Apache Corp.'s natural gas reserves in the emerging Horn River Basin of British Columbia likely are on the "high end" of its previous forecast of 9-16 Tcf net, CEO G. Steven Farris said Thursday.
Farris, who presided over a conference call with energy analysts to discuss the company's quarterly earnings, said two Ootla shale wells drilled by Apache's partner EnCana Corp. during 2Q2008 added further support to the current estimated reserves potential.
"The big story continues to be the Muskwa shale play in the Ootla area of British Columbia," Farris said. "In April we announced the results of three horizontal wells," which tested out at 5.3 MMcf/d, 6.2 MMcf/d and 8.8 MMcf/d (see NGI, May 5). "EnCana has also drilled three wells, and recently completed, tested and hooked up two of those wells, which are flowing to Apache's Missile plant. Both wells [Wednesday] were flowing at 4.5 and 4.3 MMcf/d."
To put in perspective what 9-16 Tcf of reserves could mean to Apache, Farris said, "for reference, our worldwide proven was 7.8 Tcf" at the end of 2007.
"We have yet to finalize our 2008 and 2009 winter drilling programs at Ootla, but I anticipate a step change in the activity level this coming winter," he said. "This is a key growth play for North America, but it also will be a major growth driver for Apache for several years."
Infrastructure is considered a problem, but Farris said Apache has been in discussions with an undisclosed "major pipeline company" about a new project. If all goes to plan, he estimated production could be flowing at around 400 MMcf/d "in the 2011, 2012 time frame."
Asked whether Apache, long an acquisitive company, was considering adding any new acreage to its portfolio in North America or worldwide, Farris was coy.
"In today's hectic world, it does not behoove you to say where you're putting acreage together," he told analysts. "You see what happens to acreage costs...when we bought most of the Ootla acreage, we got it for less than $200 million. If we sold it today, it would be worth $1 billion.
"We are putting acreage together in some plays, and when we have all that we want to get together, we'll talk about where our acreage is. I'm not trying to be evasive, but acreage is key today."
The Houston-based producer's quarterly production fell 3.6% from the prior-year period to 551,600 boe/d, mostly because of an explosion that disrupted operations at an Australian gas processing and transportation hub, and because of a refinery strike in Scotland that shut in production from its Forties Pipeline System. Despite those operational issues, Apache still expects oil and gas production to grow 2% this year.
"Despite the challenges we faced during the quarter, we remain positive about the long-term outlook," he said. "Driven by successful drilling programs and seven development projects that are expected to add 135,000 boe/d to worldwide net production over the next four years, we are confident Apache is entering a period of accelerating production growth in 2009-2012."
Worldwide gas production fell to 1.68 Bcf/d, down from 1.83 Bcf/d. U.S. gas output fell to 758,524 Mcf/d, compared with 801,778 Mcf/d. Canadian gas production was 357,828 Mcf/d, compared with 389,218 Mcf/d for the same period a year ago. Apache's average U.S. gas price in the quarter was $10.62/Mcf, compared with $7.29 in 2Q2007.
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