The outward appearance of North American heavy oil production has changed.
In Western Canada, heavy oil production has gotten a fairly sharp facelift in recent months; in the United States, the alteration was only superficial.
Canadian heavy oil production, as well as production of conventional oil and natural gas, soon will have a new contestant: EnCana Corp. A so-called merger of equals between PanCanadian Energy and Alberta Energy, EnCana debuts as a world-class independent valued at more than US $17 billion (C $27 billion). Both companies' shareholders approved the merger in early April, and it was scheduled to open its doors shortly thereafter.
EnCana will be one of the world's largest independent companies, with 1.3 billion bbl of proved oil and natural gas liquids reserves, production of 255,000 b/d estimated for this year and 7.8 Tcf of proved natural gas reserves. 2002 production is pegged at 2.7 Bcf/d. Combined reserves equal some 2.6 billion boe. The company's proved reserve life index is enviable at about 10 years, and it boasts a significant upside with unbooked reserves in heavy and conventional oil, as well as gas and even coalbed methane.
Both companies have been active in western Canada's heavy oil and oil sands bitumen industry. Alberta Energy has rights to 97% of the 2,000-sq mile (5,180-sq km) Primrose Air Weapons Range, which overlies the Primrose and Foster Creek heavy oil fields in north-central Alberta and boasts some 28 billion bbl of heavy oil in place. The company has a major steam-assisted gravity drainage (SAGD) project at Foster Creek that's expected to produce about 100,000 b/d by 2007. It also has a 13.8% interest in Syncrude Canada, the world's largest oil sands complex, also in Alberta. PanCanadian brings its holdings in the Christina Lake area to the table. That deep oil sands formation holds an estimated 2 billion bbl of oil in place, and PanCanadian completed the first phase of a major SAGD facility there recently.
Of course, EnCana will have major presence in conventional production around the world, combining significant exploration and production and gas storage holdings - including a North American exploration land base of 23 million acres. It will be the largest independent gas producer in the United States, and will have North America's largest independent gas storage network. It also is highly active in deepwater exploration off eastern Canada and in the US Gulf of Mexico, and has presence in the North Sea and the Oriente Basin of Ecuador. And if that weren't enough, EnCana has more than 15 million net acres of prospective undeveloped land in northern Canada, Alaska, Australia, the Middle East and Brazil.
New field announced
Stepping down in size, there's also good news from smaller Canadian heavy oil producers. Once such announcement came from BlackRock Ventures, a Calgary, Alberta-based company formed in the 1990s to develop heavy oil reserves in northern Alberta and eastern Saskatchewan.
As its winter drilling program ended last month, BlackRock announced a significant conventional heavy oil discovery at Seal, in the Peace River oil sands region of northwestern Alberta. The company drilled eight wells, with seven on production at a cumulative flow of more than 1,700 b/d (1,040 b/d net to BlackRock). Production was cut back due to lack of heavy oil infrastructure in the area, but the company is pursuing construction of a pipeline. Road upgrading also is planned for this summer, and BlackRock hopes to build a battery facility.
Conventional heavy oil production doesn't rely on steam injection to produce oil, resulting in lower capital expenditure loads. That helps bring projects to the commercial stage more quickly, said company officials. Due to "negligible" sand and water production, operating costs in the area will be low, they said. The first phase of development drilling is planned for late 2002 or early 2003.
Tom Kozmyk, exploration vice president, said that based on success so far, the company is optimistic about drilling up to 110 development wells on the company's two acreage blocks in the area, with upside potential from three other adjacent properties owned by BlackRock.
BlackRock also is developing heavy oil from its other core properties at the Hilda Lake area of Alberta and the Lloydminster area of Saskatchewan.
Moving...after only 93 years
In the United States, Berry Petroleum, one of the most successful companies ever to produce heavy oil in California's San Joaquin Basin, has moved its headquarters to Bakersfield from nearby Taft, where it was based for some 93 years. The company, founded in 1909, said the move was necessary to attract more qualified personnel for planned growth programs.
Berry, a privately owned company until 1989, is basically a heavy oil producer, with more than 99% of its production having 13° API gravity. Most of it comes from the prolific Midway-Sunset field near Taft, one of America's largest oil reservoirs, having produced more than 1 billion bbl thanks to steamflooding. Berry has produced more than 100 million bbl from the field.
Berry earned $21.9 million in 2001, even with nonpayment of considerable receivables owed by beleaguered California utilities from the sale of cogenerated electricity connected with Berry's steamflood operations.
From 1997 through third-quarter 2001, Berry posted an average return on equity of 17%, an average earnings-per-share growth rate of 14% and an average sales growth rate of 30%.
The company recently ranked 87th on Forbes magazine's list of America's 200 Best Small Companies for 2001 - one of only seven oil and gas producers included. Earlier in the year, it had been ranked 88th on Fortune's 100 Fastest Growing Companies list.
The new address is 5201 Truxton Ave., Suite 300, Bakersfield, Calif. 93309-0640. The telephone number is 661-616-3900.

Comments