(Updates share price in sixth paragraph.)
June 2 (Bloomberg) -- Petroliam Nasional Bhd, Malaysia’s state-owned oil company, made its entry into Canada by agreeing to pay Progress Energy Resources Corp. as much as C$1.07 billion ($1.1 billion) for stakes in natural-gas fields with the potential for exports to Asia.
Petronas will pay C$267.5 million for a 50 percent share in the three fields in British Columbia, Calgary-based Progress said in a statement today. The Malaysian company also will fund 75 percent, or up to $C802.5 million, of field development costs for the next five years and will explore a possible liquefied natural gas terminal to export the fuel.
Petronas, based in Kuala Lumpur, follows PetroChina Co. and Korea National Oil Co. in buying Canadian gas assets during the past year. Encana Corp., the nation’s largest gas producer, said in April it’s looking for partners to help fund extraction of the fuel in British Columbia amid “unsustainably low” prices.
“The most attractive markets for gas in the foreseeable future are clearly in Asia,” Progress Chief Executive Officer Michael R. Culbert said today on a conference call with analysts. “Petronas is a global leader in LNG. We could not have found a better partner.”
Petronas agreed to invest as much as C$600 million in the Canadian company if the decision is made to build the LNG terminal, Culbert said. Petronas would own 80 percent of the LNG joint venture.
Progress rose 59 cents, or 4.2 percent, to C$14.57 at 4 p.m. on the Toronto Stock Exchange. The shares have gained 15 percent this year.
The sale is expected to close in the third quarter, the companies said. Culbert said gas from the fields can be sold profitably on North American markets, where prices are lower than on global markets.
Gas has averaged $4.25 per million British thermal units this year on the New York Mercantile Exchange. Japan LNG imports were $13.05 as of March 31, the last available date for data.
The Progress assets include 150,000 acres of gas fields in the Montney Shale expected to yield more than 15 trillion cubic feet, Culbert said. The joint venture has enough supply to keep an LNG terminal operating for more than 20 years, he said.
“The Montney is a very good asset and this looks like a strategic move to build up a large export facility,” said Kim Page, an analyst at Wellington West Capital Markets Inc. in Toronto who has a “buy” rating on Progress and owns shares. “The price seems a little richer than recent deals, but these assets also have a higher liquid content.”
Progress may seek partners for other fields in the Montney Shale and Petronas will seek more Canadian assets, he said.
The Montney Shale, which lies beneath British Columbia and Alberta, holds an estimated 49 trillion cubic feet of gas, according to an April 5 report by the U.S. Energy Information Administration. Producers inject water, sand and chemicals into shale, a dense rock formation, to extract gas.
LNG is gas that’s cooled to minus 161 degrees Celsius, reducing its volume and allowing for shipment by tanker to markets like Asia that aren’t accessible by Canadian pipelines.
Apache Corp., the Houston-based owner of gas fields in the province’s Horn River basin, has proposed a similar LNG terminal near Kitimat, British Columbia.
BMO Capital Markets Ltd. advised Progress on the transaction and Bank of America Corp. advised Petronas.
For more news and information: Progress reserves: PRQ CN <Equity> CH7 <GO> Petronas reserves: PET MK <Equity> CH7 <GO> News on Progress: PRQ CN <Equity> CN BN <GO> Petronas news: PET MK <Equity> CN BN <GO> Top energy news: ETOP <GO>
--With assistance from Jeremy van Loon in Calgary. Editors: Tina Davis, Charles Siler
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