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EnCana takes stranglehold on northeastern B.C. play British Columbia deep basin could hold gas riches that dwarf anything else in Canada; independent invests C$500 million on land, drilling licenses Gary Park Petroleum News Calgary Correspondent
EnCana is now the pivotal natural gas player in northeastern British Columbia, taking a stranglehold on 500,000 net acres and possible long-life recoverable reserves of 4 trillion cubic feet.
Armed with data from 25 wells and faced with stiffening competition, the Canadian independent rolled the dice Sept. 17, spending C$369 million on land and drilling licenses in the Cutbank Ridge of the Deep basin play that straddles the British Columbia-Alberta border.
That raises its total investment in Cutbank over the past 18 months to about C$500 million, which it proposes to follow with 100 to 200 wells per year into the tight gas formation.
After quietly compiling about 150,000 acres by operating through land brokers, EnCana took the plunge earlier this month when it locked up another 350,000 acres.
Chief Operating Officer Randy Eresman said the company’s extensive seismic surveys, geological analysis and exploratory drilling have enabled it to identify a “promising resource play” in Deep basin.
“We have successfully demonstrated that our application of technology and large repeatable drilling programs can drive down development costs in these resource plays to achieve attractive financial returns,” he said.
Lehman Brothers analysts Thomas Driscoll and Philip Skolnick said technological innovations have indicated that single sections of Cutbank contain an average 6 billion cubic feet each of recoverable reserves. First-year decline rate 50-60 percent Full-cycle finding and development costs are calculated at C$1.50 per thousand cubic feet, with per well costs estimated at C$4 million each, including drilling, completion, production tie-ins to sales pipelines and facilities costs.
The average first-year output per well is forecast at 1 million to 2 million cubic feet per day, with a first-year decline rate per well of 50-60 percent, settling down to 15 percent a year after that.
Deep basin could hold gas riches that dwarf anything else available in Canada. The consulting firm of Petrel Robertson delivered a report to the British Columbia Energy Ministry earlier this year that rated the resource potential at 185 tcf to 525 tcf for the British Columbia side of the basin alone.
Cutbank is 30 miles southwest of Dawson Creek and viewed by EnCana as comparable to its Greater Sierra play in northeastern British Columbia and its Mamm Creek field in the U.S. Rocky Mountain region, where its accumulated experience is expected to help keep costs in check, despite Canada’s limited exposure to tight gas reservoirs.
EnCana Chief Executive Officer Gwyn Morgan told the Financial Post that his company was determined to seize control of Cutbank because it needed a large land base to deploy a drilling program that could drive down costs.
Greater Sierra, with reserves projected at 5 tcf, is currently pumping about 220 million cubic feet per day and forecast to reach 450 million cubic feet per day in 2005 as EnCana accelerates a drilling program that included 70 wells this summer.
To reinforce the confidence in Greater Sierra, the National Energy Board approved a new C$55 million pipeline earlier this month that has design capacity of 418 million cubic feet per day and is scheduled for start-up in April 2003.
There is street talk that Burlington Resources Canada could be a partner with EnCana, but no confirmation. El Paso Oil & Gas Canada, Anadarko Canada and Apache Canada are also active in the region.
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