|
Canada Arctic's risk-takers include Canadian and U.S. independents
seeking stake in last great frontier
Gary Park PNA Canadian Correspondent
J.C. Anderson is, in his own words, a “senior citizen.” He’s also a new generation trail-blazer in Canada’s Arctic. Just turned 70, crusty and straight-talking, the owner of a 700-acre ranch south of Calgary, carrying an accent that traces back to his Nebraska beginnings, he comes across as the one of the last of the old-style cowboy oilmen.
J.C., as everyone calls him, stands out in a buttoned-down, bean-counting industry because of his dry, self-deprecating humor and his flair for down-home expressions.
When asked about a competitor’s bold claims, he said: “If bullshit was music, he’d be a big brass band.”
When asked about a wildly ambitious takeover bid by a certain firm, he said of the executives who dreamed up the deal: “They must wear size two hats.”
But no one underestimates Anderson, not since he moved to Calgary in 1966 as Amoco Canada’s chief engineer, two years before he struck out on his own with a C$400,000 investment from six Texans.
In 1970, his first discovery was a monster 1.4 trillion cubic foot gas find in the Peace River area of northwestern Alberta. That got Anderson Exploration off the ground.
The second major leap occurred in 1995, when he successfully beat off his former employer with an C$800 million bid for debt-plagued Home Oil.
Over the last 18 months he has rapidly turned Anderson into one of Canada’s premier independents and earned high praise from analysts last year when he led all Canadian-based companies with a 97 percent gain in share value.
He scooped up Ulster Petroleum last year for C$970 million, scuttling a hostile takeover by Dallas-based Hunt Oil, and opened up 2001 with a C$960 million acquisition of Numac Energy.
Heady stuff to anyone but J.C. Anderson. While his rivals build gleaming high-rise monuments to themselves in downtown Calgary, the signature piece of his own office is Big Blue — a worn leather couch where he takes a noon nap. “I haven’t been out to lunch twice in the last five years,” he said.
“I think J.C.’s biggest asset has been his ability to create value in places where nobody else thought it possible,” said Martin Molyneaux, an analyst with FirstEnergy Capital. “And he has a truckload of common sense.”
Investment banker Tom Budd, with Griffiths McBurney & Partners, said J.C. is as “sharp and as keen now as he was 20 years ago. He’s got a keen eye for the right acquisition and he’s ready to pounce at the right opportunity.”
Operating with a savvy mix of intuition and insight, J.C. Anderson has turned his company into the largest holder of exploration licenses in the Mackenzie Delta and Beaufort Sea, pledging to spend C$325 million in the next five years on exploration.
“Since I’m a senior citizen, people wonder what the hell I’m doing in the Arctic,” he said. “Although we are busy drilling here in Alberta, we are not increasing production. Yet demand is going up. Arctic gas part of equation “So you ask yourself, ‘Where are you going to get the gas to supply the North American market?’”
He answered his own question last August as the high bidder at C$275 million for six of 10 licenses in the Mackenzie Delta and Beaufort Sea. Now holding 10 licenses covering 1.26 million acres, Anderson Exploration has emerged as the No. 1 owner of exploration property in the Canadian Arctic, a move analysts applaud as positioning the company for long-term growth.
“It’s a very smart move,” said Peter Linder, an analyst with Research Capital in Calgary. “They got the last onshore land available in the Delta.”
Brian Dau, Anderson’s chief operating officer, said “we’re being aggressive in this area because we believe there is significant potential for natural gas in the Delta and the shallows of the Beaufort.”
J.C. Anderson said he believes Arctic gas will come on stream in the second half of this decade. “Given our feel for the North American natural gas market we think there’s not much doubt that gas will be needed and we think the prices we are enjoying are sufficient to make it economic.”
Using 3-D seismic shot over the 1999-2000 winter, Petro-Canada, as 60 percent operator, and Anderson are poised to drill the Delta’s first exploratory well in more than a decade. Other risk-takers include BP In addition to the majors profiled in Petroleum News • Alaska last month, the Canadian Arctic’s risk-takers embrace Canadian and US independents and a varied array of juniors seeking a stake in the last great frontier.
In addition to Anderson Exploration, they include:
A joint venture by the Canadian subsidiaries of Chevron, BP and Burlington Resources:
The trio plans to build significant production and reserves in the Arctic to meet growing North American demand by committing in excess of C$200 million to shoot seismic and drill an undetermined number of exploratory holes in the Delta by 2003.
Chevron and BP will take a 50 percent interest in 470,000 acres held by Chevron; Chevron and BP will take one-third interests in 360,000 acres acquired by Burlington in 1999; and the companies have an existing partnership on another 180,000 acres.
For BP, it is another link in a chain that starts with its one-third stake in North Slope reserves and its $75 million study with ExxonMobil and Phillips Petroleum of a possible pipeline through Canada to the Lower 48.
Under the leadership of Arctic veteran Tim Holt, who spent 13 years in BP’s Alaska division, BP Canada is hopeful a pipeline will be flowing by 2007, with the first phase focusing on North Slope development.
Holt said that since its takeover of Amoco Canada in 1999, BP Canada has aimed for a “pivotal” role in moving Arctic gas to market.
“This area is a key piece of our Canadian growth strategy and we will be directing considerable resources to exploration in the Arctic over the next few years,” he said.
