A&D WATCH
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Gross ProductionAnnounced Date Target Acquiror Value Reserve Metrics Metrics (Cdn. $MM) ($/boe 2P) ($/boe/d)
Oct. 26, 2011 Equal Energy Arsenal Energy Inc. 40.3 16.10 26,833 Oct. 11, 2011 Daylight Energy Ltd. Sinopec 3,001.5 17.23 78,927 Sep. 9, 2011 Skana Exploration Bonavista Energy Corporation 80.0 6.60 42,000 Jul. 28, 2011 Milestone Exploration Inc. Bonavista Energy Corporation 95.5 11.00 35,038 Jul. 19, 2011 Zargon (Assets) Undisclosed 24.5 34.78 91,231 Jul. 5, 2011 Lakeridge Energy et al. Shoreline Energy Corp. 25.0 9.92 38,627 Jun. 17, 2011 Culane Energy Corp. Killam Acquisition Company Ltd. 100.0 19.46 112,728 May 24, 2011 Cinch Energy Corp. Tourmaline Oil Corp. 250.0 14.10 73,354May 11, 2011 Orion Oil & Gas Corporation WestFire Energy Ltd. 360.0 15.32 65,457
Recent Transaction Metrics
Edmonton
Ft. McMurray
Calgary
Regina
T120
T110
T100
T90
T80
T70
T60
T50
T40
T30
T20
T10
T50
T40
T30
T20
T10
94-O94-P
94-N
94-J 94-I
94-K
94-G 94-H
94-F
94-B94-C
93-O93-P
93-N
93-J 93-I
93-K
R10
W6M
W5M
W4MR2
0
R20
R10
R10
W3M W2MR2
0
R10
R10
R20
A L B E R TA S A S K AT C H E W A N
B . C .
ShellJV Opportunity: 25-50% WI in Chinook Nikanassin unconventional gas, current production of 35 MMcf/d
HuskyJV Opportunity: 30-40% WI in liquids-rich Ansell Deep Basin assets, including existing production of 6,165 boe/d
NexenJV Opportunity: 40% WI in the Horn River, Cordova and Liard areas in Northeast BC, current gas production 40 MMcf/d
Encana73 MMcfe/d gas production in the Greater Sierra areaJV Opportunity: Partner in existing 29 MMcfe/d gas production and future development opportunities in Greater Sierra and Horn RiverJV Opportunity: Partner in undeveloped Montney acreage in its Dawson and Cutbank areas of Northeast British Columbia
BirchcliffCorporate sale.19,250 boe/d (76% natural gas) with focus on large scale resource plays in the Peace River Arch area of Alberta
Mosaic Energy5,120 boe/d (68% gas weighted) strategic alternative process. Core operations in Northern Alberta (Jayar/Latorrell/Karr) and West Central Alberta (Edsen/Pine Creek/Carrot Creek) and Redwater Penn West4,400 boe/d (80% liquids weighted) of production in the Kaybob, Alberta, Westerose, Alberta and Virden, Manitoba areas 1,180 boe/d (45% oil & NGLs) in Redwater properties with upside in Viking development
ConocoPhillips3,600 boe/d of low decline gas and oil production in the Camrose and Hanna areas in Alberta
Rock Energy3,150 boe/d (~73% oil and NGL) of production in the Grande Prairie, Alberta and Lloydminster region of Alberta and Saskatchewan
Waseca3,000 boe/d of heavy oil properties in the Lloydminster region of Alberta and Saskatchewan
Recent Publically Announced Canadian Assets in the Market
Contents
- Introduction- Recent Publically Announced Assets in the Market- Recent Transaction Metrics- Natural Gas Export Development- CIBC’s Recent Transactions- CIBC’s Contacts
CIBC A&D Watch
The A&D Watch provides an update of the current assets on the market, summarizes recent transactions with production and reserves metrics, and highlights an active trend or play.
Current publically available assets continue to be gas-weighted with large packages on the market (divestments or joint ventures) from several of the major players.
With the current North American natural gas supply-demand imbalance, the North American gas strategy has begun to focus on Liquefied Natural Gas (LNG) exports. In 2010, 220 million metric tonnes of LNG was traded globally between 20 importing countries and 18 exporting countries.
CIBC’s enhanced oil and gas technical group has significant in-house expertise ready to serve our clients with all their M&A and A&D needs. CIBC maintains strong relationships with all industry players through its ongoing business.
NOVEMBER 2011
THIS MONTH’S FOCUS - NATURAL GAS EXPORT DEVELOPMENT
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A&D WATCH
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NATURAL GAS EXPORT DEVELOPMENT
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FORECASTED GLOBAL LNG SUPPLY VERSUS DEMAND
* Committed Supply includes export projects currently exporting or under construction.
