NuVista Energy has entered into an agreement as anchor tenant with Veresen Midstream for firm transportation and processing of 100 MMcf/d of raw gas from its newly acquired Pipestone North block of lands.

Pipeline sunset.

Image: An oil and gas pipeline project. Photo: courtesy of outgunned21/

The processing capacity will be added in two incremental steps of 50 MMcf/d, each commencing in late 2020 and late 2021.

NuVista has the flexibility to push the timing of half of the 2021 tranche to 2022 if desired.  The 15 year agreement is underpinned by 80% take-or-pay terms which provides flexibility to produce above or below these firmly contracted amounts.

The capacity will be provided by the expansion of the Veresen owned Hythe Gas Plant to accommodate an additional 100 MMcf/d of raw gas, and the construction of a new sour gas pipeline connecting a portion of NuVista’s Pipestone North production to the Hythe Gas Plant.

In addition, NuVista has entered into an agreement with a third party shipper for firm transportation service on Alliance Pipeline to Chicago for natural gas sales volumes from the first tranche of raw processing capacity starting late 2020 for a minimum period of 10 years at posted tolls.

Natural gas transportation for the second tranche of processing commencing in 2021 is expected to be provided on the NGTL system with normal three-year advance application timing.

Pembina will also provide transportation of all NuVista C3+ and C5+ (condensate) on intra-provincial pipelines for delivery into the Edmonton area from both the Veresen Hythe and SemCAMS Wapiti plants as well as our NuVista compressor stations in those areas.  Additionally, Pembina will provide associated processing services for the C3+ at the Redwater Fractionation and Storage facilities, all at competitive rates.

In order to supply these agreements, NuVista will construct and operate a 100 MMcf/d compression and dehydration facility on the Pipestone North lands with a size and design similar to our existing Bilbo or Elmworth facilities.

In pursuit of maintaining maximum balance sheet flexibility, NuVista has retained an option to have the capital cost of this facility funded by VMLP.

When added to our existing capacity, this agreement will expand NuVista’s total area firm processing capacity to approximately 420 MMcf/d of raw gas by the end of 2021 with firm egress for all sales natural gas, condensate, and C3+ liquid products.  This corresponds to growing the total NuVista firmly contracted processing and egress capacity from approximately 70,000 to 90,000 Boe/d.

These agreements represent another important milestone on our planned journey to 110,000 Boe/d, with enough timely capacity additions to meet (if we choose) the high growth cases provided for 2019 and 2020 when NuVista issued the press release for the Pipestone North acquisition on August 9th of this year.

In addition, these steps are consistent with our ongoing strategy to proactively optimize the value of our resources through minimizing reliance on AECO natural gas pricing and ensuring geographic and market diversification of our natural gas sales.

The terms for the preceding have been confirmed by a binding letter agreement which is subject to approval of the facilities by the Alberta Energy Regulator.  We look forward to providing an update on NuVista’s growth plans and 2019 budget when our third quarter 2018 results are released on November 12th.

NuVista has top quality assets and every team member is focused upon relentless improvement. We are excited to continue to extend our growth plan to 110,000 Boe/d while adding greater value per share.

We would like to thank our staff, contractors, and suppliers for their continued dedication and delivery, and we thank our board of directors and our shareholders for their continued guidance and support.

Source: Company Press Release