Bellatrix Exploration Ltd. said a $300-million joint venture deal with a South Korean firm to develop light oil plays in west-central Alberta is off, as the unnamed company was not able to meet the closing conditions by the May 31 deadline.
In the past few years, Canadian oil and gas companies have increasingly come to rely on investment from fast-growing Asia, particularly in the form of joint venture partnerships.
More recently, however, a number of planned deals in the energy sector have failed to materialize amid concerns about project returns, volatile oil prices and congestion in pipelines that transport Alberta oil to market.
The Canadian government's policy to block major oil sands takeovers by foreign state-owned enterprises in the wake of the deal between China's CNOOC Ltd. and Nexen Inc. has also added a chill in the broader energy sector.
A Bellatrix news release on Monday said the Calgary-based company "will consider alternative joint venture partners for the proposed Ferrier-area Cardium joint venture as well as continuing to consider other joint venture partners for the company's other interests in the Cardium resource play."
Shares of Bellatrix dropped 35 cents or 6.4 per cent to close at $5.10 on the Toronto Stock Exchange Monday, and traded as low as $4.70 during the day.
Company executives were not available for further comment. The news release said Bellatrix chief executive officer Raymond Smith was on his way back from Seoul. A conference call is scheduled for Tuesday.
The agreement, announced in January, was to see the South Korean partner contribute 50 per cent, or $150-million, to participate in a program likely to include 83 wells drilled north of Rocky Mountain House in the Cardium resource play. A condition of the deal was to keep the name of the South Korean private investment fund under wraps.
At the time, Bellatrix said its capital expenditure plan for 2013 is expected to increase to between $230-million and $240-million – not including the money from the joint venture partner – up from a previously announced $180-million.
AltaCorp Capital Inc. analyst Jeremy McCrea said Bellatrix has other joint venture prospects, including some in South Korea. Mr. McCrea also said the talks with the unnamed Seoul-based private investment fund continue.
"They've been working with the Korean fund for the last few months," he said. "The reason why they ended this [joint venture] with the Korean group was they were still requiring more due diligence, and Bellatrix said at the end of the day, we've got three to four other parties here that want to do a deal with us. We're no longer going to give you the exclusivity option any more … but let's still keep talking."
Mr. McCrea said on Monday the company has not given new guidance yet.
Bellatrix, with oil and gas assets in Alberta, Saskatchewan and British Columbia, is the tenth largest player in the massive Cardium region when it comes to operated wells brought on stream since 2011, Mr. McCrea said.