Suncor sells gas assets to Progress Energy

Suncor Energy Inc. said Tuesday it has signed a deal to sell a group of natural gas properties in northeast B.C. to Progress Energy Resources Corp. for $390 million.

Production from the properties known as Jedney, Beg and Blueberry, located about 125 kilometres northwest of Fort St. John, totals about 43.8 million cubic feet equivalent per day.

“The acquired assets represent a strategic fit with Progress' existing land, reserves and production position in the foothills of northeast British Columbia,” Progress president and chief executive officer Michael Culbert said.

“We have long viewed these assets as high quality legacy properties with significant conventional and unconventional upside potential.”

Suncor, which merged with former Crown corporation Petro-Canada in August, aims to trim between $2-billion and $4-billion in non-core properties from its oil sands-focused portfolio.

So far, Suncor has shed about $907-million in assets, including the January sale of its Colorado natural gas properties to Houston-based Noble Energy Inc. for $494-million (U.S.). Suncor has also agreed to sell 98 gas stations in Ontario to Husky Energy Inc.

Offshore natural gas operations in Trinidad and Tobago, as well as some smaller holdings in the North Sea, are on the block as well.

In its outlook for 2010, Progress said it expects production to average between 40,000 and 42,000 barrels of oil equivalent per day, up from 32,115 boepd in 2009

Progress expects to finish 2010 with production of 45,000 to 46,500 boepd, up from 33,109 boepd at the end of 2009.

Progress said the deal will be funded through a $350-million private placement with the Canada Pension Plan Investment Board and a $250-million public financing.

Under the financing deal, CPPIB will subscribe for 27.8 million subscription receipts at a price of $12.60 each to take a roughly 13 per cent stake in Progress.

Progress has agreed to allow CPPIB to nominate one member to the company's board so long as the fund manager owns at least a 12.5 per cent in the company.

“Progress has a proven management team and superior long-term growth opportunities that we believe can benefit from the strategic and patient capital that we can provide,” said Scott Lawrence, the CPPIB's head of relationship investments.

Progress has also signed a deal with a syndicate of underwriters led by BMO Capital Markets to issue 19.9 million subscription receipts at the same price.

Each subscription receipt will represent the right to receive one share of Progress on the closing of the acquisition.