Birchcliff Energy & AltaGas announce long-term processing arrangement
CALGARY, /CNW/ - Birchcliff Energy Ltd. and AltaGas Ltd. announced that they have entered into a definitive agreement for a long-term natural gas processing arrangement at AltaGas' deep-cut sour gas processing facility located in Gordondale, Alberta.
|AltaGas Gorondale Gas Plant
The new Processing Arrangement will be effective from January 1, 2018 and will replace the parties existing Gordondale processing arrangement. Under the Processing Arrangement, Birchcliff is being provided with up to 120 MMcfpd of natural gas processing on a firm-service basis, and Birchcliff's take-or-pay obligation is 100 MMcfpd. The term of the Processing Arrangement is for at least 15 years, subject to extension in accordance with the terms of the agreement.
"This new arrangement with AltaGas provides long-term natural gas processing and will reduce our fees at the Gordondale Facility," said Jeff Tonken, President and Chief Executive Officer of Birchcliff. "An added benefit of this arrangement for Birchcliff is that we will not have to incur significant capital to build our own deep-cut facility at Birchcliff's natural gas processing plant in Pouce Coupe, Alberta. We had previously commenced the planning and initial work to further expand the processing capacity of our Pouce Coupe gas plant by 150 MMcf/d to 490 MMcf/d (Phase VII) and by 100 MMcf/d to 590 MMcf/d (Phase VIII). In light of this new processing arrangement, we currently have no plans to proceed with Phases VII or VIII."
"The new arrangement with Birchcliff is a significant win for both parties," said David Harris, President and Chief Executive Officer of AltaGas. "The Processing Arrangement allows us to maximize the long-term value and returns from the Gordondale Facility, which is one of our key assets. The agreement fills the existing capacity at the Gordondale Facility and significantly enhances the potential to flow third-party volumes through the facility and to grow those volumes, allowing us to eventually optimize the facility and bring the operating capacity up to 150 MMcfpd, while providing lower fees for Birchcliff. The long-term commitment from Birchcliff, potential for third-party volumes and the strategic proximity of this asset to the liquid-rich Montney fairway further strengthens our plans around the future expansion of the Gordondale Facility. In addition, AltaGas will also benefit from growing propane volumes which will be dedicated to our Ridley Island Propane Export Terminal as part of the commercial arrangements."
As a result of the Processing Arrangement and other recent initiatives undertaken by Birchcliff, Birchcliff is updating its guidance range for its 2018 annual average operating expense to $3.40/boe to $3.60/boe (revised downward from $3.75/boe to $4.00/boe). Birchcliff's guidance regarding its 2018 annual average production, its 2018 average royalty and transportation and marketing expenses and its 2018 commodity price assumptions, as previously announced on February 14, 2018, remains unchanged.
In addition to the Processing Arrangement, Birchcliff, AltaGas and certain affiliates of AltaGas have entered into a product purchase and sale agreement. Pursuant to this agreement, Birchcliff will sell propane to the AltaGas parties, including for delivery to AltaGas' proposed Ridley Island Propane Export Terminal which is anticipated to commence commercial operations in the first quarter of 2019.
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