|
Industry revival on Canada’s horizon Firming of commodity prices points to resumption of oil sands growth; natural gas expected to remain weak; consolidation predicted Gary Park For Petroleum News
One of the strongest oil patch forecasts for 2010 has come from a leading Canadian law firm, which is counting on an industry revival as commodity prices strengthen, opening up the investment taps in the oil sands and playing a major role in 3.5 percent growth in the Canadian economy.
Excluding natural gas, commodities will likely continue to their firming trend, said a report by the Toronto-based firm of Bennett Jones, which has hired David Dodge, former head of the Bank of Canada, as a senior advisor.
“With oil prices having stabilized, or at least bounced off the floor, Alberta oil sands megaprojects will continue to come back to life, in post-boom moderation,” the report said.
Kathleen Keller-Hobson, a senior partner with Bennett Jones, said Canada has emerged better than most countries from the global recession and energy stands to benefit from the overall recovery, although the outlook beyond 2010 is a “little less predictable.”
The report suggested that the future of oil sands’ development relies heavily on the “next major investment from Asia,” now that Korea National Oil Corp. has gained shareholder approval for its C$4 billion takeover of Harvest Energy Trust, following PetroChina’s C$1.9 billion acquisition of 60 percent stakes in two oil sands holdings by Athabasca Oil Sands.
Victor Martinez, energy director at ATRB Financial, said merger and acquisition activity may also quicken in the natural gas sector, powered by consolidation among junior companies as gas prices reach their winter peak.
Ziff: Operating costs mixed Some encouragement for the E&P sector emerged from a review by Ziff Energy Group of 30 publicly traded companies, which concluded that, despite some indications to the contrary, producers are drawing some comfort from their operating costs.
Against a background of sharply lower oil sands and natural gas activity, the companies reported their operating costs in the first nine months of 2009 averaged C$11.63 per barrel of oil equivalent from C$11.43 in the same period of 2008.
Three companies actually reported their costs were reduced by more than 10 percent, but another seven were up by more than the same percentage. The survey did not include all of the majors.
Ziff’s 2008 field performance study concluded that operating costs for crude oil fields rose 15 percent to C$13.70 per BOE from C$11.90 in 2007. Operating costs for natural gas fields climbed by 13 percent to C$1.10 per thousand cubic feet equivalent from C97 cents in 2007.
The report covered 210 fields and 26,800 producing wells, yielding 3.3 billion cubic feet per day of gas and 160,000 barrels per day of oil, with combined operating costs running to C$2.3 billion.
Rig activity down 42% The need for a turnaround was captured in Canada-wide drilling figures in 2009, where rig activity was down 42 percent from 2008, with an average of only 232 rigs at work, the lowest total in 17 years.
Other than rig utilization numbers that barely topped 50 percent at the beginning and end of the year, the overall average was held to 28 percent.
The number of available rigs in Canada ended 2009 at 845.
Alberta posted the sharpest decline, with only 141 rigs at work during the year, compared with 47 percent and 265 rigs in 2008 and down 64 percent from the peak year in 2005 when operators employed an average 396 rigs.
Saskatchewan posted a 37 percent decline to 43 working rigs and British Columbia was off 27 percent to 47 rigs, compared with the 2005 peak of 74 rigs.
From a mixed bag of 2010 capital budgets released in December, there were signs of a solid upward trend. The list included:
• Enerplus Resources Fund, which is targeting the Bakken oil resource play and Marcellus shale, plans to hike its development capital spending by 35 percent to C$425 million, based on improved crude oil prices and economic conditions, the strength of its balance sheet and opportunities in early-stage, growth-oriented assets.
It expects to allocate about C$260 million to its Canadian prospects and C$165 million to its United States operations, with 56 percent targeted at oil opportunities and the rest at gas.
Plans include C$118 million on 42 net Bakken tight-oil wells, C$92 million on 38 wells associated with waterflood projects and C$27 million to drill seven net conventional oil wells.
The Marcellus shale gas play will receive C$80 million.
