ExxonMobil, Apache expand exploration in Western Canada

Petroleum News

Mega-major ExxonMobil and independent Apache Corp. said May 5 that they have signed an agreement to expand their exploration and development activities in Alberta, building on a broader program announced last year.

The deal, which they said will capitalize on each company’s strengths, adds 800,000 acres to Apache’s existing 6.9 million acres in Western Canada.

ExxonMobil’s subsidiary, ExxonMobil Canada Energy, will farm out its interest in approximately 650,000 acres of additional undeveloped property interests to Apache Canada over and above the more than 370,000 acres conveyed in 2004.

Under the new agreement Apache also will test additional horizons on approximately 140,000 acres of the property conveyed in 2004.

Under the 2005 agreement, Apache will drill and operate 145 new wells in both shallow and deep zones over a 36-month period “with upside potential for further drilling,” the companies said.

ExxonMobil Canada will retain a 37.5 percent lessor royalty on fee lands, while on Crown leasehold it will retain 35 percent of its original working interest for any production resulting from the drilling program.

“This agreement will enable our companies to more closely work together to develop a larger portfolio of exploration acreage in Western Canada,” Morris Foster, president of ExxonMobil Production Co. said in a press release.

“This latest extension allows Apache to add almost 800,000 acres to our existing 6.9 million acres on which to explore in one of the most prolific natural gas basins in North America,” G. Steven Farris, Apache chief executive officer, president and chief operating officer, said. “For ExxonMobil, it assures that a significant amount of its acreage will be evaluated with the drill bit.”

In May 2004, the two companies announced a program of transfers and joint-venture activity aimed at increasing the realized value of their respective portfolios across a broad range of prospective and mature properties. These properties are located in West Texas, onshore Louisiana and the Gulf of Mexico Continental Shelf, as well as Western Canada.

Under that deal, ExxonMobil gained deep gas rights to certain Apache properties in the Gulf of Mexico and onshore Louisiana, while Apache gained access to ExxonMobil properties in Canada, the Permian Basin of West Texas and New Mexico. Since the final agreement was signed last August, Apache has drilled 86 wells and completed 73 with tested capacity of 52 million cubic feet per day. The companies said the wells will be brought on production over the coming months as pipeline and processing capacity is available.

ExxonMobil is the largest crude oil producer in Canada, is a leading natural gas producer, and holds the largest resource position in Canada through its wholly owned affiliate, ExxonMobil Canada, and its majority-owned affiliate, Imperial Oil (ExxonMobil interest, 69.6 percent).

Apache is a large oil and gas independent with core operations in the United States, Canada, the United Kingdom North Sea, Australia and Egypt.