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Burlington does turnaround on Canada cost-cutting U.S. independent says must drill 900 to 1,000 wells a year in Canada to achieve production target, compared to 700-800 this year Gary Park Petroleum News Calgary Correspondent
Burlington Resources is making a course correction in Canada and going against the flow of other U.S.-based companies north of the 49th parallel by pumping another US$80 million into its 2004 Canadian capital spending.
“We believe we have a strong inventory – some 2 trillion cubic feet of economic projects in Canada,” chief operating officer Randy Limbacher told a conference call July 22. “We’re going to be ramping up our activity level heading into the winter of 2004-05.”
Executives of the Houston-based independent conceded they had “overcorrected” when they trimmed their Canadian budget to about US$700 million from about US$735 million in 2003 because of a surge in the value of the Canadian dollar and higher costs.
The squeeze lowered Burlington’s gas output in Canada to 834 million cubic feet per day in the second quarter from 868 million in the same period last year.
Chief financial officer Steven Shapiro said Burlington’s Canadian division is now spending only about 50 percent of cash from its operations at a time when project economics are “very robust.” Building momentum for 2005, 2006 He said the goal now is to “build momentum for 2005 and 2006, while ramping up our organizational capability for somewhat higher project load.”
Limbacher said Burlington needs to drill 900 to 1,000 wells a year in Canada to achieve growth, compared to the 700-800 expected this year, given that production from Canadian wells falls by 25-30 percent a year.
He said the company, faced with a 5 percent cost increase due to higher activity levels, is trying to secure better deals with service suppliers.
But coalbed methane does not figure highly in Burlington’s plans, although the company is involved in more than two dozen wells.
Limbacher said the fact that Burlington is drilling so few wells across a wide area and that it takes up to five years to “see any kind of results” from coalbed methane means it will likely be “several more years before you start to make a real call on CBM plays in Canada for the industry as a whole.”
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