Frontier Natural Gas’s $30 billion purchase of West Texas Intermediate (WTI) crude oil is a prime example of the kind of strategic deal the company has long sought to make in western Canada.
Its purchase of crude oil in Alberta is another sign of the company’s efforts to develop new markets and new markets in a region that traditionally has struggled to access new oil.
But Frontier Natural says it will make the bulk of its new revenue from Alberta.
And it says it intends to use a significant portion of the proceeds from the deal to buy new pipelines.
The company said it expects to close the deal by the end of the year.
“We have no plans to expand in Alberta.
We’re focused on developing and expanding our portfolio of operations and our pipeline footprint,” said Frontier Natural CEO Tim Boudreau.
In an interview, Bouda said Frontier is not looking to expand into other western markets.
“We have a strategy in place for our Western markets that’s going to be sustainable for us,” he said.
Boudreau also said that while the company is “committed to maintaining our Western footprint” it’s “not a strategy we’re pursuing right now.”
Bouda says Frontier Natural has “some very good pipeline partners” that will be “in the pipeline” for future pipeline investments in the area.
He also says the company doesn’t plan to expand beyond Alberta.
But the deal with West Texas will come with some significant risks, not the least of which is that the Alberta government has said that it will have to approve the purchase if it is to sell the oil in the western province.
The province has said it will not.
Budreau said Frontier will have a say in the matter.
“It’s our pipeline,” he says.
“That’s what we’ll have the final say in.”
He said that the company will not be able to sell WTI at the current prices, but said that’s not a problem because the price will likely come down.
“There’s not enough of a discount for us to have to sell at the price we’re at now,” he added.
“It will probably be around $70 to $80 per barrel.
That’s not something we’re trying to do.
We want to make sure that we are able to do it at the right price.”
The Frontier deal with the province could be the biggest Alberta oil pipeline deal since the Kinder Morgan pipeline.
West Texas crude oil will now go from the oil sands in Alberta to the Gulf Coast, where it will be used in the production of condensate and diesel fuel.
Frontier’s purchase of WTI will help it compete with Kinder Morgan and other large producers.