Petrochemicals a potential new market for Seven Generations

Seven Generations Energy Ltd. said Thursday that it’s in talks with companies seeking its lowcost natural gas for their proposed petrochemical projects.

These companies are hoping to capture a slice of the province’s $500-million incentive program designed to encourage chemical manufacturers to build new plants that produce plastics, fertilizers and other products.

On a second-quarter earnings call with analysts, Calgary-based Seven Generations said the petrochemical industry is a potential new market for its gas reserves, which would grow substantially under a proposed acquisition of land and wells in northwestern Alberta.

“We have a large quantity of low supply-cost, liquids-rich gas that we think can allow us to be a catalyst to cause projects like those to proceed,” Marty Proctor, president and chief operating officer, said in an interview.

Proctor said his company has also applied for funds under the government’s petrochemical program, though he declined to offer details.

In a $1.9-billion deal with Paramount Resources Ltd. announced last month, Seven Generations would expand its ownership in a natural gas block in the Montney formation in northern Alberta.

If approved, the acquisition would be a “tipping point” allowing the company to reach the size necessary to supply power generators and petrochemical plants, analysts with Raymond James said in a note.

Moving into these industries “could make Seven Generations’ competitive position in North America fundamentally unique and firmly planted at the toe of the economic boot for gas supply cost in North America,” the analysts said.

The Alberta government in June said it had received 16 applications from local and international companies seeking incentives to grow the province’s petrochemical industry.

After a 60-day review period, the province said it would choose two or three projects worth $3 billion to $5 billion.

The incentive program would offer $500 million in royalty credits. While petrochemical companies don’t pay royalties, they could pass the credits on to their natural gas suppliers, who could use them to offset royalty payments.

“We’ve got a path for growth mapped out for the next few years on more traditional markets,” Proctor said, referring to Seven Generations’ future access to pipelines.

“But we’re looking for ways to expand markets so we can continue that growth into the future.”

Seven Generations posted a $57-million loss in the quarter compared to a $21.9-million loss in the same period last year.

It produced a record 117,000 barrels of oil equivalent in the quarter, higher than its forecast of 115,000.