ConocoPhillips enters deal to add Montney acreage from Kelt Exploration

ConocoPhillips has agreed to acquire Montney acreage in in British Columbia held by Kelt Exploration (LNG) Ltd., a subsidiary of Kelt Exploration Ltd., Calgary, for $375 million cash plus some $30 million in financial obligations for associated partially owned infrastructure.

This acquisition is 140,000 net acres in the liquids-rich Inga-Fireweed asset Montney zone, directly adjacent to ConocoPhillips’s existing Montney position and increases ConocoPhillips’s area position to 295,000 net acres with 100% working interest.

The deal adds over 1 billion boe of high-value resource with an all-in cost of supply of mid-$30s (WTI basis) with an acquisition cost of $2-4/bbl on a WTI cost of supply basis, depending on pace of development, the company said. Transaction economics do not assume any incremental capital investments are made in the Montney in the next several years. Production associated with the asset is 15,000 boe/d.

“We have tracked and analyzed this adjacent acreage position for a long time,” said Matt Fox, executive vice president and chief operating officer of ConocoPhillips. “The transaction provides operating scale and flexibility to create significant value for shareholders by applying our drilling and completion techniques on this asset and optimizing our future overall Montney development plans.”

Separately, ConocoPhillips said it initiated production from its Montney development in first-quarter 2020. Production continues to ramp up from the company’s first multi-well pad.

Still in the process of bringing initial wells online, the early results are encouraging, Fox said. “We have confirmed the liquids-rich nature of the play and also confirmed that transferring the drilling and completion techniques we’re employing in the US Big 3 can add significant rate and recovery potential to the play,” he continued.

Kelt LNG retains its remaining British Columbia assets, including the Montney lands at Oak/Flatrock for total Montney land holdings of 374,528 net acres.

Subject to regulatory approval, the deal is expected to close in this year’s third quarter with an effective date of July 1.