0
50
100
150
200
250
300
350
400
450
500
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
MM
t /
year
Americas
Source: CIBC World Markets Inc. & Poten and Partners.
AsiaEurope
Committed Supply*
LNG Unloading
Loaded Voyage
Ballast Voyage
Upstream Pipeline LiquefactionPlant
LNG Loading
DistributionReceiving Terminal &Regasification Facility
PROCESS FLOW DIAGRAM
What is LNG?LNG is simply the phase change from gas to liquid of the same gas
molecules that make up traditional natural gas.
With the current North American natural gas supply-demand imbalance, coupled with robust global demand for LNG and pricing differentials, the North American gas strategy is now focused on LNG exports.
The West Coast of North America is well positioned to benefit from LNG export dynamics because of the access to both an abundant source of economic gas supply and a higher priced Asian market.
In order for natural gas to be exported from North America, regulatory bodies must approve the export (Canada – National Energy Board; US – Department of Energy & Federal Energy Regulatory Commission). Alaska has the only currently operational export terminal and Kitimat recently received regulatory approval to export gas. There are numerous facilities currently proposed and in various stages of the regulatory process.
As of late, there have been a lot of exciting announcements related to North American LNG processes and the quest to viably export this resource throughout the world.
LNG ProcessThe process involves upstream producers extracting the hydrocarbon and transporting it via pipeline to an LNG facility where it is transformed into a liquid. By liquefying the natural gas, it is easier to store for transportation and allows the natural gas product to be sold in the global marketplace as opposed to only being available to the domestic market.
Upon arrival at the LNG facility, the natural gas is cooled to a temperature that allows it to condense into a liquid state. This phase change dramatically reduces the volume of the natural gas (~1/600th the volume of natural gas in its gaseous phase) and allows for it to be transported at considerably more attractive economic rates.
Upon arrival at its destination the LNG is regasified and transported via pipelines to potential end users.
Canadian LNG - West CoastInterest in LNG facilities on the West Coast of British Columbia is a result of the desire to capitalize on both the shale gas plays located in N.E. British Columbia and the price differential between North American and Asian natural gas prices. At 54 degrees north, Kitimat is one of North America’s closest ports to the Asian markets (~4,300 nautical miles).
“Energy infrastructure projects will unlockCanada’s resource wealth”
Jim Prentice, Senior Executive Vice President and Vice Chairman, CIBC
The Asian LNG market typically has long contract periods and pricing derived from oil. As global demand for LNG immensely increases, the majority of demand growth will be driven by Asian markets.
The ultimate goal of the process is to allow North American natural gas to be economically exported to a global market and in turn benefit from higher prices abroad.
LNG export capability will help to re-balance the longer term gas supply-demand in North America.
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20172016201520142013201220112010200920082007200620052004 2018
2004Kitimat proposed asan import terminal
August 2006Canadian federalenvironmental
assessment decision statement received
June 2006Canadian provincial
environmental assessment approval
January 2010Apache purchases
51% of project andbecomes operator
May 2010EOG Resources Canada signspre-acquisition agreement to
purchase remaining49% of project
November 2010Haisla First Nation
votes overwhelminglyto approve land leases
November 2010Documents fully
executed for landleases with related
agreements
December 2010KM LNG Operating
General Partnershipfiles Canadian Federal
Export License application
December 2010EOG closes agreement
on purchase of 49%of project
March 2011Kitimat LNG front endengineering and designawarded to KBR
March 2011Apache and EOG welcome Encanato the Kitimat LNGdevelopment
October 2011Canada’s NEBgrants Kitimat LNG a20 year Export Licenseto serve international markets
July 2011Kitimat LNG purchasesEurocan industrial site
March 2011Apache and EOG acquireall of Pacific Trail Pipelines
2012Final investmentdecision
2015Expected onstream production
(0.7 Bcf/day)
2017/2018 Phase 2 Operational
(additional 0.7 Bcf/day)
KITIMAT PROJECT TIMELINE
September 2008Kitimat LNG announces plansto develop an export terminal
on its existing planned import site
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NATURAL GAS EXPORT DEVELOPMENT
Prince Rupert Potential Terminal
KitimatFuture LNG Export
to Asian Ports
Spectra EnergyMain PipelineExport to USWestcoast
Pacific Trail Pipeline Proposed
Horn River Basin
Montney
On October 13, 2011 the NEB approved the Kitimat LNG Partnership’s application for a license to export LNG to external markets. This application is the first that the NEB has approved.
