some assets from our Western Canada Business Unit,” company spokesperson Rob Evans said, when asked following an analyst day event whether assets from Canada would be included.  “Specific details on Western Canada assets to be [marketed] are currently being worked out,” he added.
  • November 8, 2016 – Delphi Energy Corp. has entered into a non-binding Letter of Intent with an existing working interest partner. This transaction is intended to accelerate the development of its liquids-rich Deep Basin natural gas play at Bigstone in northwest Alberta. Under the LOI, the partner will undertake a CDN$40 million (gross) joint drilling program, to be completed before July 15, 2017, of which Delphi will contribute CDN$6 million while retaining a 65 percent working interest, in approximately five to six wells to be drilled at Bigstone Montney. The partner will contribute CDN$20 million in capital, along with its 35 per cent working interest share of CDN$14 million. In addition to the above drilling capital contribution, Delphi will receive CDN$30 million in cash at closing for equalization consideration.
  • November 2, 2016 – Tamarack Valley Energy Ltd. and Spur Resources Ltd. entered into an arrangement agreement providing for the acquisition by Tamarack of all the issued and outstanding common shares of Spur. As consideration, Tamarack will issue an aggregate of 90.1 million common shares of Tamarack and CDN$57.3 million in cash. Tamarack will also be assuming Spur’s net debt, estimated to be CDN$25.7 million as at Nov. 30, 2016, after accounting for proceeds from the exercise of all outstanding options of Spur, and severance and transaction costs. Based upon the previous 10-day VWAP of Tamarack of CDN$3.60 per share, the total consideration payable by Tamarack, including the assumption of debt, is approximately CDN$407.5 million.

Unconventional

  • November 7, 2016 – Woodfibre LNG will commence construction on British Columbia’s first liquefied natural gas processing and export terminal in 2017. The facility near Squamish, north of Vancouver, will export 2.1 million tonnes a year once it is operational in 2020, according to a company statement.
  • November 4, 2016 – Athabasca Oil Corporation announced an upsizing of the previously completed contingent bitumen royalty on its thermal assets with Burgess Energy Holdings L.L.C. for additional cash consideration of CDN$128.5 million. Including the initial royalty, Athabasca has now raised total cash proceeds of CDN$257 million.

Midstream

  • November 30, 2016 – The federal government announced that it had approved Kinder Morgan Inc.’s proposal to more than double the capacity of its Trans Mountain pipeline. Prime Minister Justin Trudeau also said Ottawa had vetoed Enbridge Inc.’s proposed Northern Gateway line, which would have taken crude from Alberta’s oilsands to the Pacific coast. It approved Enbridge’s plan to replace Canadian segments of Line 3, which carries crude from Alberta to Wisconsin.
  • November 16, 2016 – Tidewater Midstream and Infrastructure Ltd. entered into an agreement with to acquire an approximate 50 per cent working interest in 150 kilometres of gas gathering pipelines which are directly connected to Tidewater’s existing Brazeau River Complex (BRC), in addition to three natural gas storage reservoirs that are also directly connected to the BRC by means of the acquired pipelines, for a purchase price of CDN$15 million in cash.
  • November 3, 2016 – Union Gas announced the commercial in-service of a CDN$391 million expansion of natural gas pipeline and compression facilities that will move an incremental 0.4 PJ/d (.36 Bcf/d) of natural gas supplies through its Dawn-Parkway System, which links markets in eastern Canada and the northeast U.S. with the Dawn Hub. The facilities placed into commercial service comprise approximately 20 kilometres of 48-inch diameter pipeline between Hamilton and Milton, Ont., and an additional compressor facility at the existing Lobo Compressor Station near London.

