Obsidian Closes Peace River Acquisition

Obsidian Energy Ltd has completed the acquisition of approximately 1,700 barrels of oil per day (boepd) of Clearwater production and 148 net allotments in the Peace River area from an undisclosed third-party supplier.

Calgary-based Obsidian Energy said in a news release that the total consideration paid for the acquisition was approximately $58.60 million (C$80.5 million), including liquids reserves and close-out adjustments, and that the effective date of the acquisition was May 1, 2024.

The company said the cash consideration for the acquisition was financed by a syndicated bank loan from Obsidian Energy and a $36.4 million (C$50 million) term loan due June 2025.

“We are pleased to have successfully completed this strategic acquisition that provides continued growth and optionality in our Peace River operating area,” said Stephen Loukas, President and CEO of Obsidian Energy. “With our expanded holdings in the region, we have identified a total of ~200 sites in the area, of which 103 (including 49 confirmed and probable sites) are aligned with our successful Clearwater Dawson development in the Peavine area. This acquisition provides us with further optionality both within and beyond our three-year corporate growth plan from 2024 to 2026.”

In its May statement, Obsidian Energy said the acquisition provides additional production, reserves and development potential along the Clearwater trend from its successful Dawson field. It also increases Obsidian’s onshore position with a new successful Clearwater Dawson development while providing additional exploration and appraisal. There are 148 net new onshore sections that are primarily prospective to the Clearwater formation.

The acquisition adds approximately 1,700 barrels of oil equivalent per day (boepd) of average production, based on April 2024 actual data, from the Clearwater Formation. It also adds proven developed production (PDP) reserves of 2.3 million barrels of oil equivalent (boe), proven (1P) reserves of 6.3 million boe and proven plus probable (2P) reserves of 12.3 million boe.

The company said its 2024 investment program will continue to focus on developing new and existing deposits, while continuing to enhance the exposure of the Peace River assets.

Obsidian Energy recently resolved an ongoing conflict with the Woodland Cree First Nation (WFCN) in the Peace River area, with both parties signing a mutual agreement.

As a result, Obsidian has resumed production at its Harmon Valley South field in the Peace River area. The field was producing about 4,500 net barrels of oil equivalent per day before it was shut in May 12 due to a conflict with WCFN, the company said in an earlier statement. The agreement between Obsidian Energy and WCFN runs through the end of 2025. Both parties intend to keep the remaining terms of the agreement confidential.

The conflict began in February when WCFN notified the Alberta Energy Regulator (AER) that Obsidian Energy Ltd.’s planned drilling expansion on its territory could not proceed. WFCN became concerned about Obsidian’s oil development plans on its territory after the AER found that improper disposal of industrial waste had caused a major earthquake.

On May 5, WCFN established a blockade near the company’s Walrus field, making it difficult for Obsidian Energy employees and outside contractors to access the site. On May 11, WCFN moved the blockade approximately 6.8 miles (11 kilometers) west of the entrance to the company’s Harmon Valley South (HVS) field, making it difficult for Obsidian Energy employees and outside contractors to access the site.

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