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Canadians forging ahead in foreign fields Oil and gas companies push the envelope in high-risk regions; 75 firms produce 835 barrels of oil, 2.1 bcf of gas on daily basis Gary Park For Petroleum News
They might have only an office, a mailing address and a telephone number, but they call Calgary home while they poke, probe and prod their way around some of the world’s most remote, risky corners.
They also find favor with investors who are looking for action outside the sometimes mundane world of the Western Canada Sedimentary basin or have seen their investments in income trusts take a battering over the last six months.
Without operating like a drain on capital in Canada, they take a wide-ranging skill set — financial acumen and technical know-how — to potential high-reward regions, wrapping themselves in the Canadian flag, ensuring they give priority to local hiring and blending in with the culture of the host nation.
The results are consistently solid. Canadian Energy Ventures Abroad, compiled with Calgary analyst Ian Doig, showed 75 Canadian-based E&P companies had interests in 65 countries last year.
Of that total, 45 produced a combined 835,374 barrels of oil and liquids per day in 33 countries, while 28 companies produced 2.1 billion cubic feet per day of natural gas in 21 countries.
They also give investors the chance to mix a little spice into their more predictable domestic portfolios.
Niko Resources tops list Topping the list of those on the verge of making a serious splash is Niko Resources which has made large strides since a successful bid for concession rights at India’s first international open licensing round in 1999.
It is now in a joint venture with Reliance Industries, India’s largest private sector company with turnover last year of US$20 billion and its only member of the Fortune 500.
In late 2006, state-owned Indian Oil said it was interested in acquiring Niko, but there’s been no sign of an offer, although Niko Chief Executive Officer Edward Sampson is certain that the more big finds his company in involved in the more likely it will face a takeover bid.
The test of Niko’s financial staying power could be looming as the joint venture moves closer to developing one of the world’s largest recent gas discoveries, known as D6 — currently estimated at 12 trillion cubic feet and possible needing US$5.2 billion — $520 million from Niko.
The plan involves start-up production by mid-2008 of 2.8 billion cubic feet per day (double the initial proposal), ramping up to 4.2 bcf per day.
In March, Niko reported two new discoveries at D6 after drilling exploration wells to depths of 10,000-13,500 feet.
Reliance has also started work on a pipeline in India, easing some of the risk factor.
Niko is also involved in India’s NEC-25 block, where it has a 10 percent working interest, claiming six discoveries to date and targeting production by late 2009.
As well, Niko is sticking with its participation in gas fields of neighboring Bangladesh, despite a blowout in 2005 that resulted in a lawsuit.
To date, although its losses for final three quarters of 2006 were C$28.5 million — reflecting a negative reserve assessment from an Indian asset — Niko has met its commitments, raising $187 million in a February equity issue.
The market confidence remains solid. It pushed above C$70 on the Toronto Stock Exchange last fall and has settled above C$80 in recent times. Over the last 52 weeks, the company has ranged from C$56 to C$90.
First Calgary Petroleums also on list Also on the most-watched list is First Calgary Petroleums, which has been on a roller-coaster ride over recent times, but manages to keep itself upright.
In some sense it is a one-trick pony, with all of its assets and hopes concentrated in Algeria, where the geopolitical risks are constant.
Having claimed discoveries of 13 tcf of gas reserves, First Calgary put itself on the block in 2005, then dropped the strategy in the face of a poor response.
Around that time it also abandoned an exploration acreage after finding no commercial oil and gas deposits, while an initial joint gas development deal with Spain’s Repsol fell through.
Undaunted, it resumed the hydrocarbon hunt under a 24-month extension of its exploration agreement with Algeria’s state-owned Sonatrach and is now putting the final touches on a field development plan that will need an investment of C$1 billion by First Calgary.
First Calgary’s plan is to drill seven wells this year at a cost of C$10 million each to delineate the size of its wells, then sign an exploration license deal with Sonatrach and start production by late 2009.
Pending formal ratification by Sonatrach of the commerciality of First Calgary’s discoveries, the company’s shares are stuck around C$7.
Investor interest remains solid, with a C$152 million bought-deal financing in March to fund exploration and appraisal work.
Further bolstering its profile, the company reported in February it struck oil at two wells, which flowed at a combined 13,161 barrels of oil equivalent per day and 48.9 million cubic feet of gas per day.
Chief executive officer Richard Anderson said that in one field complex alone First Calgary has cased and tested 13 wells with “cumulative normalized flow rates” greater than 176 million boe per day.
Other companies also on list Others worth keeping tabs on include:
• Falcon Oil and Gas, which expects to start production shortly from test wells at the Mako Trough in Hungary. If economically recoverable, the field’s massive resources could turn Hungary into a major exporter in central Europe. An independent assessment by Texas-based Scotia Group gives a 90 percent probability that Mako has recoverable resources of 21.8 tcf. At a 50 percent probability level, the resources rise to 54.9 tcf. But Falcon is keeping tight-lipped about anticipated initial flow rates. Falcon has a 37-year production license, with an option to add 18 years.
• Addax Petroleum is taking a 50 percent stake and operatorship of the Epaemeno Block onshore Gabon in West Africa, under an agreement with United Kingdom-based BowLeven. Addax has interests in two adjoining blocks, both of which contain discoveries. Addax also has a 45 percent interest in Turkish-based Taq Taq Operating Co., which has disclosed test results of 26,550 bpd of light oil from an acreage in Iraq’s Kurish region.
• Verenex Energy reported test flows in late March of 5,172 bpd of crude and 6.7 million cubic feet per day of natural gas from its initial exploration well in Libya. It plans two more wells and aims to start production by early 2009.
• Rally Energy is pumping 7,000 bpd from its Egyptian properties and is chasing 12,000 bpd in 2008. It is operator of the Issaran heavy oil concession under a 20-year production services deal signed in 1999 with Egypt’s General Petroleum Corp. It is able to pocket 70 percent of revenues without any royalties. About C$120 million will be spent over the next two years drilling 120 wells at the Issaran field. As well it has 20-year gas supply agreement with Cairo utility City Gas to meet demands of 10 million to 15 million cubic feet per day to fuel its operations, including a newly completed central production facility. The company has also negotiated a bought-deal financing with a syndicate of underwriters to raise gross proceeds of C$50 million. Earlier in April it claimed further exploration success from an exploration well drilled to a depth of 2,552 feet at the property, but wouldn’t say more until testing is completed.
• Following a trail blazed by Nexen, which has a long and successful record in Yemen, Calvalley Petroleum has a six-year production agreement and now plans to spend C$200 million drilling new wells and constructing an oil export pipeline. Other Canadian firms have found Yemen to be less hospitable, with EnCana pulling out and TransGlobe farming out some of its stakes, although it is pressing ahead with exploration programs.
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