Petrochemicals Manufacturing

  • November 4, 2016 – A part of the acquisition by Inter Pipeline Ltd.  (IPL) of The Williams Companies Inc.’s and Williams Partners L.P.’s  Canadian natural gas liquids midstream businesses, IPL assumes responsibility for the potential construction of a CDN$1.85 billion propane dehydrogenation (PDH) facility located near the Redwater Olefinic Fractionator. This facility would convert locally sourced propane into more valuable polymer grade propylene. Inter Pipeline is also assessing the commercial viability of constructing an additional processing facility, which would convert propylene into polypropylene, a solid plastic used in manufacturing a wide range of finished products. The preliminary estimate for the polypropylene facility is approximately CDN$1.3 billion. IPL is currently pursuing long-term, fee based offtake agreements with a number of global plastics manufacturing and marketing companies. Subject to securing appropriate commercial contracts, Inter Pipeline anticipates making final investment decisions on the PDH and polypropylene facilities by mid-2017, with both plants operational by mid-2021.

Oilfield Services

  • November 24, 2016 – Calfrac Well Services Ltd. entered into an agreement with Peters & Co. Limited, as lead underwriter on behalf of a syndicate of underwriters, pursuant to which the underwriters have agreed to purchase, on a private placement basis, 14,040,000 common shares of Calfrac at a price of CDN$2.85 per share for total gross proceeds of approximately CDN$40 million.
  • November 24, 2016 – Total Energy Services Inc. announced an intention to make an offer to purchase all of the issued and outstanding common shares of Savanna Energy Services Corp. for consideration consisting of common shares of Total. Total anticipates that, if the offer is successful, holders of Savanna shares will receive, in exchange for each Savanna share, 0.1132 of a common share of Total.
  • November 23, 2016 – Alberta Investment Management Corporation (AIMCo) signed a letter of commitment and a subscription agreement, on behalf of certain of its clients, to enter into a strategic financing relationship with Savanna Energy Services Corp. The financing relationship provides for a CDN$200 million debt-with-warrants financing and a private placement of 13 million common shares of Savanna at a price of CDN$1.45 per common share for gross proceeds of CDN$18.85 million.
Significant Developments in Canadian Energy – For the Month of November 2016

Significant Developments in Canadian Energy – for the Month of October 2016

Conventional

  • October 3, 2016 – DualEx Energy International Inc. has entered into an Alberta oil and gas asset purchase and sale agreement, and has also entered into two private Alberta oil and gas company share purchase agreements.
  • October 3, 2016 – Journey Energy Inc. (“Journey”) announced the closing of the disposition of an aggregate of 16.36 million common shares and restricted voting shares in the capital of Journey by Infra-PSP Partners Inc. pursuant to a share purchase agreement dated September 15, 2016.
  • October 6, 2016 – Velvet Energy Ltd., a private oil and liquids-rich natural gas producer in the Deep Basin of Alberta, has completed a private placement of US$125 million of senior secured second lien notes due 2023.
  • October 7, 2016 – Devon Energy Corp. has completed the sale of its 50% ownership interest in Access Pipeline to Wolf Midstream Inc., a portfolio company of Canada Pension Plan Investment Board, for C$1.4 billion.
  • October 7, 2016 – Alberta Investment Management Corporation has successfully entered into a strategic financing relationship with Journey Energy Inc. Journey Energy Inc. has completed a private placement of an aggregate of 30,000 units to Alberta Investment Management Corporation at a price of $1,000 per unit for aggregate gross proceeds of $30 million.
  • October 11, 2016 – Canbriam Energy Inc. purchased the British Columbia assets of Northpoint Resources Ltd. through the court appointed receiver for cash consideration of $7.5 million.
  • October 12, 2016 – SemCAMS entered into a 15-year agreement with NuVista Energy Ltd. to proceed with building a project that will have the capacity to process up to 200 mmcf per day of raw sour gas and 20,000 bbls per day of condensate in the Wapiti area of Alberta.
  • October 18, 2016 – Suncor Energy Inc. and Mikisew Cree First Nation signed a participation agreement for the purchase by Mikisew Cree First Nation of a 14.7% interest in Suncor’s East Tank Farm Development. Under the terms of the agreement, Mikisew Cree First Nation will pay 14.7% of the actual capital cost of the East Tank Farm Development once the assets become operational, which is currently anticipated to be in the second quarter of 2017.
  • October 21, 2016 – Tourmaline Oil Corp. has entered into an agreement with Shell Canada Energy to acquire strategic assets in the Alberta Deep Basin and the northeast B.C. Montney Complex for total consideration of $1.369 billion (before customary adjustments) including cash consideration of $1 billion and the remainder in Tourmaline common shares.
  • October 24, 2016 – Logan International Inc., which manufactures and sells drilling and production tools, announced that it acquisition by Rubicon Oilfield International UK Acquisition Co Limited, a wholly-owned subsidiary of Rubicon Oilfield International Holdings, L.P., by way of an arrangement under the Business Corporations Act (Alberta), has been completed. All of the outstanding common shares of Logan International Inc. were acquired for $1.49 per share.
  • October 27, 2016 – Husky Energy Inc. closed several outstanding Western Canada asset sales, in line with its objective to build a more capital efficient business with reduced sustaining capital requirements. In aggregate, about 27,000 boe a day, including royalty interests, has been sold in 2016 for gross proceeds of $1.3 billion.
  • October 31, 2016 – Suncor Energy Inc. announced it has reached an agreement to sell its Petro-Canada Lubricants Inc. business to a subsidiary of HollyFrontier Corporation for $1.125 billion, subject to customary closing adjustments.
  • October 31, 2016 – RMP Energy Inc. announced this morning the transformational sale of its Ante Creek asset for cash consideration of $114.3 million, subject to normal and customary closing adjustments.
  • October 31, 2016 – Vertex Resource Group Ltd. announced it has acquired Red Giant Energy Services Ltd., an oilfield service company specializing in storage, management and logistics of oilfield fluids in the Western Canadian Sedimentary Basin.
  • October 31, 2016 – Lightstream Resources Ltd. announced that the first phase of the sale procedures under the Companies’ Creditors Arrangement Act, in which non-binding indications of interest were received and considered, has concluded and, accordingly, qualified bidders will move to the second phase of the sale procedures. The company also confirmed that its common shares were delisted from trading on the Toronto Stock Exchange on October 27, 2016.
  • General Electric Co. (“GE”) and Baker Hughes Inc. announced that the companies have entered into an agreement to combine GE’s oil and gas business and Baker Hughes to create an oilfield technology provider with service and equipment capabilities and $32 billion of combined revenue and operations in more than 120 countries.

