Penn West Energy Trust, drawing on its new Chinese partnership, will spend up to C$100 million over the next year stepping up development of its oil sands leases in the Peace River region of northwestern Alberta.
About 60 percent of the planned 50 stratigraphic test wells will target additional primary opportunities, while the trust advances horizontal appraisal wells (which have already yielded positive results) and gears up to embark on a thermal project later this year or early in 2011.
Penn West currently produces 2,500 barrels per day from about 50 cold-flow horizontal wells.
Trust Vice President Dave Middleton told a conference call that so far only about one in five sections have been evaluated for the oil sands in place.
He said a horizontal cyclic steam stimulation pilot well will be drilled this year to test a recovery method that injects steam and allow the bitumen to flow.
A thermal project to raise production to 10,000 bpd has regulatory approval and could come onstream by 2014, Middleton said.
Chief Executive Officer Bill Andrew told analysts Penn West will “lean harder on the drill bit” as it prepares to convert to a dividend-paying corporation by the end of 2010.
The big breakthrough for Penn West occurred earlier this year when an affiliate of China Investment Corp. paid C$817 million for a 45 percent stake in the Peace River operation and agreed to spend C$435 million to acquire a 5 percent equity stake in the trust.
A C$312 million cash payment in June helped Penn West cut its debt by C$327 million, allowing the trust to reduce its net debt by C$750 million in the first half of 2010, primarily using proceeds from asset dispositions.
Second-quarter production averaged 163,700 barrels of oil and natural gas liquids per day (down 8 percent from a year earlier) and 408 million cubic feet per day of gas (down 11 percent) weighted 59 percent to crude oil and natural gas liquids.
—Gary Park