Kitimat LNG The Kitimat LNG Partnership is comprised of Apache Canada (40% interest), EOG Resources (30% interest) and Encana (30% interest). They plan to build an LNG export terminal at Bish Cove near Kitimat for an estimated cost of $3.5 billion. Construction is anticipated to begin in 2012 with commencement of operations projected to begin in 2015. LNG exports for the first phase would be 0.7 Bcf/d loaded on tankers destined for Asia. The project is designed to include an expansion phase which would add an additional 0.7 Bcf/d in early 2018.
In addition, the Kitimat LNG Partnership plans to build an underground transportation pipeline (Pacific Trail Pipeline) concurrently with the terminal construction. This pipeline would run from Summit Lake to Bish Cove and connect the export terminal to Spectra Energy’s pipeline system which transports gas from northern B.C. and Alberta. Estimated cost for this pipeline is $1.0 billion with an expected capacity of 1.0 Bcf/d.
Similar projects are being considered by other companies including B.C. LNG Export Co-Operative LLC (a joint venture between LNG Partners and the Haisla First Nation), Shell Canada and a joint venture between Progress Energy Resources and Petronas. The B.C. government envisions three LNG facilities operating by 2020.
Shell CanadaShell has purchased a marine terminal near Kitimat as part of its early stage work to assess whether to build an LNG export facility to supply Asia with Canadian resources. The land was purchased from Cenovus Energy. Industry competitors welcome the move, “we’ve broadly stated we would welcome as many LNG export facilities as can be constructed in North America” said Randy Eresman, CEO of Encana Corp., a partner in the Kitimat LNG Operating Partnership.
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Additional Recent North American LNG NewsCheniere Energy PartnersCheniere Energy plans to expand its Sabine Pass LNG import terminal, located at Cameron Parish, Louisiana, to a bi-directional facility capable of both importing and exporting LNG.
Cheniere Energy recently signed an $8.0 billion deal with BG Group PLC to export liquefied natural gas. BG will buy 3.5 million metric tonnes (mmt) of LNG a year from Cheniere in a 20-year sales agreement. This deal allows Cheniere to proceed with its Sabine Pass expansion project, which would be the first LNG liquefaction plant built in the U.S. in fifty years.
The Sabine Pass LNG import terminal has been operational since 2008. Construction is anticipated to start in 2012 to expand it to a bi-directional facility with exports of LNG anticipated to begin in 2015. The initial expansion project would be capable of liquefying 1.0 Bcf/d of natural gas from two LNG trains. Additional liquefaction capacity could be added in the future if there was a demand for it.
The Sabine Pass facility is located in close proximity to five of the six major US shale gas plays, as well as other unconventional gas plays. There is an extensive network of existing gas pipelines that would be able to deliver natural gas to the Sabine Pass LNG terminal.
Cheniere Energy’s announcement continues to confirm the growing interest in LNG exports to the global market and the significant impact that they will have in the short term.
Veresen Inc.Jordan Cove, located in the deep water port at Coos Bay, Oregon, could present another viable West Coast export project, including both an LNG terminal and a natural gas pipeline with gas supply from both the U.S. Rocky Mountains and Canada. CIBC is currently advising Veresen in seeking proposals to contract for long-term use of the Jordan Cove Energy Project and the Pacific Connector Gas Pipeline and to fund development costs of the project through to a final investment decision.
The Jordan Cove Energy LNG Terminal would be capable of 1.0 Bcf/d output capacity including full containment tanks and process facilities and offers a short vessel transit distance (7 nautical miles) from the facility to the Pacific Ocean. The facility would have expansion potential for up to 1.5 Bcf/d.
The Pacific Connector Gas Pipeline would be a 234 mile, 36-inch, 1.0 Bcf/d pipeline that has expansion potential for up to 1.5 Bcf/d. Access to key supply basins is provided by interconnecting with TransCanada, Williams, El Paso and PG&E pipeline systems. Subsidiaries of Veresen, PG&E Corporation and Williams each hold an interest in the pipeline.
Gas Resource Play
Sabine Pass Operator: CheniereInitial Capacity: 1.0 Bcf/dExpansion Capacity: 1.5 Bcf/d
Kitimat LNG Operator: Kitmat LNGInitial Capacity: 0.7 Bcf/dExpansion Capacity: 1.4 Bcf/dShell Kitimat LNGOperator: ShellCapacity: to be determined
Jordan Cove Operator: VeresenInitial Capacity: 1.0 Bcf/dExpansion Capacity: 1.5 Bcf/d
RECENT ACTIVITY
PipelinePacific Connector
FERC certification was approved in 2009 for construction and operation of the LNG import facility, as well as the connector gas pipeline. Jordan Cove is ideally positioned on the North American West Coast to enable LNG exports as well as to retain integration with large U.S. markets.
