Apache Corp. estimates it may have a net reserve potential of 9-16 Tcf in the Ootla area of northeast British Columbia, a leasehold that could be the producer's next big operating area, the company's CEO said last week.
Better-than-expected results from three horizontal gas wells in the Muskwa Shale of the Ootla area in the Horn River Basin make the leasehold an "important" piece of Apache's portfolio, said G. Steven Farris. He presided over a conference call with his management team Thursday to discuss quarterly earnings. The northeast BC region is becoming a hot play for a bevy of producers, and Apache has partnered with EnCana Corp. to develop some acreage (see NGI, April 14).
"This is likely to give us long-term natural gas production starting in 2011 and 2012 and potentially become our eighth major development project," Farris said. "One thing I will tell you is the early results are favorable. We feel good about what we're seeing."
Farris gave a nod to Apache's newest "neighbor" in the Horn River Basin, ExxonMobil Corp., which will jointly develop 115,000 acres with Imperial Canada Ltd. (see related story). Most of his enthusiasm about the play, however, was directed at the results from Apache's three wells in the leasehold, which test-flowed at rates of 8.8 MMcf/d, 6.1 MMcf/d and 5.3 MMcf/d. All three wells now are flowing through Apache's Missile gas plant in the province, he said.
Apache began 2008 with six major projects under way worldwide, which together are designed to add 135,000 boe/d to the company's output by 2012. In the first three months of this year the company launched a seventh major project, a natural gas plant in Egypt. Now the management team is contemplating a bigger move in the Horn River Basin because of the Ootla results.
"The big story is the Muskwa Shale," he said. "We've only scratched the surface with our exploration program in 2008," Farris said. "Most of our exploration activity is still ahead of us," said Farris. "We look forward to our progress in 2008."
Apache reallocated some of its Canadian spending from Alberta to British Columbia after the AB government revised its royalty rates for oil and gas producers. The short-term effect will lower Apache's Canadian production numbers, but longer term, Farris said he believes there will be a lot of value in the move. Because Alberta's government recently revised its royalty plan to allow tax exemptions for deep gas developers, Apache will re-redirect some of its capital spending in response, he added.
Asked whether Apache was considering any acquisitions in other North American shale plays, Farris said that the company "never plans for acquisitions because they are events, not a strategy. Having said that, we are a very acquisition-minded company, and we are constantly looking for things, from a well in West Texas that someone's found on the Internet to larger acquisitions.
"We are beginning to see that market loosen up a bit," he said. "We're not doing anything right now, and there's not anything on the horizon. But...there are starting to be some properties for sale. The real question is what to do if you find something in an area you like...We're in the opportunity business. We certainly don't have any stealth plays out there that we're ready to announce. But this business is a business of opportunities...We're looking for opportunities that nobody's ever seen."
The Houston-based explorer reported 1Q2008 net income of $1.02 billion ($3.03/share), which is its second consecutive quarter with earnings above $1 billion and a 108% increase from 1Q2007's $492 million ($1.47). Adjusted earnings were a record $2.99/share, up from $1.48 a year earlier. Quarterly production increased 4% from a year ago to 557,631 boe/d, driven by higher oil output in the United States and overseas.
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