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Providing coverage of Alaska and northern Canada's oil and gas industry
January 2011

Vol. 16, No. 3 Week of January 16, 2011

Canadian land sales show optimism

Gary Park

For Petroleum News

Alberta, British Columbia and Saskatchewan have succeeded where others are struggling these days. They’ve managed to make money in real estate.

The three governments raised C$3.73 billion in 2010 by selling land rights to exploration companies, decisively affirming renewed confidence in Canada’s upstream sector.

In the process they bounced back from the weak, recession-induced showing in 2009, when producers spent a combined C$1.76 billion to secure land, but fell far short of the record-setting years of C$4.24 billion in 2008 and C$5.01 billion in 2008.

Last year’s average price per hectare (2.471 acres) across Western Canada was C$771.22, up 12 percent from 2009’s C$686.72, and also the third highest return, trailing C$961 in 2008 and C$783.71 in 2006.

Companies also secured rights to 4.84 million hectares, a strong recovery from the slide to 2.56 million hectares in 2009.

In addition to the cash bids, the industry made work commitments of C$278 million for 2.28 million hectares, including C$112.7 million for 500,545 hectares in Newfoundland, C$110.7 million for 569,874 hectares in Northern Canada and C$52 million for 1.09 million hectares in New Brunswick.

Key drilling indicator

Land sales are rated as a key indicator of future drilling intentions, with last year’s bidding leaving no doubt that the industry has shifted its emphasis to unconventional, often-prolific resource plays that are being exploited with horizontal drilling and multiple-stage fracturing.

The latest year was also notable for Alberta’s return to top spot among the provinces after an absence of two years when British Columbia led the way for the first time.

Producers invested C$1.83 billion for 2.77 million hectares in Alberta, which government and industry leaders said was a vote of confidence in the province’s now-stabilized royalty regime, after earlier attempts to overhaul the system drove billions of dollars out of the province.

Alberta drilling up

Although final figures have yet to be released for 2010, Alberta operators completed drilling on 7,207 wells for the January-November period, up 43 percent from 2009; Saskatchewan surged 58 percent to 1,581 wells; and British Columbia was up 16 percent at 595 wells.

Over the 11 months, Alberta approved 3,522 licenses for wells targeting oil or bitumen and 3,405 for natural gas or coalbed methane targets, while 2,329 of Saskatchewan’s wells were aimed at oil prospects and only 92 targeted gas.

Alberta’s energy regulator has also reported a ramp up of oil sands activity, issuing permits for 985 evaluation wells this winter, compared with 387 a year ago, with Cenovus Energy leading the way with 479 licenses.

Most of the money invested in Alberta land in 2010 went to the province’s northern region, where producers spent C$1.83 billion on 2.77 million hectares, while Saskatchewan’s southeastern region set the pace in that province at C$322 million.






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