Commercial vehicle drivers wait to refuel at a compressed natural gas fueling station in Calgary, in October, 2024.Jeff McIntosh/The Canadian Press
Tourmaline Oil Corp. TOU-T, the country’s largest natural gas producer, put a massive collection of properties up for sale last week.
The price Tourmaline gets for its Peace River portfolio, and the identity of the potential buyer, will show whether oil patch CEOs are taking politicians seriously when they talk about natural gas as a solution to what ails the Canadian economy.
Calgary-based Tourmaline, run by self-made billionaire Mike Rose, is trying to sell the smallest of its three major holdings, a collection of 2,600 wells in northwestern Alberta. If successful, the company will redeploy the money in more promising territories, including development of recently acquired properties in British Columbia.
Estimates of how much Tourmaline stands to make run from $750-million to $1.4-billion, a larger-than-normal range that reflects the natural gas market’s uncertain prospects.
Look backward, and it is easy to get discouraged about the sector. Over the past year, the price of Alberta-produced natural gas dropped sharply on factors that include rising production, warm weather and slower-than-expected ramp-up of the LNG Canada export terminal in Kitimat, B.C.
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Look ahead, as Mr. Rose would prefer potential buyers do, and there are all sorts of reasons to get excited about Peace River properties that produce the equivalent of 25,000 barrels of oil a day.
The LNG Canada terminal’s long-awaited opening has industry boosters such as TC Energy Corp. TRP-T chief executive officer François Poirier pushing for Canada to take its rightful place as the top exporter of a natural gas, as part of the transition to a low-emission economy.
Prime Minister Mark Carney made expanding the LNG Canada facility one of the five initial priorities at the Major Projects Office. On Thursday, he heads to Prince Rupert – already the site of liquefied propane terminal – to announce a new round of fast-tracked developments.
Alberta Premier Danielle Smith wants to make data centres a centrepiece of the province’s economic growth. The power-guzzling facilities run off natural gas, and the province has been forced to cap development at just two data centres until it brings additional generation online.
If energy company leaders believe natural gas prices are bound to rise, on the back of rising LNG exports to Asia plus domestic demand from data centres and newly built homes, there will be a lineup of bidders for Tourmaline’s properties. And Mr. Rose will cash a cheque for well north of a billion bucks.
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If oil patch CEOs – a crowd dominated by pragmatic engineers – decide the politicians are all talk, no action, when it comes to boosting the energy sector, then Tourmaline will end up running what investment bankers call a busted auction. The company will quietly shut down the sales process, without finding a buyer.
Based on the recent pickup in oil patch takeover activity, look for Mr. Rose to cash that big cheque.
Last year, the long-term potential of natural gas prompted Advantage Energy Ltd. AAVVF to spend $450-million on properties similar to Tourmaline’s Peace River holdings.
Last week, Denver-based Ovintiv Inc. OVV-T (formerly Calgary-based Encana) paid $3.8-billion to buy Calgary-based NuVista Energy Ltd. NVA-T, which also owns oil and gas properties similar to Tourmaline’s. To fund the takeover, Ovintiv plans to sell holdings in the Anadarko region, which includes Texas and Oklahoma.
Who will show up for Tourmaline’s auction? The list of potential bidders includes Canadian Natural Resources Ltd. CNQ-T, led by another self-made billionaire, Murray Edwards.
Canadian Natural is a major player in Alberta’s oil sands, and the country’s largest energy company by market capitalization. In recent years, the company accumulated natural gas projects in the province as part of larger acquisitions focused on bulking up oil sands holdings.
Mr. Edwards reads the tea leaves as well as anyone in the oil patch, partly owing to deep political ties.
If Canadian Natural steps up for a billion-dollar-plus portfolio of Tourmaline natural gas properties, Mr. Edwards would be bestowing a Good Housekeeping seal of approval on the fossil fuel, and both the Prime Minister’s and Alberta Premier’s economic visions.