Sveinung Svarte is emphatic about where the “next Bakken” will develop — it’ll be right in his Alberta backyard.
And the company he leads agrees so wholeheartedly with his forecast that tight oil properties in the province will develop between 500,000 and 1 million barrels per day that it agreed in mid-May to adopt a name change.
From now on Athabasca Oil Sands Corp. will be known simply as Athabasca Oil Corp., AOC.
The Duvernay, Montney and Nordegg plays “are probably going to be the most active development areas in Canada, similar to activities in the Bakken, with similar results,” Svarte, the president and chief executive officer of the company, told reporters at AOC’s annual meeting.
“I see huge potential in Alberta,” he said, likening the prospects to the Eagle Ford in Texas as well as the Bakken.
Aiming for 10,000 boe per day
Svarte said Alberta’s emerging tight oil plays and its more geologically complex shale oil plays are currently yielding about 50,000 bpd and will eventually lead to 1 million bpd, or more.
AOC is targeting 8,000-10,000 barrels of oil equivalent per day later this year from its tight play at Kaybob, part of the Duvernay oil pool, and is pressing ahead with a multi-well drilling program (deploying the usual combination of horizontal drilling and multi-stage fracturing) to affirm the commercial potential of leases in the Montney, Duvernay and Charlie Lake formations.
In the first quarter, AOC reported a discovery at its Kaybob property where one well produced 6,100 bpd of 44 degree API crude and tested at a final rate of 650 boe per day.
Svarte told shareholders that drilling results have been so encouraging that AOC could exit this year well above its guidance of 10,000 boe per day.
He said it has identified three significant development areas, including Kaybob East, Kaybob West and Saxon/Placid, and is now creating the infrastructure to tie those areas into its wholly owned Kaybob-Simonette 12-inch pipeline.
AOC has net rights-holdings of about 144,000 acres in the Kaybob property and about 2 million acres of petroleum and natural gas rights in the Montney, Nordegg and Duvernay formations.
Svarte said the slump in natural gas prices has worked to the advantage of companies such as AOC, which is expanding its payroll of 250 by about 10 employees per month.
“Light oil from shale is similar to shale-based natural gas,” he said. “There is so much shut-in gas production we are able to absorb those people.”
AOC’s goal is now to achieve 250 boe per day by 2020, with half of that expected to come from tight and shale oil and liquids-rich gas properties.
Will remain in oil sands
Although the tight oil formations have delivered beyond his expectations, Svarte said they produce and decline quickly, unlike the oil sands which are slow to ramp up, but can produce for 50 years.
For that reason, he does not see the tight plays competing directly with the oil sands, meaning AOC will remain a leading participant in the oil sands, despite selling 60 percent stakes in its Dover and MacKay River projects, designed to produce a combined 400,000 bpd, to PetroChina.
The company still holds 100 percent of the Hangingstone, Dover West and Birch assets, 50 percent of the Grosmont lease and 40 percent of Dover and is seeking other joint venture partners.
However, Svarte conceded that tight oil does not attract anywhere close to the controversy that accompanies the oil sands.
“Oil sands worldwide is a big mining crater on TV,” he told the Financial Post. “And we’re not doing that. Our footprint (applying steam-assisted gravity drainage technology) is in line with conventional oil and gas. We drill wells.”
Other big spenders in Alberta’s tight oil — Talisman Energy, Encana and Devon Energy — are offering a less bullish assessment of the plays.
John Manzoni, chief executive officer of Talisman, said it is too early to forecast whether his company’s operations in the Duvernay will match the current hype.
He said “we know the oil is there … the question is how to you get it out. We hear a lot of predictions. But they don’t add up to much yet.”
