CANADIAN EXPLORER a Review of Exploration, Land & Prospect Activity in the Canadian E&P Sector
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August 31, 2009 • Volume 18, No. 13 E&P CANADIAN EXPLORER A Review of Exploration, Land & Prospect Activity in the Canadian E&P Sector Daylight and Highpine merger creates synergetic explorer Daylight Resources Trust agreed to acquire Highpine Oil & Gas Ltd. in a deal valued at Note from Brian Lidsky $530 million. The combination of Highpine’s high netback, high cash flow light oil properties Managing Director, Research with Daylight’s portfolio of high impact Deep Basin natural gas resource plays creates an emerg - As noted last week in PLS’ Canadian ing senior energy player with 38,000 BOEPD and an enterprise Acquirer, it is heartening to witness value of ~$1.8 billion. See Canadian Acquirer dated August 25 for a heated acquisition market. The details on the acquisition. Highpine’s light oil assets are primarily Petrobank/Tristar deal ($2.7 bil - focused in the Pembina/Brazeau area, where Highpine has been the dominant lion), Crescent Point (nearly $1 player, combining technical expertise with a dominant land position and own - For more A&D check the billion), PetroChina/AOSC ($1.9 ership of facility infrastructure. Canadian Acquirer. Highpine’s lands outside of Pembina have a strong synergy with Daylight’s billion) and Daylight/ core West Central and Elmworth assets. Daylight has proven up an exceptional Highpine ($1.8 bil - resource play development in the Elmworth area with over 20 producing wells utilizing horizontal lion) are all indicative that oil/gas remains and multi-stage fracturing technology in the Cadomin and uphole Cretaceous zones. The internal of significant value and the markets do Daylight estimate of the resource potential in this play is estimated at ~1.0 TCF. Utilizing this same indeed adjust. Capital is paying attention! technology in its West Central core area, including the Pine Creek and Kaybob assets, Daylight has From south of the border, PLS, Inc. recently begun the development of the Bluesky and Montney zones, following up on recent industry attended the Winter NAPE last week in success in the area. dayligHt continues on page 9 Houston. Traditionally, this event is elbow to elbow with attendees and exhibitors. Horn River wells bode well for Apache/EnCana JV We note that attendance was markedly Apache Corp. said that recent drilling results at the Horn River shale play of NE British down and the prospect quality was Columbia have strengthened earlier estimates that individual horizontal wells in the play potentially much improved – not surprising given the can recover 10 BCF. Three recent wells at Two Island Lake, operated by joint venture partner EnCana , industry environment. have been brought on line at gross initial production rates of more than 16 MMCFD per day and continue to produce 8.0 to 10 MMCFD after several weeks. Both north and south of the border, Apache and EnCana pioneered the shale play in the Horn River Basin and today’s industry drivers are unconven - each has a 50% stake in 425,000 gross acres — tional plays (deemed a game changer for the leading acreage position in the play. Apache Horn River wells estimate upped to 10 BCF. the industry), seven year lows on natural tested the shale potential in a recompletion of a gas prices, and a virtual shutdown of con - vertical well in the Ootla area in March 2005. So far, the two companies have drilled 28 wells and ventional exploitation. Regarding true brought 10 horizontal wells on production, and expect to have 32 wells on production by Q1 of 2010. exploration, though, at press time, BP The two partners have increased fracture stimulations to as many as 14 stages per hor - announced a “giant oil discovery” in the izontal section. “Drilling costs have come down as we have gained experience and become Gulf of Mexico – Tiber – which exceeds BP’s more efficient, reducing the time needed to drill a well to as little as 16 days from a planned Kaskida field – estimated to yield 3 billion 30 days when we started,” said John Crum, Apache’s co-chief operating officer and bbls. It is a major discovery drilled to President — North America. HoRn RiveR continues on page 14 35,055 feet – the deepest exploratory well Apache & EnCana’s Horn River Joint Venture success for the industry. Regarding “unconventional resource plays”, the Horn River shale play of NE BC is worthy of attention and PLS is monitor - ing the play closely. The Apache/Encana partnership controls 425,000 gross acres and Apache has just increased recovery estimates to 10 Bcf/well. Recent IP’s are 16 MMcf/d and continue at 8 – 10 MMcf/d after several weeks, after going to as many as 14 fracs. With 2,000 to 3,000 well locations to these partners alone, this cer - tainly is a major, multi-year gas resource. As further evidence of the maturing of the play, Apache also announced a frame - work to commit 200 to 300 MMcf/d (plus Spectra Fort Nelson Plant an equity