Vermilion Energy Inc. has amassed sizable positions in key Alberta oil and gas resource plays and it is looking to add more through acquisition, the company’s chief executive says.
Vermilion, which also has operations in Europe and Australia, may take advantage of some of the Western Canadian properties that have been put on the auction block by senior energy producers, or even scoop up a small rival, CEO Lorenzo Donadeo said.
The company bid for a large package of properties that Imperial Oil Ltd. has had for sale for several months, but it does not appear to have emerged the winner. With output of 15,411 barrels of oil equivalent a day, Imperial’s lands in the Boundary Lake, Rocky Mountain House and Pembina regions of Alberta would have increased Vermilion’s estimated 2014 production by about a third.
“We bid on it but we understand we’re not the successful bidder, and that’s all I can probably say on that,” Mr. Donadeo said in an interview. “But there are a number of other opportunities that are out there that we’re evaluating right now.”
Merger and acquisition activity in the oil patch dried up in 2013, but activity has picked up this year. In early February, Baytex Energy Corp. announced a $1.8-billion deal to buy Aurora Oil & Gas, giving it a stake in the Eagle Ford oil shale play in Texas. Two weeks ago, Canadian Natural Resources Ltd. scooped up Devon Energy Corp.’s Canadian natural gas properties for $3.1-billion.
Vermilion increased its own Canadian reserves by 27 per cent in 2013, concentrating on such plays as Cardium light oil as well as Mannville and Duvernay liquids-rich natural gas, the latter being a big target for such large names as Encana Corp., Chevron Corp. and Royal Dutch Shell PLC. A major part of the draw is the potential for large volumes of condensate, the light hydrocarbon used to thin bitumen from the oil sands so it can flow in pipelines.
The company has set a 2014 spending budget of $555-million, but that does not include potential acquisitions.
“There are a lot of opportunities right now in Alberta, and there’s not as much competition in terms of well-capitalized companies our size that are out there, so it’s a less competitive environment for new assets,” Mr. Donadeo said. “So, yeah, we’re looking at a number of opportunities and we’re hopeful we can execute something this year for sure.”
Imperial put its Alberta assets on the block in September and set a deadline for bids of early November. It asked suitors to submit new bids when proposals came in below its expectations, industry sources said. Based on recent average prices for light oil and liquids-rich gas, the assets could be worth more than $900-million. Other companies speculated to be interested in some or all of the properties are Sinopec Daylight Energy Ltd. and Whitecap Resources Inc.
Scotia Waterous is handling the sale. It has also agent for an 18,000-barrel-a-day package of Apache Corp. properties in Alberta and B.C.