Three-month TSX trading in Progress

Progress Energy Resources Corp. has a framework agreement to sell  half of its interest in three northeast British Columbia shale gas properties for $1.07 billion in a deal aimed at developing and exporting liquified natural gas to Asia, the company said Thursday.

The buyer is Petronas, the Malaysian national oil company, which will bring capital and its access to LNG markets to the table.

The strategic partnership will enable the company to speed up its growth strategy, Michael Culbert, president and CEO of Calgary-based Progress, said in a news release.

The Progress deal is the most recent in a series that have seen international companies inject billions of dollars into B.C. shale gas developments. 

Progress shares closed up 59 cents or 4.2 per cent to $14.57 in TSX trading.

New gas export facility considered

The partnership will look for ways to develop liquefied natural gas exports. It will establish an LNG export joint venture, 80 per cent owned by Petronas and 20 per cent by Progress, which will look into building and operating a new LNG export facility on B.C.'s west coast.

Petronas would operate the facility, and the two companies would jointly market the LNG using Petronas' existing network of global LNG customers.

Progress will sell 50 per cent of its working interest in its Altares, Lily and Kahta properties (the North Montney Joint Venture) to Petronas. The Malaysian company will pay 25 per cent ($267.5 million) in cash at closing,  and will contribute the remaining 75 per cent to pay Progress' share of future capital expenditures in the North Montney over the next five years, to a total of $802.5 million.

The deal "provides Progress with the capital required to accelerate the development of its unconventional assets and unlock the value underlying the company's vast Montney land holdings," the release said.

North Montney includes 149,910 acres, about 20 per cent of Progress' rights in its northeast British Columbia Foothills land holdings, which total 700,000 acres. The joint venture properties currently include five wells with minimal production.

The deal will close if the companies can negotiate definitive agreements and receive regulatory approval.

Other gas producers had earlier turned to international partners. In February, Encana announced a $5.4-billion joint venture deal with PetroChina in which the Chinese state oil company took a half interest in Encana's Cutbank Ridge gas properties in northern B.C. and Alberta. Unlike the Progress deal, however, those properties are already producing significant volumes of gas.

In March, Talisman Energy Inc. sold half its Cypress A shale gas properties in northeastern British Columbia to South African chemical producer Sasol for $1.05 billion.

The deal represented an expansion of their relationship, after Sasol in December paid the same amount for a half-stake in Talisman's nearby Farrell Creek assets.

Cypress A and Farrell Creek are both part of the Montney shale formation, which stretches through northeastern B.C. and northwestern Alberta.

Last summer, Penn West Energy Trust announced a joint venture with a division of Mitsubishi Corp., Japan's largest general trading company, exchanging a half interest in the Cordova Embayment area, as well as conventional natural gas properties in the Wildboy region, for $250 million in cash and a $600 million investment by Mitsubushi.