Poco Petroleums to Drill Hot Chevron Prospects
Thanks partly to decisions in the United States, Canadians are
turning up the heat under hot drilling plays along the Alberta
foothills of the Rocky Mountains and in northeastern British
Columbia. Chevron Canada's western exploration manager, Larry
Stewart, revealed in a session of financial analysts how
American-held hot prospects of filling expanding export pipelines
are being opened up to Canadian-owned firms.
Stewart disclosed that parent Chevron Corp. made a major
"strategic shift" last fall. It was determined that there are no
"large-impact" exploration-drilling plays left on land in North
America worthy of Chevron's own attention, he said. The cutoff for
suitable target size is reserves equivalent to one billion barrels
of oil. As a result, exploration funding was removed from western
Canada, Stewart said.
But Chevron did not lose interest in the region or the vast
holdings of prime drilling targets that made it a celebrated finder
of major gas fields through the 1970s and '80s. For the
wholly-owned Canadian subsidiary, it became a matter of finding
someone to take the drilling risk.
Enter Poco Petroleums Ltd., Canada's ninth-biggest gas producer
and determined to climb higher up the ladder by rapidly growing
from its 1998 average production of 490 MMcf/d. Poco knocked on
Chevron Canada's door soon after the parent company's decision and
just emerged with the prize.
In trade for a commitment to drill up to 16 wells for C$100
million over the next two years, Poco secures 50% ownership of its
pick of prospects from 400,000 Chevron acres and an option to add
an extra year to the exploration program in order to expand it.
Poco also gets help making the picks, by gaining complete access to
10,000 miles of two-dimensional seismic surveys plus 450 square
miles of the latest in three-dimensional data. The seismic data
alone would cost about C$150 million (US$100 million) if a Canadian
company had to collect it today, the financial analysts were told.
They were also assured Chevron will not hold back any ace
targets for itself to drill later. In a foothills region known as
West Kaybob and a northeastern B.C. area called Maxhamish, the
"farm-in" joint venture covers some of the most prized drilling
prospects in western Canada. Land prices at recent government
auctions of Crown minerals have at times exceeded C$1,000 (US$670)
The companies' geologists calculate they could get most of the
way toward the Chevron cutoff because the reserve potential of
their drilling targets stands at up to 730 Bcf capable of being
produced at a combined rate exceeding 600 MMcf/d. Poco said six
rigs have been hired for the drilling campaign, which will probe
deep gas targets with wells going down 11,000 to 15,000 feet and
each costing $C$6-$7 million (US$4-$4.7 million).
Stewart made it plain that despite the loss of money from the
parent company to risk on exploration funding, Chevron is not about
to give up easily its place as 21st-ranked Canadian gas producer
with about 230 MMcf/d. He said the company will participate in
developing discoveries made with Canadian risk money. Chevron
already is leading an otherwise Canadian consortium, set up with a
similar farm-in, in a development application to the National
Energy Board to put into production-at a rate of 80 MMcf/d - its
spectacular spring discovery near Fort Liard, just across the
Northwest Territories boundary from the new Maxhamish drilling
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