EnCana Corp. has completed a major land acquisition program along the Devonian Jean Marie reef margin in the Greater Sierra region in northeast British Columbia. With the acquisition, the company now holds more than 2 million net acres of land on the Greater Sierra play, which is one of the fastest growing gas producing regions in North America. In total, the company estimated that it has spent C$100 million (US$65-70 million) on the acquisitions.

A spokesman for the company said that most of the deals within the program were land sales by the province, while some of the property was gained through “swaps, trades and purchases along the way.” The primary objective was “to go in and acquire land over time through the routine [provincial] sales,” said Alan Boras, spokesman.

EnCana, the new combination of PanCanadian and Alberta Energy, said it believes the Greater Sierra lands that it has obtained contain the largest regional gas play discovered in Western Canada in the past decade. Over the past four years, the company has been steadily acquiring mineral rights and extending the productive area of this play.

“We believe that the Greater Sierra natural gas field is a world class discovery which will be a key element of our long-term gas growth strategy,” said Randy Eresman, president of EnCana’s Onshore North American division. “The region’s resource potential on EnCana lands is estimated at more than 5 Tcf of sweet gas in place, and we expect to recover more than half of that.

“We first entered the Greater Sierra play in 1998, and each year our technical and operations teams have improved their understanding of the play, moving from the lower productivity carbonate platform to the more prolific reef margin,” Eresman said. “We are now in a position to predictably grow reserves at attractive full cycle finding and development costs of between C$1.25-$1.50 per thousand cubic feet. To date we have booked about 600 Bcf of established gas reserves in Greater Sierra.”

The company, Canada’s largest independent producer, said it is coming off of a “very successful” winter drilling program in which it drilled 45 wells, adding about 150 Bcf of established reserves. EnCana added that approximately half of these wells targeted the reef margin. “We expect that daily gas production from Greater Sierra, currently about 150 MMcf/d from approximately 200 wells, will more than double in the next three years, and continue to grow after that,” Eresman said. “To date, 500 potential drilling locations have been identified, and current plans are to drill about 100 wells a year. We are well positioned with infrastructure as the company owns seven gas plants with about 200 MMcf/d of processing capacity in the area. As well, we have long-term transportation commitments with Duke Energy Gas Transmission in BC and TransCanada PipeLines’ Alberta system.”

The most prolific wells of the Greater Sierra development are located east of Fort Nelson, BC along the reef margin that is about 3 to 5 miles wide, extending more than 175 miles south from the Northwest Territories border to the disturbed belt of the Rocky Mountains. According to the company, typical wells in the reef margin will produce from 2-4 MMcf/d in the first year and then stabilize in the range of 1 MMcf/d with a reserve life of greater than 10 years. EnCana estimates that each square mile of productive land on the reef margin contains an estimated 5-10 Bcf of gas in place. To date, the company’s success rate along the margin has been approximately 90%.

EnCana compares the Jean Marie Formation to the modern day reef complexes of Australia’s Great Barrier Reef. The formation’s unique characteristic is that it is undersaturated with respect to water, resulting in up to 40% more natural gas per unit area in the rock, compared to normally saturated formations, according to EnCana.

“Relative to other major fields in the Western Basin, Greater Sierra has comparatively few wells drilled,” Eresman said. “We have an extensive land base, solid infrastructure and a low cost structure, with operating costs targeted at less than $0.50 per thousand cubic feet. This positions us to generate sizable, reliable and profitable gas growth. As an added bonus, there are shallower zones that we have yet to exploit that can only add to the value of Greater Sierra.”

The company said it is forecasting gas sales of close to 2.7 Bcf/d in 2002, marking a 14% increase in average daily gas sales compared to the 2001 combined results for Alberta Energy Co. Ltd. and PanCanadian Energy Corp. In early April, shareholders of PanCanadian and AEC approved PanCanadian’s $6.4 billion purchase of AEC and the renaming of PanCanadian to EnCana Corp. (see NGI, April 8). The merger formed the largest independent producer in terms of reserves and production with an enterprise value (including debt) of $18 billion (C$30 billion). Ninety percent of the combined company’s assets are in four North American growth platforms: Western Canada, offshore Canada’s East Coast, the U.S. Rocky Mountains and the Gulf of Mexico.

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