Enerplus Resources Fund said this week it is nearly done with a series of acquisitions and sales that will reposition it as more shale-weighted and less oilsands-heavy.
Over the past 18 months the Calgary-based producer said it has added more than 450,000 net acres of prospective shale leasehold in Canada and the United States. At the same time Enerplus agreed to sell its once-touted Canadian Kirby oilsands lease, as well as several other noncore conventional assets in Alberta and British Columbia.
"We have made tremendous progress on our strategy this year," said CEO Gordon J. Kerr. "We have invested over $1.3 billion in two of the best resource plays in North America -- the Bakken light crude oil play and the Marcellus Shale gas play -- expanding our portfolio and significantly improving the future growth prospects of Enerplus."
In late August Enerplus completed its acquisition of 58,500 net acres of undeveloped land in the Marcellus Shale spread across northwest West Virginia and Maryland. The acreage is predominantly located in Preston County, WV, and Maryland's Garrett County. Enerplus is operating the leasehold with an average 90% working interest.
Including its latest acquisition in the Marcellus Shale, Enerplus said it has spent more than C$150 million in the play this year and added close to 70,000 net acres. The new leasehold is in addition to the company's 127,000 net acres of nonoperated land in the play.
"These new lands in West Virginia and Maryland are in emerging areas with limited existing development, however, we believe that the geologic characteristics are similar to Fayette and Somerset counties of Pennsylvania," said Kerr. "Early results from offset operators including those of our joint venture interests have been encouraging. While no proved or probable reserves have been acquired, we estimate original gas in place on this acreage of approximately 50-60 Bcf per 640 acres...
"A majority of the leases have two to three years remaining on the original five-year term with an additional five-year extension option at nominal cost. Our initial plans are to shoot seismic and begin the permitting process this fall, and we expect to begin drilling in 2011."
The company has been "encouraged by the results of our development plans and current production is approximately 15 MMcf/d." However, he said Enerplus is evaluating whether to reduce its nonoperated acreage position "given the addition of our new operated acreage and in order to maintain a desired level of exposure."
Enerplus also has paid US$456 million to add 46,500 net acres (72 sections) in the Fort Berthold area of Dunn and McKenzie counties in North Dakota's Bakken Shale. The new leasehold expands its position in the area to more than 70,000 net acres (109 sections). Most of the leasehold would be operated by Enerplus, with a 90%-plus working interest.
"With this acquisition, we now have over 210,000 net acres of undeveloped land with early stage Bakken and Three Forks potential in North Dakota and Saskatchewan, in addition to our core Bakken field at Sleeping Giant in Montana," said Kerr.
The purchase includes about 800 b/d of light crude oil production and estimated proved plus probable (2P) reserves of 10 million boe. Enerplus said it already had an estimated 8 million boe of unbooked 2P reserves in the play.
Enerplus also agreed to sell all of its stakes in the Kirby steam-assisted gravity drainage oilsands lease to an unnamed buyer for C$405 million gross. Enerplus, which would still have some oilsands assets, acquired the Kirby lease in 2007 for C$203 million and since that time it has spent about C$58 million to delineate and identify the bitumen resource on the lease.
The company also agreed to sell about 70 conventional gas and oil properties in Alberta and British Columbia. The C$158.5 million sale, expected to be completed by the end of this month, includes 2,500 boe/d of production and 9.3 million boe of 2P reserves.
"We will continue to evaluate opportunities to improve our portfolio, however, we would expect these last sales will complete the majority of our divestment activities this year," said Kerr. "Upon completion of these divestments, Enerplus will have sold over 10,000 boe/d of noncore production in 2010 for estimated total proceeds of over C$900 million, including the sale of Kirby."
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