NGI The Weekly Gas Market Report / NGI All News Access

ExxonMobil Lassos Leasehold in Horn River Basin

May 5, 2008
/ Print
| Share More
/ Text Size+

ExxonMobil Corp. is jumping into what may be Canada's most promising natural gas region: the Horn River Basin in northeastern British Columbia. The oil major has acquired 115,000 acres in the play with joint partner Imperial Oil Ltd., and the companies will begin evaluating the leasehold later this year.

Imperial, which is 70% owned by ExxonMobil Corp., and ExxonMobil Canada will share the rights to the properties, said ExxonMobil's vice president of investor relations Henry Hubble. He presided over a conference call Thursday to discuss the oil major's 1Q2008 earnings.

Except for its leasehold in the Piceance Basin of Colorado, ExxonMobil has made few publicly announced investments in North America's unconventional gas resource plays. With the Lower 48's unconventional gas resource plays grabbing a lot of press in recent weeks, Hubble was asked, "Why the Horn River Basin?"

"We've got a pretty wide aperture on what we're looking at," Hubble said. "We have a global program that allows us to assess opportunities around the world and identify the best resources, the best type of resources, wherever they are." ExxonMobil, he said, is "constantly evaluating...basically looking for the best opportunities on a global basis." This global approach "allows Exxon to target the best opportunities that we see out there."

When it comes down to choosing where to explore, "geology and the end market" are the key drivers, said Hubble. "We bring some technology advantages, frankly, that we think provides us with unique advantages in multi-zone stimulation, fast-drill technology...all of those are really important in those kinds of developments, in tight gas plays."

The Horn River Basin and a few other global developments "have potential, but it's still in the early days," he said. "We've basically been able to take advantage of our global understanding of basins, and get in early, work with folks to evaluate these prospects. We will be going through the evaluation phase...and other delineation activities" later this year.

Whether the Horn River Basin is "the best" opportunity for ExxonMobil remains to be seen, but the region is becoming the go-to place for several big-name independents. EnCana Corp., the busiest operator in the play, has a joint development plan under way with Apache Corp., and EOG Resources Inc., Nexen Inc. and Quicksilver Resources also are building substantial positions in the basin (see NGI, April 28).

Asked about other Lower 48 opportunities that ExxonMobil may be reviewing, Hubble demurred.

"We don't talk about everything we are looking at," Hubble said. "There may be more to come. Who knows?" he said, laughing. "We're watching the acreage pick-up in a number of areas, but I can't give a direct figure."

ExxonMobil's U.S. natural gas production in the first three months of 2008 declined to 1,305 MMcf/d from 1,514 MMcf/d in 1Q2007. Canadian/South American gas production also was off, falling to 663 MMcf/d from 852 MMcf/d a year earlier. The decline in U.S. gas output mostly was due to natural field declines, said Hubble. The fall-off in Canada's gas output, he said, was almost all related to ExxonMobil's decision to pull out of Venezuela. Worldwide gas production in the period reached 10,246 boe/d, slightly above the 10,114 MMcf/d in 1Q2007.

Record high commodity prices helped ExxonMobil's net income to jump 17% in the quarter -- but the profit was still short of Wall Street's expectations. Net income was $10.9 billion ($2.03/share), compared with $9.3 billion ($1.62) in 1Q2007. On average analysts had expected ExxonMobil to earn $2.13/share. Revenue climbed to $116.8 billion from $87.2 billion a year earlier.

Earnings in the quarter from exploration and production increased 45% from a year ago to $8.79 billion, and spending on capital and exploration projects jumped 30% $5.5 billion. For full-year 2007 ExxonMobil spent $21 billion on its capital program, and it expects to spend $25-30 billion a year between now and 2012 for exploration and production.

©Copyright 2008 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus