Chevron Canada Ltd. is selling a 30-per-cent stake in its Duvernay shale gas play to Kuwait Foreign Petroleum Exploration Co. for $1.5-billion (U.S.).
The deal brings in a partner to help spread the risk for the next stage of development of Chevron Canada’s Duvernay shale formation assets.
A Reuters report in August said Chevron Canada parent Chevron Corp. of San Ramon, Calif., was looking for a partner willing to invest about $1.5-billion of equity in the project.
Chevron Corp. said on Monday it is selling the 30-per-cent position to Kuwait Foreign Petroleum Exploration subsidiary KUFPEC Canada Inc.
The price includes cash paid at closing as well as a carry of a portion of Chevron Canada’s share of the joint venture’s future capital costs, Chevron Corp. said.
“This sale demonstrates our focus on strategically managing our portfolio to maximize the value of our global upstream businesses and is consistent with our partnership strategy,” Chevron Corp. senior vice-president of upstream operations Jay Johnson said.
The Duvernay play, which Chevron Corp. says is believed to be among the most promising shale opportunities in North America, is located about 200 kilometres northwest of Edmonton.
The agreement with KUFPEC – a subsidiary of global oil and gas company Kuwait Petroleum Corp. – creates a partnership for the appraisal and development of liquids-rich shale resources in about 330,000 net acres in the Kaybob area of the Duvernay, Chevron Corp. said.
“The transaction provides us an expanded relationship with a valued partner. It also recognizes the outstanding asset base we have assembled,” Mr. Johnson said.
The deal is expected to close in November of this year.
Chevron Canada will retain a 70 per cent interest in the joint venture Duvernay acreage and remain the operator, it said.
So far, Chevron Canada has drilled 16 wells with initial well production rates of up to 7.5 million cubic feet of natural gas and 1,300 barrels of condensate per day, the company said.
The investment in Duvernay by KUFPEC is its first in North America and an opportunity to develop shale technology with a “world-class” shale operator, KUFPEC said in a news release.