ownership stake) to the 700 Horn River MMcf/d Kitimat LNG project (see PLS, Inc. Basin Outline Midstream News). Continues on page 3 All Standard Disclaimers & Seller Rights Apply. Source: EnCana CANADIAN EXPLORER Page 2 Jackfish helps boost Devon to record output Devon Energy boosted production by 12% to a record 65.4 MMBOE (~719,000 Welcome to PLS’ BOEPD) in Q2. This is the highest average daily production of any quarter in Devon’s history How To Use Canadian explorer , a monthly recap of and compares with 643,000 BOEPD in Q2 of 2008. Average production in Q2 increased 5% recent exploration and production in Canada. sequentially, compared with 685,000 BOEPD in Q1 of 2009. In addition to the news, the report also carries The 12% increase in year-over-year Q2 production was driven by growth 80-120 listings focused on prospect (DV), far - in all major operating segments. U.S. onshore natural gas production led by the mouts (FO) and lands (L) for sale. The Explorer Barnett Shale field in Texas demonstrated does includes some properties (PP), but the significant growth. Continuing ramp up of Jackfish is extremely profitable and leads emphasis is on drilling ventures. daily volumes from the Jackfish oil sands the industry. Anonymous listings are coded alpha-numerically. project led oil production growth in Canada. Clients interested in accessing only listing pack - Canadian natural gas production increased principally due to lower government royalties. age information call (or email) PLS and provide Devon drilled 198 wells (197 successful) in the quarter compared to 494 wells (483 the listing codes. successful) drilled in the year ago Q2. The company has reduced drilling activity and Besides the Explorer , PLS also publishes the related capital expenditures in response to declines in natural gas and oil prices. CanadianAcquirer a monthly recap of the A&D In spite of the lower activity levels, Devon achieved several notable operational market (red newsletter) which includes current accomplishments in the second quarter: The most notable improvement occurred in Canada A&D news and carries the latest producing type as differentials for heavy oil narrowed due to the addition of some new heavy refining capacity listings including properties (PP) and overrides and higher seasonal demand. (RR). The Acquirer is designed for engineers, busi - Jackfish 2 on schedule to produce Overall, company-wide realized price for ness development and finance executives. 35,000 BBlS/d. the quarter averaged $52.44 per barrel or ~88% PLS also publishes various themed analysis of the WTI benchmark. This result represents a MarketAlerts and DealAlerts (listings only) to $19.00 per barrel improvement in oil price realization compared to the previous quarter. supplement these monthly publications. The company said at its 100% owned Jackfish project, well and reservoir performance Additional product details can be obtained by continues to lead the industry. Production at the Jackfish oil sands project continued to ramp visiting our website at www.plsx.com . up, and averaged 28,000 BPD in the quarter. Peak rates of 33,000 BPD were achieved in June, nearing its design capacity of 35,000 BPD. Following two weeks of scheduled downtime for plant maintenance in September, Devon will be again ramping Jackfish back up and expect to reach the facility ’s capacity in Q4. CANADIAN ACQUIRER “It is worth pointing out that with current oil and gas prices, favorable differentials and non-fuel operating expenses running below $6.00 per barrel, Jackfish is extremely profitable,” said Dave Hager, EVP of Exploration and Production, at a conference call. PLS, Inc. Construction remains on schedule for the Jackfish 2 project. Jackfish 2 (J2) is approxi - Suite 700, 205-5 Ave. SW mately 15 km (10 miles) southeast of Conklin, Alberta in the Regional municipality of Wood Calgary, AB T2P 2V7 Buffalo. J2 will be adjacent to the initial Jackfish Project, which was approved in 2004 and is Phone: (403) 294-1906 currently under construction. Devon holds a 100 percent working interest in 53 sections of Fax: (403) 294-1942 land that make up the leases in Townships 75 and 76, Ranges 5, 6 and 7 W4M. The project is Website: www.plsx.com expected to produce 35,000 BPD and to ultimately recover 300 MMBO over the project life. Construction is ~40% complete. Managing Director of Research Devon is also drilling in the Horn River Basin and said it would have IP rates in Q3. Brian Lidsky - [email protected] Editor Devon’s Infrastructure at Jackfish Deborah Ward - [email protected] Director of Listings Laurie Lewis - [email protected] Listings Manager Ross Benoche - [email protected] Graphic Design Lisa Armstrong - [email protected] Advertising Beau Kelley - [email protected] Client Services Ali Rizvi - [email protected] To obtain additional information on properties for sale in this Canadian Explorer , please contact our listing dept: (403) 294-1906 or by fax: (403) 294-1942 with the property number (If you are located in the U.S.