Midstream

  • October 20, 2016 – AltaGas Ltd. announced that its board approved an investment decision for the construction, ownership and operation of the North Pine facility, to be located approximately 40 kilometres northwest of Fort St. John, B.C. AltaGas will be constructing the North Pine facility with two NGL separation trains each capable of processing up to 10,000 bbls per day of propane plus NGL mix (C3+), for a total of 20,000 bbls per day. Site preparation for the first NGL separation train is expected to begin in the first quarter of 2017, with an expected commercial onstream date in the second quarter of 2018. The second 10,000 bbl-per-day NGL separation train is expected to follow after completion of the first train.

 

Significant Developments in Canadian Energy – for the Month of October 2016

Iran Issues Pre-qualification for Upstream Tenders

Iran is said to be targeting an increase in oil production from 3.85 to 4 million barrels per day by the end of 2016. Iran is also hoping to start export of a new heavy oil, called West Karun, and which is expected to compete with Iraq’s Basra Heavy crude, which has gained a significant market with US and Asian refiners since its launch in 2015.

Iran’s new upstream contract, the Iran Petroleum Contract (IPC), was delayed by parliamentary amendments but is now scheduled for launch in January 2017. The State-owned National Iranian Oil Company (NIOC) has already signed up an IPC with local firm, Persia Oil and Gas Development Company, which is one of eight Iranian contractors authorised to team up with international joint venture partners. Whilst Iran’s production costs may be rock bottom, foreign investment (and currently foreign exchange) is needed to deliver scale and speed of development.

NIOC (on behalf of Iran’s Ministry of Petroleum) has published its “Pre-qualification Questionnaire for Exploration and Production Oil and Gas Companies,” to be completed by 19.11.16 in order for NIOC to publish a “Long List” of qualified applicants on 7.12.16. This list is intended to be valid for two years as a pre-requisite for participating in upstream tenders. NIOC intends to then invite a short-list of qualified applicants from the long list, depending on project type (Short List).

