The utilities company BG Group bought a natural gas company in Canada yesterday for $345m (£182m) in cash to tap in to North America's undeveloped reserves.
The company has taken over the Canadian arm of the El Paso Corporation, a US-based firm that has 690,000 acres in Canada. Production from the area stands at about 80 million standard cubic feet of gas a day, which will provide BG with immediate cash flow.
But 630,000 acres of its land bank are as yet untouched and BG said the land assets hold "considerable exploration potential". Seismic research and geological data have already been completed, showing substantial gas reserves of about 132 billion cubic feet of gas. Part of the $345m price tag includes this research, which will enable BG Group to start drilling on the undeveloped regions this year.
"The acquisition secures valuable producing and exploration properties, which are located in an important supply area. The very large position of undeveloped oil and gas acreage provides significant opportunities for expansion and development.... The acquisition has enough opportunities to support a drilling campaign for many years," said Martin Houston, the president of BG's US division, adding that the sites have low operating costs and are close to existing infrastructure.
The move marks a re-entry to Canada for BG after it sold stakes in two businesses in the early 1990s. The group is trying to expand in North America, where demand is high.
The transaction is BG's second purchase from El Paso since December, when it agreed to buy capacity and contracts from El Paso's liquefied gas plant in Savannah, Georgia, for $127m. El Paso is selling assets to reduce debt, which it wants to fall to $15bn by the end of next year, from $23.6bn. In November, the company reported its sixth straight quarterly loss.