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Bulk of U.S. operators in Canada hike 2003 spending Natural gas prospects dominate list of targets, with strong emphasis on northern British Columbia and Alberta; north of 60th parallel also getting attention Gary Park PNA Canadian Correspondent
A mixed bag of capital spending plans has been unveiled by the “new generation” of U.S.-based companies that have set up shop, or expanded their interest in Canada over recent years, many of them acquiring exploration rights in the Mackenzie Delta/Beaufort Sea and other northern plays.
As some continue to digest their purchases, many made at premium prices when natural gas was in the stratosphere, the 2003 budgets cover a wide spectrum.
Anadarko Petroleum Corp. — a member of the Mackenzie Delta Explorers Group — has mapped out one of the most aggressive 2003 campaigns, including US$363 million to explore its Canadian properties and drill 43 exploration wells in the Fort Liard area of the Northwest Territories, the northeast British Columbia Slave Point play and the Peace River Arch Saddle Hill natural gas region.
In the Monkman area of northeast British Columbia, where Anadarko with a 30 percent holding — in partnership with Talisman Energy Inc. 40 percent, National Fuel Exploration Corp. 20 percent and Olitec Resources Ltd. 10 percent — make a possible 1 trillion cubic foot gas discovery in 2002, the company plans delineation drilling.
Canadian production is forecast to average 33 million barrels of oil equivalent in 2003.
For the fourth quarter of last year, Anadarko reported gas production in Canada of 387 million cubic feet per day, up 40 million cubic feet from a year earlier. Year-end gas output grew to 370 million cubic feet per day from 331 million in 2001.
But Canadian oil and condensate output eased back to 33,000 barrels per day for 2002 from 35,000 barrels in 2001.
Burlington replaces 161 percent Burlington Resources Inc., also part of the Delta explorers’ group, reported that it replaced 161 percent of production last year, largely resulting from its takeover of Canadian Hunter Exploration Ltd. in 2001 and the purchase of Alberta gas properties from ATCO Gas last year.
Chief Operating Officer Randy Limbacher said the company is currently operating more than 80 rigs in Canada and aims to drill 750 wells this year, 200 of them in the Deep Basin of Alberta, where it controls 1.5 million acres.
But there has been no indication of any plans for Burlington’s 540,000 acres of exploration licenses, held in partnership with Chevron Canada Resources on the Mackenzie Delta — a region company executives have suggested could come on stream before 2015.
Burlington expects first-quarter daily production from Canada will average from 830 million-870 million cubic feet of gas, 25,000-28,000 barrels of natural gas liquids and 4,500-5,000 barrels of crude. Output last year averaged 1.11 billion cubic feet of gas and 43,400 barrels of oil and liquids.
Canadian proved developed reserves ended 2002 at 1.84 trillion cubic feet, up 8 billion cubic feet in a year; gas liquids at 53.1 million barrels, up 13.2 million barrels; and oil at 12.9 million barrels, down 25.5 million barrels.
ConocoPhillips production down ConocoPhillips Canada Ltd. has seen a sharp decline in Canadian gas production since its purchase of Gulf Canada Resources Ltd. in mid-2001.
Output averaged 442 million cubic feet per day, on a pro forma basis, in the fourth quarter compared with 541 million cubic feet a year earlier.
For 2002, the gas yield slumped 22 percent to 517 million cubic feet per day, which ConocoPhillips President and Chief Executive Officer Jim Mulva attributed to sales of assets and reduced capital spending in that segment of the E&P division.
Similarly, Canadian liquids production slumped to 37,000 barrels per day in the final quarter of 2002 from 49,000 barrels in the same period of 2001, although for the full year the daily average climbed to 42,000 barrels from 27,000 barrels.
The company’s 9.03 percent stake in the Syncrude Canada Ltd. oil sands operation yielded an average 22,000 barrels per day last year, up from 10,000 barrels for 2001.
Despite its 1.2 trillion cubic feet of net gas reserves at Parson’s Lake in the Delta region, ConocoPhillips has made no announcements of any further exploration efforts.
But it is one of four partners in the Mackenzie Delta Producers Group that is expected to decide this year whether to proceed with regulatory applications to develop the Delta.
Archie Dunham, while still chairman of Conoco Inc. a year ago, said the company was pleased to be starting work on the regulatory phase and was “fully committed to an expeditious schedule” for development of the Delta.
