Marking the second asset sale by ExxonMobil and its subsidiaries last week, Devon Energy Corp. announced it has acquired oil and gas properties in the Iron River area of Western Canada from ExxonMobil Canada Energy for approximately US$200 million.
Also last week, XTO Energy Inc. said it had purchased some Permian Basin properties in West Texas and New Mexico from the oil giant for a closing price of $200 million (see related story).
Located 120 miles northeast of Edmonton, AB, the Iron River acquisition includes 208 net sections of heavy oil leases and 51 net sections of conventional oil and gas leases. These leases encompass approximately 165,000 net acres with an average working interest of approximately 96%. Devon reported the acreage is largely undeveloped.
Iron River is located northeast of and immediately adjacent to Devon's Manatokan field, which produces 7,000 bbl/d of oil from about 300 wells. Devon believes Manatokan is a direct analogy to Iron River in terms of geology, reservoir characteristics, oil quality and operations. About 85% of Devon's wells in the Manatokan field have been successful. It is the largest and best performing field in Devon's Lloydminster project area.
"We pursued this acquisition because of Iron River's similarities to our Manatokan field and the success we have enjoyed there," said Stephen J. Hadden, Devon's senior vice president, exploration and production. "It represents several years of low risk drilling, including 70 locations that are drill-ready today. We can generally drill year-round in the Lloydminster area, and we plan to have four or five rigs running at Iron River in the third quarter of 2005."
The company anticipates drilling in excess of 800 wells on the Iron River property over the next four years. This ramp-up of drilling activity is expected to boost production from its current level of less than 3,000 bbl/d to approximately 30,000 bbl/d by 2010. Iron River is expected to add approximately 700,000 barrels of oil equivalent to Devon's 2005 production.
Oklahoma City-based Devon Energy is an independent energy company engaged in oil and gas exploration, production and property acquisitions.
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