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NATURAL GAS EXPORT DEVELOPMENT
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CLICK HERE to view CIBC’s website for current public mandates
NATURAL GAS EXPORT DEVELOPMENT
ASIAN LNG IMPORTING COUNTRIES
Japan7.55 million metric tonnesAugust 2011
Taiwan1.17 million metric tonnesAugust 2011
China1.15 million metric tonnes
September 2011
South Korea2.25 million metric tonnes
July 2011
India0.75 million metric tonnes
July 2011
Asian LNG Importers Annual Volume Latest Month(1)
Country 2009 2010 2011 (mmt) (mmt) (mmt)
Japan 64.6 70.1 7.55South Korea 25.8 32.6 2.25China 9.1 8.9 1.15Taiwan 8.6 10.8 1.17India 5.5 9.4 0.75Total 113.6 131.8 (1) Latest month for which data is publically available
1 million metric tonnes LNG = 48.7 billion cubic feet NG
LNG Export OpportunitiesFrom about 2000 to 2008, it was forecast that the gas supply in North America would be insufficient to meet demand and that imports of LNG would be required. However, in 2008 technological advances in horizontal drilling and multi-stage fracturing unlocked the development of unconventional sources of gas in North America. In just over a year the success of shale gas plays changed the gas market from undersupplied to significantly oversupplied.
The North American LNG strategy has now shifted from one of LNG imports to LNG exports, with numerous proposals to build LNG export terminals in North America. It is now a race to build LNG liquefaction capacity by either building a new facility or converting an existing re-gasification facility to a liquefaction facility.
West Coast LNG export dynamics is a very attractive. There is a limited number of LNG projects planned along the West Coast and the shipping distances from the West Coast to Asia are significantly shorter than from other LNG exporting nations. Shorter trade routes are important because an LNG tanker utilizes its cargo as fuel so being even one day closer to Asia can have an impact.
Global LNG MarketsThe global trade of LNG has grown significantly since it began in 1964, with worldwide demand for LNG expected to continue to grow. In 2010, over 220 million metric tonnes of LNG was traded globally between 20 importing countries and 18 exporting countries. The demand for LNG imports is forecast to be over 450 mmt/y by 2035, with growth being led by the Asian markets.
Asian markets currently comprise about 60% of the global LNG trade. The five major importing countries are Japan, South Korea, Taiwan, China and India. While Japan, South Korea and Taiwan have established LNG markets, China and India have only more recently began to establish LNG import markets.
Even before the earthquake in Japan, Asian markets were forecast to increase their LNG imports. After the earthquake, the potential now exists for a dramatic increase in LNG demand not yet accounted for in existing models as Asian countries shift away from their dependence on nuclear energy. For example, in Japan only 10 of 54 reactors remain on the grid.
Source: Bloomberg
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NATURAL GAS EXPORT DEVELOPMENT
Export Facilities
# Facility Name Operator Location Status Capacity (Bcf/d)
1 Kenai ConocoPhillips Alaska, U.S. Operational 0.242 Point Fortin BP PLC Trinidad and Tobago Operational 2.003 Kitimat LNG Kitimat LNG Inc British Columbia, Can. Proposed 1.404 Douglas Channel Maverick/First Nations British Columbia, Can. Proposed 0.135 Kitimat Marine LNG Shell Canada British Columbia, Can. Proposed TBA6 Jordan Cove Veresen Inc Oregon, U.S. Proposed 1.007 Freeport Freeport LNG LLC Texas, U.S. Proposed 1.808 Sabine Pass Cheniere Energy Inc Louisiana, U.S. Proposed 2.209 Lake Charles Southern Union/BG Louisiana, U.S. Proposed 2.0010 Cove Point Dominion Resources Inc Maryland, U.S. Proposed 1.00 Import Facilities
