Centrica Plc (CNA) and state-run Qatar Petroleum agreed to buy natural gas fields from Canada’s Suncor Energy Inc. (SU) for C$1 billion ($981 million) as the largest U.K. household-energy company seeks added supplies for North American customers.
The assets, mostly in southern and central Alberta, will be operated by Centrica and produce about 250 million cubic feet of gas a day this year, the company said in a statement today. Centrica will own 60 percent and Qatar Petroleum International 40 percent. The deal is Qatar Petroleum’s first investment in an overseas gas field and the first by the two companies under a cooperation accord signed in December 2011.
“The acquisition provides attractive returns in a region we know well, and significantly increases the size and quality of our portfolio,” Sam Laidlaw, chief executive officer of Windsor-based Centrica, said in the statement. With the prospect to develop another 1 million acres, it has “the potential to improve returns further.”
The deal adds to Centrica’s energy supplies as North Sea output drops and it seeks to double profit from North America by adding retail customers and meeting more demand from its own resources. For Suncor, the sale covers the majority of its conventional gas production in western Canada. It doesn’t include most of Suncor’s shale-gas production in the Montney or oil sands in Alberta.
North American gas producers have sold assets and sought joint-venture partners to help fund drilling as a glut in supply sent prices to a 10-year low last year in New York. The U.S. is poised to become a gas exporter as the use of hydraulic fracturing technology allows the nation to exploit reserves of the fuel trapped in shale rock.
“This may prove to be Centrica’s largest North American investment this year,” Chris Rogers, a Bloomberg Industries analyst in London, said by e-mail. “Investors will want to know whether they will take a big position in shale as well.”
The U.K. company has more than 5.5 million customers and operates about 4,600 wells in North America. On March 25, Centrica signed a 20-year deal to import gas from the U.S. from Cheniere Energy Inc. (LNG:US)
Centrica rose 0.6 percent to a record 381.70 pence at the close in London. It has gained 14 percent this year. Suncor, Canada’s largest energy company, fell 4.6 percent to C$27.50 in Toronto, the biggest decline in two months. The Calgary-based company’s shares have fallen 16 percent this year.
The sale “represents 7 percent of Suncor’s estimated 2013 production volumes and essentially 100 percent of its natural gas production, now making it a pure play oil company,” Greg Pardy, a Toronto-based analyst at RBC Capital Markets, wrote in a note to clients today.
The deal will boost Suncor’s cash flow and may lead to further share buybacks, a dividend increase and additional debt reduction, Pardy wrote.
The Suncor fields hold estimated reserves equivalent to 978 billion cubic feet of gas, Centrica said. The deal also includes more than 1 million acres of undeveloped land, where Centrica said there’s potential to bolster reserves and production using horizontal drilling and fracturing.
Qatar, the biggest liquefied natural gas exporter, has a deal with Centrica to jointly seek so-called upstream oil and gas projects. Centrica said December 2011 that projects may include liquefied natural gas developments, as well as gas storage or combined-cycle gas turbine power plants.
Qatar is seeking assets abroad amid a moratorium on new development of the emirate’s North Field, the world’s largest gas reservoir, Nasser Al-Jaidah, chief executive officer of Qatar Petroleum International, said on Nov. 13.
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