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Yukon well helps fill Canadian junior’s coffers
Gary Park Petroleum News Canadian Correspondent
With one of the longest-running legal battles behind it, Canada Southern Petroleum is finally starting to profit from the Yukon’s only producing gas field.
Having rebounded from a slight setback earlier this year, the Calgary-based junior reported that the Kotaneelee L-38 well is now producing 17 million cubic feet per day.
“We’re very pleased it is now on stream and a major contributor to the company,” Canada Southern president and chief executive officer John McDonald told the company’s annual meeting.
Canada Southern has a 30.76 percent working interest in the well, which was spudded last August and required a sidetrack in January to penetrate the Nahanni formation. The operator is Devon Canada.
Total drilling costs have been estimated at C$29 million, up C$12.3 million from the original budget, largely because of technical challenges encountered during drilling of the original trajectory.
Canada Southern is unable to estimate reserve additions from the L-38 well, but it plans to submit the results of production testing this summer by Devon Canada to an independent evaluator. No additional drilling in near future Canada Southern said it does not expect further drilling in the Kotaneelee area in the near future, saying that would depend on positive production information from L-38 and a complete re-evaluation of existing 2-D seismic or acquisition of new seismic data.
The Kotaneelee field in the far southeast corner of the Yukon was discovered in 1977, with original gas-in-place of 400 billion cubic feet. It was connected to the British Columbia pipeline network in 1979.
But, for 13 years from 1990, Canada Southern was involved in suing its original partners, Imperial Oil and Anderson Exploration, for C$100 million, accusing them of breaching their fiduciary duty by failing to develop or adequately market gas from the field.
The suit was finally settled in 2003 for C$25 million, with Canada Southern estimating its litigation costs at C$16 million.
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