Long List applicants will be scored according to typical technical and financial criteria but with some additional emphasis seemingly echoing NIOC’s objectives, including “scale” and “internationality”. The greatest score (25%) is allocated under the heading “Reliability” to credit ratings. Whilst it seems unusual to delegate financial capability diligence simply to reliance on a third party credit rating agencies, it does reduce the internal resources needed to sift financial data. That said, a number of those with credit ratings (and by definition, public equity or debt) may not yet have the appetite for Iranian investments, whilst those privately funded entrepreneurs and companies with strong balance sheets, may not seemingly participate, assuming that NIOC doesn’t choose to deal with non-compliant applicants.

“Scale” is assessed in terms of production rates and wells drilled over the last three years, with technical capability assessed over the same period and broken down into experience type including conventional and fractured operations, and improved and enhanced oil recovery. Choosing the last three years of oil pricing where some operations may be moth-balled etc. may be significant, but given that it is unclear as to how applicants may be assessed competitively, this is perhaps academic, provided a minimum threshold is demonstrated.

“Internationality” is judged against an “applicant’s headquarters’ business and/or registration place” which is seemingly designed to allow some flexibility to avoid being disadvantaged by a tax headquarters and otherwise to make the best of an organisation’s international operations, and possibly from more than one headquarters, if one takes a literal interpretation of the punctuation.

For the purposes of the Short List, applicants are “requested” to specify their “priorities and interested fields” and whether they wish to act as operator or non-operator. This clearly allows room for judgement versus competitors as to whether applicants would wish to share their commercial position at the outset.

It seems likely that most of the credit-rated applicants who would qualify, are already known to NIOC / have registered their interest more or less formally. The collation of extra data should enable NIOC to take into account preferences, but to grade applicants and to allocate tender opportunities in a manner perceived as transparent and which tends to avoid the dominance of any particular constituencies. Whilst the application of such process could be regarded as a short-term disincentive to some with an incumbent position, it could also be used to justify the favouring of incumbents, safe in the knowledge that the market was tested first. Otherwise, such process is likely to be regarded more generally as a welcome codification of what is expected to be a hotly-contested new market for lower cost developments.

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Iran Issues Pre-qualification for Upstream Tenders

Significant Developments in Canadian Energy – For the Month of September 2016

Conventional

  • September 27, 2016 – In connection with a state visit to China by Canadian Prime Minister Justin Trudeau, Sinoenergy Corporation Ltd. announced its intention to support the operations of Long Run Exploration Ltd. by the injection of an additional CDN$500 million in investment over the next two years
  • September 23, 2016 – Goldman, Sachs & Co. acquired 14.79 million common shares of Prairie Provident Resources Inc. in connection with the business combination of Lone Pine Resources Canada Ltd. and Arsenal Energy Inc. to form Prairie Provident. GS&Co now beneficially owns, controls and directs more than 10 per cent of the outstanding common shares of the amalgamated company.
  • September 20, 2016 – Encana Corporation announced a public offering of 107 million common shares at a price of US$9.35 per share, for gross proceeds of US$1 billion. Encana intends to use roughly half of the net to fund a portion of its 2017 capital program. The majority of this capital program is expected to be allocated to growing Encana’s Permian production.
  • September 20, 2016 – InPlay Oil Corp. and Anderson Energy Inc. announced an agreement to combine to create a new, Cardium-focused producer. InPlay also announced an agreement to acquire Cardium light oil assets in the Pembina region of Alberta from Bellatrix Exploration Ltd. for total consideration of $47 million, made up of $42 million cash, and 16.67 million shares of InPlay having a deemed value of $5 million (30 cents per share).
  • September 12, 2016 – Imperial Oil Limited announced that it will be seeking a buyer for its interest in the Norman Wells Oil Field in the Northwest Territories, though a definitive decision to sell the assets has not been made.
  • September 9, 2016 – Suncor Energy Inc. announced that it will issue an aggregate of $1 billion of senior unsecured Series 5 medium term notes. The offering will be conducted in two tranches consisting of $700 million of senior unsecured Series 5 medium term notes maturing on Sept. 14, 2026, and $300 million of senior unsecured Series 5 medium term notes maturing on Sept. 13, 2046.
  • September 9, 2016 – Crescent Point Energy Corp. entered into an agreement, on a bought deal basis, to sell 33.7 million common shares at $19.30 per share to raise gross proceeds of approximately CDN$650 million. Crescent Point increased its fourth quarter capital budget by $150 million, resulting in budgeted annual capital expenditures of $1.1 billion for 2016.

