Calgary-based Nexen Inc.'s management team said Tuesday the producer's near-term priorities will be shale gas development in the Horn River Basin, an integrated project in the Athabasca oilsands, as well as conventional development and exploration in "select basins."
The management team hosted investors and analysts on Tuesday to preview its revamped global strategy. With 2011 capital spending of C$2.4-2.7 billion, Nexen now projects next year's production after royalties will increase by 4% year/year at the midpoint of guidance and 7% adjusted for the sale of properties in the Bakken Shale.
"For 2011, we expect our production will range between 230,000 and 270,000 boe/d, before royalties," CEO Marvin Romanow said. "The range is driven by the pace of ramp up at Long Lake [the oilsands prospect], run-times at Buzzard and Scott/Telford in the North Sea, and the timing of new volumes from our North Sea tieback opportunities, and from our Horn River Shale gas program.
"At the mid-point of our guidance ranges, production volumes after royalties would grow by as much as 7%. This continues the robust growth of about 7% on a compound annual basis we have realized over the prior five years, after considering the sale of our heavy oil properties... This 2011 growth is the first step to our delivery of about 70,000 boe/d of new production over the next 24 months..."
In a land sale in British Columbia earlier this year Nexen increased its position in the prospective Horn River Basin to more than 300,000 acres from 128,000 (see Daily GPI, July 16). Nexen was one of the early movers into the massive shale play; the company in 2008 estimated that its then 90,000-acre leasehold in the Dilly Creek acreage held 3-6 Tcf of recoverable contingent resources, assuming a 20% recovery rate (see Daily GPI, April 24, 2008). The acquisition this year also added to Nexen's 38,000 net acres in the promising Cordova play.
"We now have substantial acreage of over 300,000 acres in the Horn River, Cordova and Liard basins in northeast British Columbia, which we own with a 100% working interest," Romanow said. "We estimate that our Dilly Creek lands in the Horn River and our Cordova acreage contain between 4 Tcf and 15 Tcf of contingent resource, and our Liard acreage contains between 5 Tcf and 23 Tcf of unrisked prospective resource.
"Our best estimates for contingent and prospective resources are 8 Tcf and 13 Tcf, respectively..."
Capital spending plans for the Horn River acreage "are focused on the continued successful execution of our drilling and completion programs," said the CEO. "We plan to finish drilling our nine-well pad this winter with frack [hydraulic fracturing] and completion activities planned for next summer. We are progressing plans to commence drilling an 18-well pad in the second half of 2011.
"First shale gas production from the nine-well pad is expected in the fourth quarter of 2011 with production from the 18-well pad expected in late 2012."
Nexen also has agreed to sell its gathering, pipelines and storage assets in the Bakken Shale of North Dakota and Montana to Plains All American Pipeline LP for US$210 million. The sale, expected to be completed by the end of the year, should allow Nexen to report a gain of between C$115 million and C$130 million.
"This brings the total proceeds from our noncore asset sales to over C$1.2 billion," Romanow said. "We now expect to generate well over C$1.5 billion from all asset sales, once we complete our disposition program" including the sale of chemical affiliate Canexus in the coming year. "The proceeds will be used to develop the success we are having throughout our portfolio."
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