The Strategic Alliance will aid in the development of liquid-rich gas processing infrastructure in northeast B.C., while also providing preferred access to international energy markets for Painted Pony’s Montney production.
Under the first phase of the Strategic Alliance, AltaGas will construct and operate a 198 Mmcf/d shallow-cut gas processing facility in the Montney resource play, which has earned the name of the “Townsend Facility”.
Painted Pony will reserve the right to a minimum of 150 Mmcf/d of firm capacity.
“We are pleased to announce a multi-faceted Strategic Alliance with Painted Pony to support the exciting growth in the Montney region,” Chairman and CEO of AltaGas, David Cornhill said. “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 news markets, including Asia.”
The Townsend Facitlity will be located approximately 100 kilometres north of Fort St. John and 20 kilometres southeast of AltaGas’ Blair Creek facility, through which Painted Pony has already been processing a significant portion of its Montney production.
The Townsend Facility is estimated to cost approximately $325 – $350 million, constructed and funded by AltaGas, expected to be in service by the end of 2015.
Commercial operation is subject to regulatory and other customary approvals.
“We are very pleased to enter into this Strategic Alliance with AltaGas,” President and CEO of painted Pony, Patrick Ward said. “We have established a strong working relationship with their team and our companies are fully aligned with respect ot the potential for Montney gas development and the timing requited for achieving our mutual goals.”
There’s also a trade off of responsibilities between the two companies. AltaGas will become the primary marketer for Painted Pony’s natural gas and natural gas liquids production from its northeast B.C. land base, while also seeking premium marketing transactions for Painted Pony’s products through its North American and global network.
Meanwhile, Painted Pony will become a significant supplier to AltaGas, providing preferred access to export opportunities for LNG and natural gas liquids from existing and planned facilities.
Upon completion of the first phase of the Strategic Alliance, another processing facility is said to be constructed in northeast B.C., which may include a deep-cut system for the recovery of additional natural gas liquids and fractionation.
In accordance with the Strategic Alliance, AltaGas has agreed to subscribe, on a private placement basis, for a little over 4.1 million common shares in the capital of Painted Pony, priced at $12 per share, for a total of approximately $50 million.
The common shares are subject to a one-year hold period restriction and approval of the Toronto Stock Exchange.
The closing of the private placement is expected no later than September 5 2014.