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The billionaire Koch brothers throw away Canadian oil leases while the foreign exodus continues

KALGARY – once one of the largest land owners in the oil fields, industrial conglomerate Koch Industries Inc. he sold his lease contracts and abandoned licenses due to heavy oil, joining the stream of foreign companies leaving bituminous formation.

Headquartered in Wichita, Canada, Koch Industries has signed a contract to sell thousands of hectares of land on the Cavalier Energy Inc. oil fields. from Calgary, a subsidiary of Paramount Resources Ltd., controlled by the Riddell family, in a transaction that took place in June, confirmed Financial Post.

Koch, one of the largest private companies in the world, owned by American billionaires and Republican donors Charles and David Koch, also gave up licenses that it did not sell in a transaction with Paramount and allowed lease agreements to expire.

Meanwhile, Paramount is expanding its shares in the oil fields, which already include ownership in Cavalier and shares in the steam oil producers MEG Energy Corp. Founded by the late billionaire geologist Clay Riddell, Paramount has built a reputation for exploring oil and gas resources in new plays and in the unused corners of existing plays. In 2002, his son Jim Riddell became the president and CEO of Paramount and took over increasing responsibility for the company and its subsidiaries. He is currently the President and CEO of Paramount and President of Cavalier.

"Most Koch Oil Sands licenses have been transferred to Paramount Resources Ltd. All other well licenses have been abandoned, which means they have been permanently sealed and decommissioned," said Alberta Energy Regulator spokeswoman Shawn Roth in an email.

Paramount, with a market capitalization of USD 806 million, did not disclose transactions except for the update of owned land in the investor presentation this month. In the latest investor presentation, Cavalier now has the rights to 1,994 net sections in oil fields – an increase of 512 percent over the 326 net sections it had at the beginning of the year.

The Alberta government lists one part of its land as 640 acres, which means Cavalier can hold nearly 1.3 million acres in oil areas – six times the surface of Calgary.

David Koch in 2012.

Scott Eells / Bloomberg files

Neither Paramount nor Cavalier responded to requests for comment.

Koch remains invested in the Canadian energy industry through its subsidiary Flint Hills Resources, which owns oil storage tanks in Hardisty, Alta. And refineries in the US that process diluted bitumen from oil sands.

However, the company confirmed that it sold its oil and mining resources, and submitted to expired lease agreements in the performance.

"Lease agreements that were owned by Koch Oil Sands Holdings have changed over the years. These recent transactions are merely a reflection of the opportunities that are currently available on the market and our desire to prioritize other initiatives, "said Koch spokesman Rob Carlton in an email.

Koch's departure from oil production continues the trend of exiting the game by foreign companies after the sale of billions of dollars by Shell Canada Ltd., ConocoPhillips Co., Devon Energy Corp., Marathon Oil Corp., Statoil SA, Total SA and others have sold since 2017 production and non-production assets in heavy oil deposits because the lack of new export pipelines hindered the development of this area, and lucrative games such as the Permian Basin in Texas pulled investors away from Canada.

Most buyers are large Canadian producers, such as Suncor Energy Inc., Canadian Natural Resources Ltd., Cenovus Energy Inc. and Athabasca Oil Corp., who established their position in the oil areas.

These recent transactions are only a reflection of the opportunities that are currently available … and our desire to prioritize other initiatives

Spokesperson Loves Rob Carlton

Now, Paramount through Cavalier has become a major Canadian oil buyer.

Although the value of the Koch-Cavaliar transaction was not disclosed, the prices of unused land in the oil fields dropped dramatically from their highest level 10 years ago, when foreign companies and domestic producers were buying game blocks at inflated prices, said Eight Capital analyst Phil Skolnick.

Skolnick said most of the land that changed hands in the game recently shows the attempts of large companies to buy packages adjacent to their existing facilities, which looks like "filling a chessboard."

He said the recent CNRL agreement on the purchase of unused Joslyn oil complexes leased to expand its Horizon oil mine was an example of how valuable land adjacent to existing projects is.

Lease Oilsands further from the business center near Fort McMurray and Cold Lake in Alta. It is less valuable, and Koch is not the only company that transfers the lease back to the province, instead of developing land.

CNRL Horizon Oilands project.

Courtesy of Canadian Natural Resources Ltd.

The post office could not confirm whether the lease of Koch had acquired Paramount in close proximity to other oil projects. Some of Koch's vast estates were located in more distant, deeper, and technically more difficult parts of the region called the carbonate deposits, but it is not clear which leases were sold and which expired.

Koch is not the only company that allows the expiry of lease contracts in oil fields, because the pace of development of the performance has slowed down in recent years.

In an effort to reduce costs, MEG Energy's president and CEO, Derek Evans, said in a recent call from the company that his company would allow the termination of long-term shares instead of paying increasing rents for land.

"There is some land that I would call our fourth development project in the Duncan area, these are the lands we are leaving. We will not extend the lease on them, "said Evans. "They were at some point in their lives when annual rents for these leases were soon to increase."

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