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BG Group goes after ‘big gas’ in Canada
Gary Park For Petroleum News
BG Group has embarked on some housecleaning in Canada, transferring its attention to exploration by unloading production interests in northern British Columbia and Alberta for C$526 million.
Three years after scooping up El Paso’s Canadian upstream operations for C$345 million and accumulating an extensive portfolio of exploration land in Western Canada and the Northwest Territories, BG decided it was time to shed the production plays and chase bigger, deeper gas opportunities.
BG Canada Chief Executive Officer Glenn McNamara said the company is retaining all of its exploration acreage, with a heavy emphasis on the Foothills region on both the Alberta and British Columbia sides of the Canadian Rockies.
That’s consistent with BG’s stated intention over recent times to target the risky, technically more challenging “big gas” prospects in the Foothills and Deep basin areas.
The company said it has both the expertise and the financial means to operate in that environment.
It is also operator, in partnership with International Frontier Resources, of two exploration licenses in the Colville Hills area of the Central Mackenzie Valley — one of the possible major sources of gas to help fill the proposed Mackenzie Gas Project pipeline.
BG is recently entered Alaska as a third partner with Anadarko Petroleum and Petro-Canada in the gas-prone Brooks Range Foothills.
Progress will retain some 6,400 boe The assets were sold to Progress Energy Trust, which immediately flipped some of the British Columbia assets to junior explorer ProEx Energy for C$134.3 million.
If the deal is completed as scheduled by April 2, Progress will retain production of 6,400 barrels of oil equivalent per day, 95 percent of its natural gas, from proved plus probable reserves of 17 million boe, which it is confident can be increased by 50 percent through drilling.
The operating costs are estimated at C$6-$6.50 per boe, plus general and administrative costs of about C$1 per boe.
By adding to its Deep basin properties in the region straddling the northern British Columbia and Alberta border and the Foothills of the Canadian Rockies, Progress expects 2007 output will grow by an average 25 percent to 22,000-24,000 boe per day, with an exit rate for the year of up to 26,000 boe per day.
The transaction also bolsters the trust’s undeveloped land by a net 250,000 acres, along with substantial 3-D and 2-D seismic.
It anticipates capital spending of C$140 million as it sets new priorities on existing and acquired properties.
Progress Chief Executive Officer Michael Culbert said the trust has “demonstrated discipline while the acquisition market was relatively overheated and concentrated on drilling which has resulted in a three-year average finding and development cost efficiencies of C$10.63 per boe.”
ProEx gets some 2,200 boe For ProEx, the deal-making gives it current production of 2,200 boe per day, raising its 2007 average target to 10,000-10,500 boe per day, with a year-end exit rate of up to 12,000 boe per day.
The proved plus probable reserves acquired by ProEx are estimated by BG’s independent evaluators at 6.6 million boe, which it hopes to build significantly by drilling 20 to 25 wells per year over the next two years.
ProEx Chief Executive Officer David Johnson said the BG properties are a “hand-in-glove fit” with the company’s existing producing assets in northeastern British Columbia and will increase ProEx’s land interests by 80,000 net undeveloped acres to 365,000 acres.
The acquisition will see ProEx hike its 2007 exploration and development capital budget by C$30 million to C$150 million.
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