The oil and gas exploration and production company Continental Resources Inc said on Wednesday it was about to sell a stake in its $1.9 billion investment in the Canadian gas project that has sparked the country’s energy crisis.
The deal, worth $2 billion, is a significant coup for the Canadian energy giant and its allies in a country that has been wracked by an energy crisis that has left millions of people without power and gas supplies.
Continental, which has a deep-water gas well in Nova Scotia, has a long-term relationship with Canada’s biggest gas producer, Suncor Energy Inc. It also has a significant stake in Canadian energy projects, including an oil and natural gas pipeline that will bring natural gas from Western Canada to Europe.
The $1 billion investment is a boost for Continental’s operations, which are struggling to keep up with the rapid growth of domestic gas production in the U.S. and the international market.
The company has been in talks with other companies to buy shares in its Continental Gas Exploration and Production Company Inc. (CGEP), the Canadian company that has bought most of the stake it had in CGEP since 2012.
CGEp has not yet revealed its stake price but it is expected to pay $1 per share.
Continental will pay the share price based on the average price of the Standard & Low oil benchmark, which was up 7.4 per cent on Wednesday, compared with a rise of more than 15 per cent for the S&Low oil index.
“The purchase price is the best it’s ever been, which is great news for Continental,” said Stephen Hargrove, an analyst at UBS Group AG.
“They’re clearly on the right track, and we’re very pleased that the deal is now in place.”
The Canadian government has been urging the companies to sell, but has not been able to find enough buyers to meet its requirements.
The Energy Department has said it needs $6.3 billion in new federal aid to keep its economy from collapsing into a recession.
Continental and Suncor have both been among the companies that have struggled to find buyers for their investments.
The CGET deal could help Continental and its partners.
It could help stabilize the Canadian dollar, which would be beneficial for Canadian consumers who can afford the higher price of gas, said James Smith, an energy analyst at Barclays Plc.
The oil price is currently below $40 per barrel, and the company is not expected to be able to sell more than $6 per barrel of oil until after the March 31 expiry date of a federal subsidy for energy producers.
It will likely be hard for Continental and other companies looking to sell their stakes to find a buyer, said Robert Hall, head of energy strategy at Canadian Imperial Bank of Commerce.
The government has said that the government will not subsidize any oil and coal companies that drill for gas, as that would make them too profitable.