Roland George, an analyst with Purvin & Gertz, said BP is a “very, very important player to have on board for the development of the Mackenzie Delta. Whether it’s on the Canadian side or the U.S. side, BP is basically pushing very hard to monetize those Arctic gas assets.”
However, George cautioned that the Arctic is “not the only place on the continent where there are potential incremental supplies to satisfy an ever-increasing demand.” Chevron builds relationships with aboriginals Chevron also has positions across a broad sweep of the Arctic, especially its spectacular exploration success with its K-29 and M-25 boomer wells at Fort Liard in the lower Northwest Territories.
Chevron Canada president Jim Simpson said the Delta region is a “major component of Chevron’s North American growth portfolio and a natural extension of our activities in Fort Liard, the Yukon and Alaska,” he said.
Chevron Canada has also invested heavily in building a strong working relationship with the Inuvialuit and other aboriginal groups in the region.
Company spokesman Charlie Stewart said, “ the new partnership and the work of other explorers is part of a larger development plan that compliments the work” ExxonMobil Canada, Shell Canada and Gulf Canada are doing in their pipeline feasibility study.
Burlington wants Mackenzie pipeline Burlington, although a newcomer to Canada, has its sites fixed squarely on rapid expansion.
“We think that the Mackenzie Delta and Beaufort Sea have tremendous reserve potential which is very conservatively stated today,” said Burlington Canada president Terry McCoy, predicting a pipeline will be built in the 2007-2010 period.
He also believes it’s likely Prudhoe Bay gas will connect to the Delta. “Then the preferred route in our view is down the Mackenzie Valley,” he said.
Burlington created a tidal wave when it entered Canadian waters in 1999, seizing Poco Petroleums for C$3.7 billion, landing 1.1 trillion cubic feet of reserves and 3.1 million acres of undeveloped land in the process. Already this year, it has built on that base with another 300 billion cubic feet of reserves in two deals — C$328 million for the gas properties of Atco Gas and C$57 million for assets held by Petrobank Energy & Resources. It is now forecasting daily Canadian production of as much as 470 million cubic feet of gas and 16,000 barrels of oil.
Alberta Energy and Anadarko’s partnership Another partnership of high-flying independents that emerged from a land swap on both sides of the U.S.-Canada border last August.
AEC, which now has a market value of C$14 billion and has the stated goal of becoming a “global super-independent,” bought one-third of Anadarko’s Arctic Slope Regional Corp. acreage of more than 3 million gross acres.
In return Anadarko bought a 37.5 percent interest in two AEC licenses covering 530,000 acres in the Mackenzie Delta and paid $2.4 million for another Delta-Beaufort tract covering 176,000 acres.
Gulf Canada, with Delta reserves estimated at 300 million barrels of oil and 2.3 trillion cubic feet of gas, is a 25 percent partner with Anadarko and AEC, which hold 37.5 percent each of the Parsons Lake discovery of 1.8 trillion cubic feet.
Anadarko CEO Robert Allison said the transactions “put us in a better position to have gas available for delivery into whatever pipeline is ultimately built.”
AEC had earlier established a foothold in the North Slope by joining Phillips and Chevron in a deal to explore about 140,000 acres, including the McCovey and Grizzly Gomo prospects.
The two transactions create the potential for a new growth platform for AEC, said CEO Gwyn Morgan, whose expansionary ambitions have also taken him south of the 49th parallel in the past seven months.
To become the major player in the northern U.S. Rockies, AEC has snapped up two privately held U.S. companies in the last nine months — Denver-based Murry Oil for C$910 million last May and Montana-based Ballard Petroleum for C$274 million in January to gain about 1.4 trillion cubic feet of gas reserves in Wyoming and Colorado.
David Stenason, an analyst with Scotia Capital, said more will be heard from AEC, which is concentrating on three platforms — Western Canada, the U.S. Rocky Mountain states and Ecuador.
“They will build on their natural gas presence in the U.S. and add to their oil production internationally,” he predicted.
AEC is also part of a pack of juniors and senior independents who have made work commitments of C$44 million to go hunting — mainly for oil — in the Central Mackenzie Valley, north of the long-established Norman Wells oilfield.
It is shooting seismic and staging a modest drilling program in the belief that “the big pools have got to be somewhere,” said a spokesman.
In addition, it has teamed up with Husky Oil and Renaissance Energy (which merged last August) to evaluate seismic data from two parcels of land acquired in recent bidding, although there are no plans to shoot more seismic at this time. The little players The little players are scattered throughout the Northwest Territories, following a pattern of pairing up to work their internally generated plays.
International Frontier Resources is following the standard set by Purcell Energy which teamed up with Chevron in the prolific Fort Liard play. “We felt that if we could put together good technical prospects we could attract a good-sized partner,” said IFR president Pat Boswell.
IFR not only assembled 100,000 acres in the Tulita discovery license, it struck an agreement with the Tulita District Land Corp. to gain surface access to land within the Sahtu Dene First Nations settlement area.
Devlan Exploration and Genesis Exploration have formed a 50/50 joint venture encompassing 870,000 net acres in the Grandview Hills area, midway between the Delta and Norman Wells. A seismic program has been followed by the first of three 1,500-meter oil wells scheduled for 2001.
Others in various stages of planning, shooting seismic or gearing up for drilling in the Central Mackenzie and Fort Liard areas include Paramount Resources, EOG Resources Canada, Northrock Resources, Canadian Forest Oil, Veritas Energy and Trace Explorations.
| 