Full disclosure: we had to rework this article and title from our original title of “Is Repsol selling the rest of its Canadian assets?” because yesterday we found out that Repsol actually was selling its assets before we could hit publish. Why did we think this might be about to happen? Because BOE Intel picked up a giant licence transfer application on September 1st, 5 days before it would be announced that Peyto was buying Repsol’s Canadian assets.
This AER licence transfer didn’t show anything about who the buyer was or might be, but was suspicious because of its size and the listed buyer at the time: Respol Oil & Gas Canada Inc. to numbered company 15249856 Canada Ltd. The application was for 4260 wells, 189 facilities and 254 pipelines. That transfer is currently pending AER approval.
Figure 1
While it was possible at the time that this transfer had some other meaning, it appeared likely that a large amount of assets were being set up to be transferred; maybe to a hold co. for an eventual sale or maybe to a company representing an eventual buyer.
We found out yesterday that buyer was Peyto. Click here for the press release on the acquisition and financing.
Peyto announced that it has acquired Repsol’s Canadian assets for C$636 MM. This would include ~23,000 BOE/d (25% liquids), 455,000 net acres and complementary infrastructure. On a flowing barrel basis, the production is being acquired at about $27,652/BOE/d. That is certainly on the lower side of recent flowing barrel prices, although we haven’t seen too many Deep Basin, non-Montney gas weighted acquisitions in the recent past to compare to. To see this transaction relative to the rest of BOE Intel’s M&A database, click on the table below in Figure 2.
Figure 2
As we look back in hindsight at Repsol’s activity levels, there was also a bit of a tip off that the company was possibly showcasing its assets and/or trying to get production up a bit for a better sale price. 2017 was the last active year for Repsol in Canada. That year the company spud 24 wells. The following year in 2018, Repsol only spud 5 wells, and then did not spud another well for 5 years….until 2 months ago. In the last two months, activity had all of a sudden perked up, with the company spudding 11 wells in the Deep Basin; 7 Cardium, 3 Bluesky and 1 Falher.
Figure 3 – Repsol spud activity
| Spud Date | Spuds |
|---|---|
| 2015 | 21 |
| 2016 | 19 |
| 2017 | 24 |
| 2018 | 5 |
| 2019-2022 | 0 |
| 2023 | 11 |
BOE Intel has a monthly production tool that aggregates all wells licensed to a company on a gross basis (assuming 100% working interest). For Repsol, gross licensed production in July was approximately 21,000 BOE/d. This is pretty close to the quoted 23,000 BOE/d figure for the acquisition, particularly when you realize that none of the 2023 spuds were on production yet in July. The NGL volumes won’t show up on the monthly production tool as a result of single stream reporting in Alberta, but instead would come out of the gas volumes.
Figure 4 – Repsol Gross Licensed Production
While Repsol has other mineral rights scattered all around Western Canada, the majority of the company’s mineral rights are centered around Edson, in between Fox Creek and Hinton as shown in Figure 5 below. The map below shows how well these assets fit in with Peyto’s current assets. What is also readily apparent in this map is how undrilled the Repsol assets are. The lack of activity over the last 5 years means that Peyto is getting production with a very low decline rate, quoted as ~12% in the press release.
Figure 5 – Peyto/Repsol Crown mineral rights and spuds (last 5 years)
Also a part of the acquisition is a significant amount of infrastructure. Figure 6 below from the company’s press release shows the key gas plants. Peyto cites ~400 mmcf/d of net natural gas processing capacity being acquired, along with ~2,200 km of operated pipelines and a 12 MW cogeneration power plant
Source: Microsoft Word – Repsol Edson Acquisition Final.docx (peyto.com)
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