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U.S. energy giants like what they find over the border New arrivals bullish on prospects, with special attention to oil sands, Arctic and East Coast offshore; most report success Gary Park PNA Canadian Correspondent
The shape of Canada’s petroleum industry has gone in one year from the American Revolution to the Canadian Evolution. On the heels of a year when U.S.-based companies invested an unprecedented C$27 billion snapping up companies and assets north of the border, 2002 has been dominated by deals involving Canadian buyers and sellers, leaving U.S. companies to digest their feast.
Despite widespread feelings that U.S. buyers overpaid for many of their new Canadian assets, there is no sign of second-guessing among the American powerhouses, who are agreed that Canada will be a major growth area.
There is no hint of wavering in their plans to spend billions of dollars in the Western Canada Sedimentary Basin, Alberta oil sands, Arctic and offshore East Coast. Canada growth vehicle Mark Ellis, president of Burlington Resources Canada Ltd., said Canada is “by far and away the growth vehicle” of his parent company. “It is where the capital is being spent right now,” he said.
For Anadarko Canada Corp. the strategy is to get established, hire quality people and grow in established areas, using that platform to launch into the East Coast and Mackenzie Delta, said president Bob Daniels.
John Richels, chief executive officer of Devon Energy Corp’s Canadian operations, said his company is looking at its Canadian assets as part of “one big basin in the North American market.”
Henry Sykes, president of Conoco Canada Ltd. since the C$8.9 billion takeover of Gulf Canada Resources Ltd., said he has been given the green light by head office to develop a “made-in-Canada” strategy of moving from high-cost, high-decline assets to larger projects, including Arctic and East Coast gas.
Like others, Sykes believes the future growth prospects are in the oil sands and deeper gas, which he insisted is “securing both Canada’s energy future and security.”
Of the emerging U.S. players in Canada, highlights of first-quarter reports showed: Devon Energy Devon Energy Corp. — Reported a “highly successful” 2002 winter drilling program, with success from 88 percent of its 276 wells in the Western Canada Sedimentary Basin. By the end of the first quarter, production was 53,000 barrels per day of crude oil, 16,000 barrels per day of natural gas liquids and 825 million cubic feet per day of gas. Devon Canada president John Richels said last fall’s acquisition of Anderson Exploration Ltd. “significantly increased” the company’s portfolio of drilling targets, with special emphasis on deep gas prospects in the foothills of the Canadian Rockies.Murphy Oil Murphy Oil Corp. — Had net first quarter sales of gas close to 200 million cubic feet per day, almost double a year earlier, crude oil and condensate output more than doubled to 19,759 barrels per day and synthetic crude production was 11,342 barrels per day. But the contribution British Columbia’s Ladyfern gas field made to Murphy’s record production levels is likely to be short-lived as rapidly declining flows could cut output in half by the end of 2002.Anadarko Anadarko Petroleum Corp. — Boosted its Canadian natural gas reserves to 1.03 trillion cubic feet from 720 billion cubic feet a year earlier, partly due to its acquisition of Berkley Petroleum Corp. in March 2001. Canadian gas sales volume in the first quarter averaged 347 million cubic feet per day, against 269 million cubic feet a year earlier, while crude oil and condensate volumes rose to 38,000 barrels per day from 31,000 . The company is one of the most active players in the lower Northwest Territories and northern British Columbia and Alberta, reporting three gas discoveries in the January-to-March period, as well as drilling 123 first-quarter wells in northeastern Alberta’s heavy oil region where net production averaged 20,000 barrels per day in 2001.Burlington Burlington Resources Inc. — Doubled Canadian gas output in the first quarter to 790 million cubic feet per day following its C$2.1 billion takeover of Canadian Hunter Exploration Ltd. and C$344 million purchase of Atco Gas properties in Alberta. The company said those deals played a major role in Burlington’s repositioning of assets to reduce its decline rate. It is moving capital from the Gulf of Mexico to longer-life properties in the Rocky Mountain region, especially in Canada. The company drilled 52 exploration wells in Canada during the quarter for a 54 percent success rate.EOG Resources EOG Resources Inc. — After picking up two juniors, the Houston-based independent reported gas output in Western Canada of 145 million cubic feet per day, up from 117 million last year, with crude oil and condensate output edging up to 1,800 barrels per day. Overall the company’s strategy has been to protect against lower gas prices in the first quarter, building production later this year in keeping with its prediction of strengthened prices.
In the second of a three-part series, Taking Canada’s Energy Pulse, Petroleum News • Alaska’s Canadian
correspondent Gary Park examines the aftermath of last year’s takeover spree, which has been dominated so far in 2002 by Canadian-based deal-making and early signs of a new generation of junior E&P start-ups. This story has three segments, which can be found on pages 12, 13 and 14 of this issue.
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