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Staying in the game U.S. independents continue to chase growth in Canada’s northern plays Gary Park Petroleum News Calgary Correspondent
Fort Liard in the Northwest Territories, northern British Columbia and Alberta and coalbed methane — all figure prominently in the immediate growth plans of U.S.-based “branch plants” in Canada.The subsidiaries of several U.S. independents show few signs of wavering in their Canadian commitments, regardless of the summer decision by Marathon Oil to exit Western Canada by selling its assets to Husky Energy.
Programs disclosed in third-quarter reports included: Anadarko Petroleum Like its U.S.-based peers, Anadarko Petroleum is eying the newer Canadian frontiers, with a winter program that is likely to see 20 to 22 rigs on active duty in all of the emerging growth areas.
In the lower Northwest Territories, Anadarko expects to complete two Fort Liard wells that were stalled by early thaw last winter, along with an exploration hole north of those prospects.
Canadian Vice President Bob Daniels said the Fort Liard operations all lead to a decision in 2004 to extend infrastructure into the region.
Other key winter exploration will focus on northeastern British Columbia, including a push into the Foothills; northwestern Alberta; and shallow gas/coalbed methane in southern Alberta’s Wild River area.
Anadarko’s Canadian gas production has climbed in the first nine months to 379 million cubic feet per day from last year’s average 364 million, but oil and natural gas liquids output has shrunk to 17,000 barrels per day from 37,000 bpd in the same period of 2002.
Daniels said the latest quarter was affected by a plant turnaround that took longer than anticipated, but “we expect our fourth-quarter volumes to be … the strongest of the year.” Devon Energy Devon Energy, North America’s largest independent, aims to expand its Canadian operations by up to 6 percent a year, with its major hopes riding on British Columbia and Alberta, Canadian unit President John Richels told analysts in a conference call.
Canadian gas output climbed to 761.5 million cubic feet per day in the third quarter from 725.3 million a year earlier, but slipped to 731.1 million for the first nine months from 772.9 million; oil volumes edged up to 37,400 barrels per day from 37,300 bpd in the latest quarter but dropped to 36,800 bpd over the nine months from 44,500 bpd; and gas liquids tapered to 12,700 bpd for the quarter and 13,500 bpd for nine months from 13.100 bpd and 15,000 bpd respectively.
Topping the list of prospects to achieve the growth objective, Richels gave priority to the highly-touted Deep Basin and the Foothills of British Columbia and Alberta.
He said Devon has poured major resources into various areas of the Western Canada Sedimentary Basin “particularly concentrated on the Deep basin, where we have a very large interest in the Foothills, northeast British Columbia, which includes a number of gas-prone areas.”
The gains so far include 18 million cubic feet per day net to Devon from two new wells in northeastern British Columbia and the western Alberta Foothills, with net overall Foothills output at 136 million cubic feet per day.
With Devon hiking its Canadian rig count to 36, from 24 in the third quarter and just four in 2002, a heavy winter program is expected.
In addition, Devon is counting on regulatory approval in 2004 for its C$400 million Jackfish steam-assisted gravity drainage heavy oil project in northeastern Alberta, which is targeting 35,000 bpd when it becomes operational in 2008. Murphy Oil Ladyfern continues its rapid decline to extinction in northeastern British Columbia with no immediate hopes for Murphy Oil of finding replacement reserves.
Like some shooting star that has blazed across the sky, Ladyfern has plummeted from its peak 668 million cubic feet per day in May 2002 to a mere 187 million in August, reflecting the sharp drop in Murphy’s Canadian production to 111.86 million cubic feet per day in the latest quarter from 192.59 million a year earlier.
Claiborne Deming, president and chief executive officer of the Arkansas-based company, said in a conference call that Murphy’s Ladyfern hopes now hang on three Devonian prospects west of the field that will be drilled this winter.
However, the “sad but accurate truth” is that neither those wells nor active drilling in central Alberta will offset the Ladyfern losses, he said.
Some comfort came from improvements in Murphy’s crude oil and liquids production in Canada, with third quarter crude and condensate averaging 49,902 bpd compared with 44,937 bpd a year earlier, while liquids increased to 1,245 bpd from 1,040 bpd. EOG Resources Having snapped up former Marathon Oil assets in a US$320 million spin off deal with Husky Energy, EOG Resources is turning its attention to coalbed methane plays in southeastern Alberta.
Chairman and Chief Executive Officer Mark Pappas told analysts there is optimism that the coalbed methane reserves will actually be about 330 billion cubic feet, 150 billion more than originally estimated.
He said the 75,000-acre Twinning prospect, alongside a pilot coalbed methane project by EnCana and Quicksilver Resources, is similar to other coalbed methane plays in the United States, without the water production that has troubled the Powder River basin.
Pappas said favorable drilling results could see EOG launch a coalbed methane pilot program alongside a planned 1,000-well shallow gas drilling program scheduled for this winter, adding that coalbed methane is “nothing more than drilling shallow gas wells.”
As well as Twinning, EOG has 35,000 acres in a separate Horseshoe Canyon coalbed methane prospect in southeastern Alberta.
For the third quarter, EOG logged production of 152 million cubic feet per day of gas in Canada, unchanged from a year earlier, accounting for 19 percent of the company’s total gross volumes. Oil and gas liquids edged up to 3,100 bpd from 2,900 bpd, or 12 percent of EOG’s total.
Pappas continues his upbeat view of the North American gas outlook, predicting “this will be the sweet spot in the North American energy picture for at least seven years.” National Fuel Gas Under-performing oil assets in Saskatchewan have been offloaded to enable National Fuel Gas to embark on full-cycle natural gas exploration in northeastern British Columbia.
The Saskatchewan sales, involving proved reserves of 117 billion cubic feet of gas equivalent, yielded an after-tax loss of US$39.6 million because of the weakened U.S. dollar, with net proceeds of $76.4 million used to pay down debt.
National Fuel Chairman, President and Chief Executive Officer Philip Ackerman said his company was “obviously not pleased” to incur the loss, but believes that a successful Canadian exploration program and the resulting reserve additions will help avoid any repetition.
On the upside, National Fuel has teamed up with Talisman Energy and Oiltec Resources in a Permian gas discovery in British Columbia’s Monkman play and is aiming for a 150 percent reserve replacement next year at finding and development costs of about $1 per thousand cubic feet equivalent.
Ackerman told a conference call that the company has “really cranked up the exploration component of our program. We have a number of very nice looking prospects in Canada ... and any could have a significant impact on production.”
National Fuel is projecting total gross production of up to 62 billion cubic feet equivalent in 2004, with about 17 percent coming from Canada.
For the 12 months to September 30, it produced 5.77 billion cubic feet in Canada, down from 6.39 billion in 2002. Forest Oil Despite a downturn in Canadian production this year and wet-weather induced delays, Forest Oil had a “fairly active quarter,” President and Chief Executive Officer Craig Clark said in a conference call.
The bright spots include continued record output at the company’s Narraway field in the Foothills, where Forest has working interests of 50 to 100 percent and volumes were 28 million cubic feet equivalent per day in the third quarter. Two more wells are being completed and should soon contribute sales volumes.
Clark also said that in the Plains area his company is becoming “increasingly more active.”
Progress in the Fort Liard area of the Northwest Territories hinges on a National Energy Board response to an application for a discovery license at the P-16 well drilled in partnership with operator Anadarko Canada. Until then, completion and testing work is on hold.
For the year-to-date, Forest has logged Canadian production of 33.8 million cubic feet per day of gas, down from 39.1 million a year ago and a drop in liquids to 2,800 bpd from 3,300 bpd.
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