Paramount Resources is selling its Karr Montney gas plant, in the midst of an expansion, in a move that analysts say will help the company reduce debt and increase focus.
The company announced on Friday it will sell the facility to CSV Midstream for total consideration of $470 million. CSV already operates Montney plants at Pipestone and at Resthaven.
While announcing the deal, CSV also announced that it has been acquired by Northleaf Capital Partners.
The Karr plant is currently undergoing what’s called the D2 facility expansion, which will essentially double capacity to process a total of 150 mmcf/d of natural gas and 30,000 bbls/d of liquids.
It is scheduled to be completed in the second half of 2020.
CSV’s deal with Paramount includes a $140-million capital commitment to fund and complete the project, leaving Paramount with $330 million in total cash proceeds.
“The injection of $330 million in cash will improve year-end 2019e net debt levels from $979 million to ~$650 million,” GMP FirstEnergy analyst Cody Kwong wrote in a research note on Friday.
“We believe the implied transaction metrics secured in this deal are quite attractive, but equally as important, is the capital commitment that Paramount passes on to CSV for the D2 expansion. This will allow Paramount to focus its capital more efficiently on just simply drilling wells to fill this facility expansion at Karr, which improves our view of operational risk for the stock moving forward.”
As part of the deal, Paramount will enter into a midstream services agreement with CSV Midstream that includes a fee-for-service arrangement, a reliability guarantee and a take-or-pay volume commitment that ends 20 years following the completion of D2.