Chevrons deal with KUFPEC Canada Inc. is valued higher than any other deal in the Duvernay Shale

October 7, 2014

Chevron’s acreage had an estimated NPV/acre of ~$4,000/acre, slightly above the average estimate of ~$3,700/acre, as per Rystad Energy’s latest Duvernay analysis (North American Shale Report Q3/2014). NPV/acre is here estimated at an oil price of $100/bbl and a 10% discount rate.

This average includes the best acreage in Duvernay Shale, including Shell, Athabasca Oil Corporation, Encana, Talisman, among others. KUFPEC agreed to acquire 30% interest in about 330,000 net acres prospective for Duvernay play for $1.5 billion.

“Based only on the acreage acquired comprising 99,000 net acres, KUFPEC paid ~$15,100/acre, which is the highest value per acre ever paid in Duvernay Shale”, says Sona Mlada, Analyst at Rystad Energy. In late 2012, when Petrochina acquired 49.9% interest in Encana’s Duvernay acreage for C$2.18 billion, the company paid ~$9,960/acre. The acreage of Chevron is located in the liquids window of the Duvernay Shale, whereas Encana’s acreage is exposed more to the condensate and gas window. “The initial production rates of the wells drilled on Encana’s acreage are on average ~40% higher than the Chevron’s wells; at the same time, Encana drills longer laterals. From all wells drilled in 2013 in Duvernay, Chevron had the highest average condensate content of ~70%,” says Ms. Mlada.