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AltaGas and Painted Pony announce strategic alliance

Published: 00:12 20 Aug 2014 AEST

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AltaGas (TSE:ALA), an energy infrastructure company, and Painted Pony Petroleum (TSE:PPY)  a junior Canadian oil and gas company, agreed to enter into a 15-year strategic alliance for the development of processing infrastructure and marketing services for natural gas and natural gas liquids. 

The strategic alliance will provide for the development of essential liquids-rich gas processing infrastructure in northeast British Columbia and will provide preferred access to international energy markets for Painted Pony's Montney production, the companies said in a statement today.

In the first phase of the deal, AltaGas will construct and operate a 198 Mmcf/d shallow-cut gas processing facility (the Townsend facility) in the Montney resource play, of which Painted Pony will maintain the right to a minimum 150 Mmcf/d of firm capacity.

"We view this Strategic Alliance as both a testament to AltaGas' strategic assets and capability, as well as Painted Pony's confidence in our ability to connect producers to new markets, including Asia," AltaGas Chief Executive Officer David Cornhill said in the statement.

The Townsend facility, located  100 kilometers north of Fort St. John and 20 kilometers southeast of AltaGas' Blair Creek facility, is estimated to cost $325 to $350 million, to be constructed and funded by AltaGas, and is expected to be in-service by the end of 2015. 

"The Strategic Alliance also brings viable solutions for providing long-term marketing optionality for Painted Pony's rapidly growing natural gas and natural gas liquids production," Painted Pony Chief Executive Officer Patrick Ward said in the statement.

AltaGas will become the primary marketer for Painted Pony's natural gas and natural gas liquids production from its northeast British Columbia land base and AltaGas will seek marketing transactions for Painted Pony's products.

Painted Pony will become a supplier to AltaGas under the deal, which will provide preferred access to export opportunities for liquefied natural gas and natural gas liquids from existing and planned facilities.

AltaGas has agreed to subscribe, on a private placement basis, for 4.2 million common shares in the capital of Painted Pony priced at $12 per share, for total proceeds of approximately $50 million, according to the statement. 

Pursuant to the terms of the private placement, the common shares subscribed for by AltaGas will be subject to a one-year hold period restriction. Closing of the private placement is expected no later than September 5. 

Painted Pony said it intends to use the proceeds of the private placement to further expand its planned 2015 capital program to accelerate development of its Montney project to align with the timing of the planned facilities contemplated by the Strategic Alliance.

AltaGas rose 1.5 percent to C$52.69 at 9:55 a.m. in Toronto, while Painted Pony climbed 4.5 percent to C$13.06.

TD Securities and Cormark Securities acted as financial advisors to Painted Pony. FirstEnergy Capital acted as strategic advisor to Painted Pony

 

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