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Forest Oil makes deep cut to Canadian spending for 2002 Chairman warns that price cycles make the difference between winners and losers, but company continues to build acreage in Foothills region Gary Park PNA Canadian Correspondent
Forest Oil Corp. is the latest U.S. operator in Canada to slash its capital budget, driven by worries about the outlook for oil and gas prices. One of the key players in the frontiers of British Columbia and the Northwest Territories, Forest announced its Canadian spending in 2002 will drop to US$20 million from US$63.1 million in 2001.
“Our industry is unfortunately accustomed to cycles,” Bob Boswell, chairman and chief executive officer, told analysts in a conference call last month. “How a company plays these cycles often makes the difference between winners and losers.”
The Canadian budget will be dominated by non-operated projects, including a deep Devonian carbonate thrust prospect in the lower Northwest Territories that Forest is pursuing in a joint venture with Anadarko Petroleum Corp. and Calgary-based Paramount Resources Ltd. Seismic operations In the Fort Liard area of the Northwest Territories, Forest reached a farm-out deal last year for a portion of its interest with Anadarko.
The program began in the fourth quarter with two-dimensional and three-dimensional seismic operations, while Anadarko has a further commitment to drill one deep test well and options on additional wells to earn acreage.
At North Liard, Forest and its partners are testing a re-entry well spudded in January.
Forest has enjoyed some success in the Northwest Territories drilling Cretaceous tests in the Chinkeh and Mattson formation and one discovery well has been producing about 12 million cubic feet per day for the past year.
On the gas front alone, Forest has reserves in the Northwest Territories of 31.6 billion cubic feet and another 88 billion cubic feet in the three western provinces, including 73 billion cubic feet in Alberta. As well the company has crude oil reserves in Canada of almost 10 million barrels.
The company reported last month that its Canadian gas output dropped 5 percent last year to 30.1 million cubic feet per day, although fourth quarter volumes rose 17 percent to 33 million cubic feet. Liquids production dropped 12 percent in 2001 to 3,700 barrels per day. Wildcat spudded In the Maxhamish area of northeastern British Columbia, Forest is completing a wildcat spudded in January and, upon successful testing, will be tied-in for immediate production.
During 2001, Forest’s Canadian subsidiary completed 17 of 20 wells for an 85 percent success rate, while in the Foothills of the Canadian Rockies, Forest drilled 19 wells with a 90 percent success rate.
Craig Clark, president of chief operating officer of Forest, told analysts in a conference call that the “most significant event” for the company in Canada occurred in February when the Narraway field in the Alberta Foothills came on stream at 20 million cubic feet per day.
During the fourth quarter of 2001 the company added 6,325 net acres to its Foothills inventory, bringing its total land-holdings to over 40,000 net acres, reinforcing earlier comments from Forest officials that the region is a prime target because of its mix of traditional plays up to 10,000 feet, deeper sour gas targets and coalbed methane prospects.
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