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February 2005

Vol. 10, No. 8 Week of February 20, 2005

U.S. branch plants target coalbed methane in Canada

Gary Park

The exodus of U.S.-based companies from Western Canada’s conventional oil and gas plays has been partly offset by a burst of U.S. activity in Alberta’s coalbed methane fields.

In addition, to MGV Energy, a unit of Quicksilver Resources, the Canadian units of Apache, Pioneer and EOG Resources are all major contributors to the three-fold increase to 3,000 in coalbed methane wells planned for 2005.

Apache, one of the few U.S. majors to still give a vote of confidence to Western Canada’s conventional opportunities, is also one of the leading coalbed methane operators.

After acquiring access to nearly 400,000 acres of high-potential Canadian leases last year under a deal with ExxonMobil, Apache plans to drill 250 conventional and coalbed methane wells on its Alberta packages at Hatton, Provost, Nevis and Zama.

Coalbed methane production, currently 50 million cubic feet per day, comes from the Nevis area, where the company has a combined total of 610 wells and owns 350,000 gross acres.

For all of Canada, Apache posted success from 1,057 of the 1,255 wells it drilled and booked 542 billion cubic feet of reserve additions. It has budgeted for 1,031 wells in 2005.

President and Chief Executive Officer Steven Farris described his company’s Canadian operations as having “very high repeatable opportunities and a very high working interest.”

Pioneer working coalbed methane in southern Alberta

Pioneer is just breaking into the coalbed methane field through the southern Alberta properties included in its 2004 takeover of Evergreen Resources.

Chief Executive Officer Scott Sheffield told a February conference call that drilling will start in the second quarter on a coalbed methane program in Alberta’s anchor coalbed methane play in Horseshoe Canyon.

He said the Horseshoe Canyon acreage is in the same region where EnCana, Quicksilver, EOG and Apache are active and gives Pioneer about 600 drilling locations.

Sheffield said recompletions done last year were “very positive,” but drilling results are not expected until the end of 2005.

A pilot program may also be put in place for the Manville coalbed methane formations in southern Alberta, he said.

EOG plans 100 coalbed methane wells

EOG Chairman and Chief Executive Officer Mark Papa said 100 Horseshoe Canyon coalbed methane wells are on tap for this year, following 80 completions in 2004.

Of last year’s wells, 60 were in pilot areas and 20 were test holes to identify further locations on 250,000 gross acres. Those wells are currently averaging about 300,000 cubic feet per well on 160-acre spacing, he said.

Papa told analysts Feb. 3 that Horseshoe Canyon is a “nice bread-and-butter play for us, but is not going to be a high-impact play.”

Manville, however, is a “hidden kind of crown jewel,” although the commercial viability of the zone faces the uncertain problem of having larger volumes of produced water, unlike Horseshoe Canyon.

EOG spent about 20 percent of its 2004 budget of US$1.5 billion in Canada, but is not yet putting a figure on how much of this year’s US$1.6 billion program will flow across the border.

Quicksilver had earlier announced plans for MGV Energy to drill 280 net wells and 490 gross wells in southern Alberta where it has proved reserves of more than 250 billion cubic feet.






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