By James Wood

City nets $53.5 million on gas well sale

Apr 27, 2017 | 9:33 AM

The City of Medicine Hat received more than $50 million after selling off natural gas fields in 2017.

According to the yearly financial statement of the municipal government, which was released earlier this week, proceeds from the sale of a quarter of the city’s wells and related assets brought in $53.5 million, while relieving the City of liabilities.

The sale date was effective as of January 1, 2017. The proceeds of the sale will exceed the value of the assets, with a gain on disposition of $28.7 million.

The sale was approved by council vote during the meeting on December 20, 2016. At the time of the approval, the name of the company buying the assets was not released, nor was the price paid for the sale. The decision to keep the information private was made at the request of the buyer, and the discretion of the City.

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The gas fields sold off include the operations at Hatton, Hatton North, Hatton South, Bigstick and Horsham. All of those are in Southwestern Saskatchewan. Cessford, a field north of Brooks, was also included.

The sale includes all existing mineral rights, wells and facilities in the subject properties, and the transfer of all future abandonment and reclamation liabilities to the purchaser.

““It significantly reduces them (liabilities),” said Brad Maynes, general manager of the city’s natural gas and petroleum resources department. “Our liabilities are in excess of $200 million associated with approximately well over 4,000 wells.”

The deal will result in the city selling off around 1,500 wells — or about a third of its overall amount Maynes adds.

“It will result in about a 20 per cent reduction in our reserves, which is our amount of gas that’s available for production,” says Maynes. “So it’s a fairly material drop.”

“There’s always that worry that people want to look in the gas tank and say ‘How much is left?’,” said Medicine Hat Mayor Ted Clugston Thursday afternoon outside his office. “We always hear that 10 year number but it could change, we’re actually actively drilling for oil right now. When you’re drilling for oil often times you’ll hit gas.”

Clugston says the profit from the sale will go into the natural gas and petroleum resources division general reserve fund to focus operations on properties holding the most financial and strategic importance.

The plan is for more oil wells to be drilled in 2017, with four successful wells having been drilled in southwestern Saskatchewan previously in 2016. While the strategy is currently costing money, profit was said to be expected from 2018 onwards.

Clugston speaks about the sale below

-with files from Leah Murray