Building on a program they started last year, ExxonMobil and Apache Corp. are expanding their successful exploration and development venture in Alberta.

A joint agreement in May 2004 gave Apache 28 of ExxonMobil’s producing oil and gas fields in West Texas and New Mexico, as well as exploration rights on more than 370,000 undeveloped acres in Alberta (see NGI, May 31, 2004).

Under the new agreement announced Thursday, ExxonMobil Canada Energy will farm out its interest in 650,000 acres of additional undeveloped property interests in Canada to Apache Canada Ltd. over and above the 370,000 acres conveyed in 2004. Apache also will test additional horizons in 140,000 acres of the Canadian property conveyed in 2004. Apache also will have access to 1,234 sections under the new agreement.

The agreement gives Apache the right to drill and operate 145 new wells in both shallow and deep zones over a 36-month period with upside potential for further drilling. ExxonMobil Canada will retain a 37.5% lessor royalty on fee lands, while on Canadian Crown leasehold it will retain 35% of its original working interest for any production resulting from the drilling program.

“This agreement will enable our companies to more closely work together to develop a larger portfolio of exploration acreage in Western Canada,” said Morris Foster, president, ExxonMobil Production Co. “It allows us to create more shareholder value from these assets by taking advantage of the relative strengths of both companies to increase both the near-term and long-term value of these prospects.”

Apache CEO G. Steven Farris said that the “latest extension allows Apache to add almost 800,000 acres to our existing 6.9 million acres on which to explore in one of the most prolific natural gas basins in North America. For ExxonMobil, it assures that a significant amount of its acreage will be evaluated with the drill bit.”

Since signing its 2004 agreement, Apache has drilled 86 wells and completed 73 wells with tested capacity of 52 MMcf/d. The wells will be brought on production over the coming months as pipeline and processing capacity is available.

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