# Facility Name Operator Location Status Capacity (Bcf/d)
11 Costa Azul Sempra Energy Mexico Operational 1.0012 Altamira Shell Mexico Operational 0.7013 Gulf Gateway Excelerate Energy Louisiana, U.S. Operational 0.5014 Freeport Cheneire/Freeport LNG Texas, U.S. Operational 1.5015 Golden Pass Qatar Petroleum, Exxon, ConocoPhillips Texas, U.S. Operational 2.0016 Cameron Sempra LNG Louisiana, U.S. Operational 1.5017 Lake Charles Southern Union/BG Louisiana, U.S. Operational 2.1018 Sabine Pass Cheniere Energy Louisiana, U.S. Operational 4.0019 Elba Island El Paso Corp Georgia, U.S. Operational 1.7520 Cove Point Dominion Resources Inc Maryland, U.S. Operational 1.8021 Everett LNG Facility Distrigas of Mass. Mass., U.S. Operational 1.0022 Northeast Gateway Excelerate Energy Mass., U.S. Operational 0.8023 Canaport Canaport LNG LP New Brunswick, Can. Operational 1.0024 Andres AES Corp Dominican Republic Operational 0.2725 Guayanilla Bay Edison Mission Energy Puerto Rico Operational 0.1026 Manzanillo LNG KMS (Kogas/Mitsui/Samsung) Mexico Construction 0.5027 Pascagoula Gulf Gulf LNG Energy Mississippi, U.S. Construction 1.5028 Oregon LNG Oregon LNG Oregon, U.S. Proposed 1.0029 St. Helens Port Westward LNG LLC Oregon, U.S. Proposed 0.7030 Creole Trail Cheniere Energy Louisiana, U.S. Proposed 3.30
LNG TERMINALS AND SHIPPING ROUTES
1
12
2
5 34
11
13
1415 16
1718 19
20
2221
23
24 25
2730
2829
6
87
26
10
9
EUROPE
SOUTH AMERICA
ASIA~4,500 Nautical Miles~10 days
~9,000 Nautical Miles~20 days
~4,500 Nautical Miles~10 days
~4,500 Nautical Miles~10 days
Export Terminal
Import Terminal
Shipping Route
~4,500 Nautical Miles~10 days
Shane PopowichExecutive Director, Calgary
Art KorpachVice Chairman, Calgary
Jeff ShawChief Engineer, Calgary
Denise PoleyChief Geophysicist/Geologist, Calgary
Dave SmithChief Geologist, Calgary
Mark HorsfallManaging Director, Head of Global Energy, Calgary
Duff AckerleySr. Communications Coordinator, Calgary
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Jordan HoroschakExecutive Director, Houston
Chris FolanManaging Director, London
+44 (0) 207 234 [email protected]
Stuart CooperA&D Advisory, London+44 (0) 207 234 6808
Li QuanAsian Coverage, Beijing/Calgary
Katherine PilgerPetroleum Engineer, Calgary
CIBC EXPERTISE
CLICK HERE to view CIBC’s website for current public mandates
has sold its interests in
Tunisia assetsto
An Undisclosed Buyer
C$25 million
Financial Advisor to Talisman
March 2010
sold itsWarburg Assets to
C$147 million
Financial Advisor to Talisman
November 2009
C$15 million
Financial Advisor to North Peace
November 2010
has been sold to
C$82 million
Financial Advisor to Excelsior Energy
November 2010
sold a first package ofundeveloped oil and gas
acreage inSoutheast Saskatchewan to
Financial Advisor to Tundra
May 2010
Undisclosed
sold a second package ofundeveloped oil and gas
acreage inSoutheast Saskatchewan
to
Financial Advisor to Tundra
August 2010
has been sold to
North Peace EnergyCorp.
Southern PacificResource Corp.
has formed a strategic partnership with
SCDM Énergie
$15 Million
Financial Advisor to Petrolia
August 2010
has been sold through a series of transactions to
Undisclosed Buyers
Undisclosed Amount
Financial Advisor to Martin Head
March 2010
sold selectWestern Canadian
assets to an
Undisclosed Buyer
C$65 million
Financial Advisor to Encana
January 2009
Talisman Energy Inc.
Talisman Energy Inc.
West Energy Ltd.
Excelsior Energy
AthabascaOil Sands Corp.
Tundra Oil & GasPartnership Petrolia
Martin HeadOil & Gas Ltd.
Tundra Oil & GasPartnership
NAL EnergyCorporation
Encana
has been sold to
Undisclosed buyer
Undisclosed Amount
Financial Advisor to Sifton Energy Inc.
December 2010
Sifton Energy Inc.Sold
Gulf of Mexico assetsto
US$22 million
Financial Advisor to Providence
March 2011
has been sold to
Undisclosed buyerand
created a new growth oriented producer
C$229 million
Financial Advisor to Spartan
June 2011
SpartanExploration Ltd. Providence
Dynamic OffshoreResources
has sold Onshore/Offshore ItalyNatural Gas Assets to
Undisclosed buyerC$66 million
Financial Advisor to Mediterranean
May 2011
MediterraneanOil & Gas Plc.
has sold the Aurora Property to
C$25 million
Financial Advisor to Encana
August 2011
Encana
Undisclosed buyer
Select CIBC A&D Transactions