Enerplus estimates its 2010 projects will yield strong economic returns at WTI prices of US$60 per barrel and AECO gas prices of C$4.20 per thousand cubic feet or Nymex prices of US$4.50 per thousand cubic feet.
The fund expects production will average 86,000 BOE per day, down about 2 percent from its 2009 exit rate, including 37,000 bpd of crude and gas liquids and 294 million cubic feet per day of gas.
Forecast operating costs are about C$340 million, averaging C$10.90 per BOE, up 7 percent from 2009.
• Pengrowth Energy Trust is pumping an extra 33 percent into its budget, with plans to spend C$285 million, with C$192 million earmarked for drilling, completions and tie-ins.
It said the program will be flexible and “responsive to uncertain commodity prices and market conditions,” with a 70 percent focus on oil and liquids development, the bulk of that going to tight carbonate and heavy oil projects.
If gas prices remain low or decline further, the trust said it may shift spending to oil-weighted projects or use cash for acquisitions.
Whatever shifts are made, it is committed to living within its cash flow, ensuring positive economics at US$60 for WTI crude and C$3 for AECO gas.
Full production for 2010 is forecast at 74,000-76,000 BOE per day, compared with third quarter output in 2009 of 78,135 BOE per day and 80,189 BOE in the first nine months,.
• Baytex Energy Trust plans a 40 percent boost in its exploration and development budget to C$235 million as it prepares to convert to a corporation by year’s end.
About 60 percent will go to heavy oil operations, dominated by the Seal development in the Peace River oil sands of northwestern Alberta, with the balance going to light oil and natural gas operations in the United States and Canada.
The budget is designed to generate 43,500 BOE per day, up 2,200 BOE per day from 2009, with 63 percent heavy oil, 17 percent light oil and liquids and 20 percent gas.
Baytex said 2010 is a transition year as it moves form a mostly income-focused model to a growth-and-income model.
• Trilogy Energy Trust, which will move from trust to corporate ranks during 2010, has raised its capital budget to C$120 million from C$80 million, concentrating on low-risk, high-quality drilling and completions work that it expects will increase production by 10 percent to 22,000 BOE per day.
Forecast operating costs for next year are C$11.50 per BOE.
Trilogy said results from its latest three horizontal wells have provided encouraging results, at rates of 15 million to 23 million cubic feet per day, supporting further Montney development plans in British Columbia.
About C$26 million will go to completion of a proposed pipeline with capacity of 100 million cubic feet per day and a sour gas plant extension.
• Painted Pony Petroleum expects to spend C$90 million, about C$40 million more than its anticipated outlay in 2009.
The junior company plans to participate in drilling more than 30 horizontal Bakken oil wells in Saskatchewan and start work on its shale gas resource plays.
The company’s land inventory includes a net 98,400 acres in British Columbia, including 68,500 acres of Montney-Doig rights and 59,843 acres in Saskatchewan.
• Compton Petroleum, committed to operating within cash flow, expects to lower its capital expenditures to C$70 million-$80 million, compared with an expected C$40 million-$45 million in 2009 and an actual C$135 million in 2008.
It predicts output in 2010 of 17,900-18,500 BOE per day compared with 21,000 BOE per day in 2009 and 28,658 BOE per day in 2008.
Its guidance is based on average forecast prices of C$6 per gigajoule for AECO gas and C$78.39 per barrel of crude oil.
Compton has identified up to C$150 million of opportunities during its budget process, giving it room to hike spending should commodity prices exceed forecast levels.
• U.S.-based Quicksilver Resources has allocated about 10 percent or US$52 million of its capital program to Canada, predominantly the Horn River basin and the rest to coalbed methane production in Alberta.
For all of North America, Quicksilver expects 2010 production to average 390 million to 400 million cubic feet equivalent per day, with gas accounting for 80 percent.
• PetroBakken expects to exit 2010 with production at 42,500 BOE per day, with the majority of its program focused on drilling 141 gross wells in the Bakken resource play and 121 wells on its conventional light oil plays in Saskatchewan and Manitoba.
Its current production is 36,500 BOE per day, on track to meet its 2009 target of 37,000 BOE per day.
| 