Apache has large inventory Apache Canada Ltd., one of the key operators in north British Columbia and Alberta, has an inventory of about 820 drilling locations, with the Hatton play in Saskatchewan as the company’s core area.
The Canadian subsidiary completed 820 of 850 wells in 2001, 599 of them in Hatton, adding a gross 24 million cubic feet per day to gas production, said Steven Farris, Apache’s president, chief executive officer and chief operating officer.
EOG Resources Inc. raised its total Canadian production last year by 23 percent to 171 million cubic feet equivalent per day, with gas output climbing 22 percent to 154 million cubic feet per day. For all of North American gas volumes rose 4.5 percent in the fourth quarter.
Chairman and chief executive officer Mark Papa said EOG plans to drill six Deep Basin wells this year, predicting that tightening supplies will keep gas prices high for the next couple of years.
He forecast that U.S. domestic gas production will drop by 2 percent to 3 percent if drilling rebounds strongly and by up to 5 percent without a drilling recovery, meaning U.S. gas markets will “have to make do with about 2 billion cubic feet per day less supply in 2003 versus 2002.” Pioneer production flat Pioneer Natural Resources Co., faced with “fairly flat” output from Canada over the last two years, is hungry for success in at least one exploration play to help achieve its goal of 10 percent to 15 percent overall annual growth, said Chairman and Chief Executive Officer Scott Sheffield on Jan. 30.
He said that if a shallow gas exploration program makes a breakthrough there could be hundreds of drilling locations for the next few years.
For the fourth quarter of 2002, Pioneer’s daily production in Canada averaged 44.76 million cubic feet of gas, 858 barrels of gas liquids and 83 barrels of oil, compared with year-earlier figures of 51.39 million cubic feet of gas, 959 barrels of liquids and 851 barrels of oil.
Pioneer’s total fourth quarter sales averaged 31,248 barrels of oil, 22,591 barrels of gas liquids and 380 million cubic feet of gas — translating into 117,153 barrels of oil equivalent per day – a figure it hopes to increase by 3,000 to 11,000 barrels per day this quarter.
The company expects to spend between US$40 million-$50 million on Canadian development and exploration this year, up from US$25 million in 2002 and close to one-tenth of its parent company’s US$450 million-$550 million capital budget.
Plans for Canada include 20 exploration wells, including 17 shallow gas tests as well as development drilling. The latest record indicate Pioneer Canada completed 25 gas wells last year, with one hole listed as exploratory.
Pioneer said about 60 percent of its cap-ex will go to Lower 48 activity, with Canada and Argentina each accounting for 9 percent and Africa claiming 22 percent.
The exploration program includes 7 to 10 wells in the Gulf of Mexico, up to 3 wells in Alaska, 6 to 9 wells in Tunisia and 3 wells offshore South Africa.
Pioneer said it exited 2002 with total proved oil and natural gas reserves of 737 million barrels of oil equivalent, including 381 million barrels of crude and natural gas liquids and 2.1 trillion cubic feet of gas. It added 107 million barrels of oil equivalent of proved reserves in 2002, replacing 258 percent of production.
Unocal looking at higher-risk prospects Dominion Exploration Canada Ltd. expects to drill about 75 wells and spend C$125 million — matching its original 2002 budget, although that increased to about C$160 million.. Its current operations produce an average 150 million cubic feet per day of gas and 10,000 barrels per day of crude oil and natural gas liquids.
However, Dominion may drill 10 coalbed methane wells in Western Canada, although chief executive officer Anthony Marino is not ready to identify the locations, or indicate whether commercial production is the objective.
Unocal Corp., after completing 185 wells in Canada last year at a cost of US$150 million, is turning its attention to deeper, higher-risk prospects this year, although the budget will be about the same, excluding its 2002 acquisition of Corsair Exploration Inc.
Privately held National Fuel, a unit of Houston-based Seneca Resources Corp., whose Canadian production has been shrinking, plans to continue moving capital out of Canada to the Lower 48, company officials said Jan. 28.
For 2002, total output of gas fell to 1.51 billion cubic feet from 1.83 billion cubic feet and oil dropped to 640,000 barrels from 755,000 barrels.
The shift of spending is planned despite National Fuel’s 20 percent interest in the Monkman discovery, which Talisman estimates has opened up more than 30 other drilling locations after already producing 1 trillion cubic feet from the area since the 1980s.
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