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Penn West offers feast of land goodies
By Gary Park Petroleum News Canadian Contributing Writer
Penn West Energy Trust has come to the aid of Canadian E&P companies hungry for exploration opportunities.
As part of its restructuring since converting to the trust ranks in the spring the company is unloading 5.1 million acres through sales, farm-ins and joint ventures.
The first package of 1.24 million acres — equivalent to about one-quarter of all land auctioned by the Alberta government this year — comes from 24 properties in Alberta and three in British Columbia.
Based on “numerous” proposals, Penn West Chief Executive Officer Bill Andrew is counting on deals that will result in “aggressive drilling on our lands” through the rest of 2005. Western Divestments, Penn West’s broker, said there has been phenomenal interest in the offerings from companies covering the spectrum from start-ups to majors. If the land does no better than to match average land prices this year, Penn West is counting on returns of C$300 million from the transactions.
But the aggressive bidding for exploration rights could see it easily surpass that figure. Alberta tally at C$1.16B The first government land auction of September pushed the year-to-date tally in Alberta to C$1.16 billion, beating the previous 12-month high of C$1.15 billion set in 1997.
The average price per hectare (2.471 acres) for 2005 now stands at C$547, easily topping last year’s average of C$363 and the record average of C$492 set in 1979.
So far, two juniors — Galleon Energy and Highpine Oil & Gas — have gained access to Penn West exploration prospects in two of the hottest plays in Alberta.
Galleon plans to drill 15 wells over the next 18 months on 125,000 acres in the Pace River Arch area of northwestern Alberta, where it is now the second largest landholder after Devon Energy.
Highpine will drill seven wells in the Pembina area southwest of Edmonton, where it can earn a 100 percent working interest in exchange for paying royalties to Penn West.
Pembina, after a 50-year history as one of Alberta’s most productive regions, is staging a comeback with the help of new deep drilling technologies.
In a spring land sale, one unidentified buyer paid an average C$16,700 per acre for 316 acres.
But it is not all gravy for Penn West, which gave up 400,000 acres in southeastern Saskatchewan that was “viewed as not prospective by the industry,” Andrew said.
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