May 6 (Reuters) - Canada's Woodland Cree First Nation

has rejected oil and gas producer Obsidian Energy's ( OBE )

proposal to expand drilling operations on its traditional

territory, the Indigenous community said in a statement on

Monday.

WHY IT'S IMPORTANT

The formal notice that Woodland Cree's chief and council

have rejected Obsidian's drilling plans mark a further breakdown

in relations, after the First Nation initially raised concerns

about the company's activities on their territory in northern

Alberta in February.

The community urged Obsidian to address their concerns about

a series of earthquakes in their territory in late 2022 and

early 2023, that regulators said Obsidian were responsible for.

CONTEXT

Calgary-based Obsidian produces around 6,500 barrels of oil

equivalent per day (boepd), or 20% of its total production, from

assets in the Peace River region, some of which are within

Woodland Cree territory.

MARKET REACTION

Obsidian shares were last down 0.4% at C$10.90 on the

Toronto Stock Exchange.

Analysts at brokerage Stifel said that while the rejection

would not have a meaningful impact on Obsidian's short-term

outlook, because the company already had well licenses in hand,

it was not ideal for longer-term plans in the region.

THE REACTION

Obsidian did not immediately respond to a request for

comment.