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Poco Petroleums to Drill Hot Chevron Prospects

Poco Petroleums to Drill Hot Chevron Prospects

Thanks partly to decisions in the United States, Canadians are turning up the heat under hot drilling plays along the Alberta foothills of the Rocky Mountains and in northeastern British Columbia. Chevron Canada's western exploration manager, Larry Stewart, revealed in a session of financial analysts how American-held hot prospects of filling expanding export pipelines are being opened up to Canadian-owned firms.

Stewart disclosed that parent Chevron Corp. made a major "strategic shift" last fall. It was determined that there are no "large-impact" exploration-drilling plays left on land in North America worthy of Chevron's own attention, he said. The cutoff for suitable target size is reserves equivalent to one billion barrels of oil. As a result, exploration funding was removed from western Canada, Stewart said.

But Chevron did not lose interest in the region or the vast holdings of prime drilling targets that made it a celebrated finder of major gas fields through the 1970s and '80s. For the wholly-owned Canadian subsidiary, it became a matter of finding someone to take the drilling risk.

Enter Poco Petroleums Ltd., Canada's ninth-biggest gas producer and determined to climb higher up the ladder by rapidly growing from its 1998 average production of 490 MMcf/d. Poco knocked on Chevron Canada's door soon after the parent company's decision and just emerged with the prize.

In trade for a commitment to drill up to 16 wells for C$100 million over the next two years, Poco secures 50% ownership of its pick of prospects from 400,000 Chevron acres and an option to add an extra year to the exploration program in order to expand it. Poco also gets help making the picks, by gaining complete access to 10,000 miles of two-dimensional seismic surveys plus 450 square miles of the latest in three-dimensional data. The seismic data alone would cost about C$150 million (US$100 million) if a Canadian company had to collect it today, the financial analysts were told.

They were also assured Chevron will not hold back any ace targets for itself to drill later. In a foothills region known as West Kaybob and a northeastern B.C. area called Maxhamish, the "farm-in" joint venture covers some of the most prized drilling prospects in western Canada. Land prices at recent government auctions of Crown minerals have at times exceeded C$1,000 (US$670) per acre.

The companies' geologists calculate they could get most of the way toward the Chevron cutoff because the reserve potential of their drilling targets stands at up to 730 Bcf capable of being produced at a combined rate exceeding 600 MMcf/d. Poco said six rigs have been hired for the drilling campaign, which will probe deep gas targets with wells going down 11,000 to 15,000 feet and each costing $C$6-$7 million (US$4-$4.7 million).

Stewart made it plain that despite the loss of money from the parent company to risk on exploration funding, Chevron is not about to give up easily its place as 21st-ranked Canadian gas producer with about 230 MMcf/d. He said the company will participate in developing discoveries made with Canadian risk money. Chevron already is leading an otherwise Canadian consortium, set up with a similar farm-in, in a development application to the National Energy Board to put into production-at a rate of 80 MMcf/d - its spectacular spring discovery near Fort Liard, just across the Northwest Territories boundary from the new Maxhamish drilling targets.

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ISSN © 2577-9877 | ISSN © 1532-1231
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