The agreement, which must still be approved by Mitsubishi's board and the Canadian government, is expected to close in late September.
Penn West said it will sell Mitsubishi half of its working interest in the Wildboy play, including current production of about 30,000 Mcf/d, 550,0000 gross acres of land of which 120,000 acres targets shale gas in the Cordova Embayment, the Wildboy gas processing plant, a gas pipeline that connects the area with TransCanada's gathering system in Alberta and associated
infrastructure.
When the deal closes, Mitsubishi will pay Penn West roughly C$250 million for the existing assets and fund about C$600 million of the first C$800 million of exploration and development costs under the joint venture. Penn West will serve as operator of the assets.
In a statement Penn West said it has since 2006 "accumulated a significant shale gas position in the Cordova Embayment ... [and] initial drilling results in the area have been promising ... ."
The company said it believes the joint venture "will accelerate the exploration and development of this significant unconventional gas asset ... [and] supports our corporate strategy, which recognizes the importance of maintaining a balanced exploration and development portfolio as we assess and
develop the full potential of our diverse resource plays. This agreement is the foundation for a long-term relationship with [Mitsubishi], who has world-wide experience in major project development."
The deal marks Mitsubishi's first move into North American shale plays and comes less than a month after India's Reliance Energy said it was buying a 60% stake in essentially all of Carrizo's Marcellus Shale holdings in Pennsylvania for $392 million, marking that company's third joint venture in a US shale play.
The Carrizo deal came after Reliance bought a 40% interest in Pittsburgh-based Atlas Energy's Marcellus holdings in southwestern Pennsylvania for $1.7 billion in April and in June bought a 45% stake in Dallas-based Pioneer Natural Resources holdings in the Eagle Ford shale in south Texas for $1.15 billion.
Mitsubishi said it believes the gas resources in the Penn West deal have reserves of about 5 to 8 Tcf, based on independent evaluations.
A Mitsubishi spokesman also said the company will consider other acquisitions in North American shale gas plays.
China Chemical Weekly: http://news.chemnet.com/en/detail-1403616.html
