Bruce March, president and CEO of Imperial Oil, addresses the company's annual meeting in Calgary, Thursday, April 28, 2011.Jeff McIntosh/The Canadian Press
Imperial Oil is about to be less skewed to oil prices.
After mulling its options, the company's board decided to exercise its right to partner with Exxon Mobil Corp., its majority owner, in the $3.1-billion acquisition of Celtic Exploration Ltd. The two will split the deal 50-50.
Right now, about 85 per cent of Imperial's production is weighted to oil, with the company involved in some of the biggest oil sands projects, such as Syncrude. Celtic on the other hand has a total of 545,000 net acres in the Montney shale and just over 100,000 acres in the Duvernay shale, and Imperial will get the rights to half of that.
Earlier this month, Imperial's management team met with analysts to offer updates on its operations, and at the time it was suggested that it could take 30 to 60 days for the board to decide if it should exercise its rights on Celtic. The answer came much faster than expected.
But this may not be the last we hear of Celtic from Imperial or Exxon. There's a possibility that something larger is in the works. Analyst Peter Ogden at Bank of America Merrill Lynch noted in November that should Imperial exercise its acquisition rights, he expects the two buyers "to communicate a west coast LNG strategy at some time in the future."
During his meeting with management, they were "reasonably clear that LNG was an attractive proposition" but it would require a minimum plant size of 2.5 to 3 billion cubic feet per day and would have to come on stream between 2020 and 2025. Mr. Ogden added that management "would not indicate whether a site had been purchased for future development."
Tim Kiladze