Unconventional

  • September 27, 2016 – the Government of Canada announced its approval, subject to conditions, of Progress Energy’s Pacific North West LNG project. The announcement was made at an evening press conference held in Richmond, British Columbia by federal Ministers Catherine McKenna (Environment), Jim Carr (Natural Resources), and Dominic LeBlanc (Fisheries, Oceans and the Canadian Coast Guard). PETRONAS, the parent company of Progress Energy, subsequently announced that it will be reviewing the project internally in light of the conditions to approval imposed by the federal government and prevailing market conditions.
  • September 19, 2016 – Seven Generations Energy Ltd. announced that it had entered into a development agreement with Steelhead LNG to explore infrastructure development and open new overseas markets for Canadian natural gas. 7G also acquired a minority ownership interest in Steelhead LNG.
  • September 16, 2016 – The Alberta government approved three new oilsands proposals: (a) the Blackpearl Resources Inc. Blackrod SAGD development; (b) the Surmont Energy Ltd. Wildwood oilsands SAGD development; and (c) the Husky Energy Inc. Saleski oilsands development. Collectively these projects represent about $4 billion of potential investment into Alberta’s economy and about 95,000 bbls per day of production.

Midstream

  • September 29, 2016 –Enbridge Inc. announced an agreement for the sale of liquids pipelines assets in the South Prairie Region to Tundra Energy Marketing Limited for $1.075 billion in cash. Closing of the transaction is expected to close in the fourth quarter of 2016.
  • September 26, 2016 – TransCanada Corporation announced that its wholly-owned subsidiary, Columbia Pipeline Group, Inc. has offered to acquire, for cash, all of the 53.84 million outstanding common units of the master limited partnership, Columbia Pipeline Partners, LP at a price of US$15.75 per common unit (aggregate US$848 million). This represents an 11.3 per cent premium to the 30-day average closing price on September 23, 2016.
  • September 7, 2016 – Veresen Inc. announced that Veresen Midstream secured CDN$650 million of new credit facilities, which will be primarily used to fund Veresen Midstream’s contracted capital projects under construction, including the Sunrise, Tower and Saturn processing facilities.
  • September 6, 2016 – Enbridge Inc. and Spectra Energy Corp. entered into a definitive merger agreement under which Enbridge and Spectra Energy will combine in a stock-for-stock merger transaction, which values Spectra Energy common stock at approximately CDN$37 billion (US$28 billion), based on the closing price of Enbridge’s common shares on September 2, 2016. The combination will create the largest midstream energy company in North America and one of the largest globally based on a pro-forma enterprise value of approximately CDN$165 billion (US$127 billion). The transaction was unanimously approved by the boards of directors of both companies and is expected to close in the first quarter of 2017, subject to shareholder and certain regulatory approvals, and other customary conditions.
  • September 2, 2016 – Enbridge Inc. announced that its affiliate, Enbridge Energy Partners, L.P. (EEP), will defer its US$2.6 billion Sandpiper project in the Bakken and withdraw associated regulatory applications currently before the Minnesota Public Utilities Commission. EEP decided that the project should be delayed until crude oil production in North Dakota recovers sufficiently to support development of new pipeline capacity.

Alternative / Green

  • September 20, 2016 – In connection with Alberta’s Climate Leadership Plan, the provincial government announced the appointment of a task force to provide recommendations on government investment into “climate technology.” The appointees are: Gordon Lambert, chair; W.L. (Vic) Adamowicz; Shelly Vermillion; Suzanne West and Sara Hastings-Simon.
  • September 19, 2016 – Canadian Environment Minister Catherine McKenna announced that Canada will impose a carbon price on provinces that do not adequately regulate emissions by themselves. Details of this new carbon price and how it will be implemented have not yet been announced.
Significant Developments in Canadian Energy – For the Month of September 2016