E&P Programs Gifted with Big Bonuses for 2001
'Tis the season to spend money, and many of North America's large and
small producers are doing just that, dropping bonuses into the envelopes
of newly expanded exploration and development programs for the coming year.
In recent days, both U.S. and Canadian producers have announced visions
of increased energy production next year, with most of the promise in domestic
natural gas development.
For U.S. independents like Mitchell Energy & Development Corp.,
the budget increases are the biggest in nearly 20 years. Across the Canadian
border, companies like Talisman Energy Inc. plan to ramp up exploration
and production in some of the biggest-ever-announced programs. All are
going after natural gas.
In the United States, Mitchell Energy last week increased its capital
spending budget 45% for the coming year, allocating $325 million of the
$473 million total for exploration and production alone. Another $124 million
will be set aside for gas services. All of the capital spending is expected
to come from operating cash flow.
"This is our highest capital spending program since the early 1980s
and reflects plans for accelerated development of the extensive inventory
of undrilled locations in our core fields," said CEO George P. Mitchell.
"At this spending level, we expect to add significant proved reserves
during 2001 and increase production of both natural gas and natural gas
liquids by at least 25% and 20%, respectively, versus this year's volumes.
These targets exceed our previously announced growth expectations of 20%
In exploration and production, The Woodlands, TX-based independent will
spend $263 million to drill 364 gross wells, up from its 211 wells this
year. Most of the increase will come in the Barnett shale, where 276 new
wells are included with a 12-rig program, more than doubling the number
of wells drilled there this year. Also, a 50% increase in drilling to more
than 40 wells is planned for the Personville field area, and $40 million
will be set aside for an "aggressive rework program" in the Barnett
and other fields.
With its E&P program trained on Texas, Mitchell said the company
expects to maintain its capital program at the new level "for at least
the next three years and increase our natural gas production over this
period by more than 20% compounded annually."
Another independent, Houston-based Nuevo Energy Co., increased its capital
budget on Friday 51% to $181 million. Of the total, the company will use
78%, or $141 million, to target exploitation projects, primarily earmarked
for building projects onshore California. Another 15%, or $27 million,
will go toward new exploration, mainly for drilling 12 exploration wells
in California and Africa.
Onshore California's single largest exploitation project for the coming
year is the continuing development of its Star Fee acreage in the Cymric
Field. Offshore California, Nuevo's capital spending will be directed toward
drilling in the Santa Clara Field and in the Pitas Point Field to increase
natural gas production. In its base 2001 capital budget, Nuevo's production
is forecast to be 21.6 MM boe, a 9% increase in production from this year.
Alaskan exploration is where it's at for Bartlesville, OK-based Phillips
Petroleum, which increased its capital spending 25% for next year. The
company approved a capital spending budget of $2.5 billion for 2001, up
from $2 billion in 2000, and nearly 87% of the spending will be directed
toward exploration and production programs.
Phillips said that more than half, about 53% of the 2001 budget, would
be spent domestically, with the Alaskan business unit receiving 77% of
the planned domestic spending. U.S. coalbed methane plays also are included
in exploration plans. In Alaska, Phillips plans to spend $914 million,
including a study now under way on the potential North Slope pipeline to
the Lower 48. Two weeks ago, BP, Exxon Mobil and Phillips said they were
jointly studying construction of a pipeline (see NGI, Dec.
Funding also is earmarked for developing Alpine and Meltwater fields
and the satellite fields of both Prudhoe Bay and the Greater Kuparuk Area.
In the Lower 48, Phillips plans to develop coalbed methane projects in
the San Juan, Powder River and Uinta basins, as well as natural gas fields
in north Louisiana.
"Our 2001 budget reflects the dramatic change our company has undergone
in the past year," said Jim Mulva, CEO. Phillips will spend $1 billion
on international projects, and Mulva said the company would build "on
our legacy asset positions in Alaska and Norway," and move forward
with the development of its three international legacy projects, Hamaca,
Bohai Bay and Bayu-Undan.
In what CEO Roger C. Beach called a more "disciplined" capital
spending approach, Unocal Corp. also upped its budget for 2001 to $1.6
billion, a slight increase from this year's budget of $1.4 billion. The
spending forecast includes higher exploration drilling in the Gulf of Mexico
and in international projects in Kalimantan, Indonesia and Brazil and Gabon.
In North America, the El Segundo, CA-based company expects to spend
about $930 million, including $130 million for its Gulf of Mexico deepwater
exploration drilling. It also plans to spend $350 million for exploration
and production projects on the Gulf shelf and the Permian Basin, through
its 65%-owned Pure Resources Inc. These projects all are expected to generate
additional natural gas production volumes.
"We will maintain discipline in our capital spending even in the
face of extremely high commodity prices," said Beach. "The spending
will add production in Southeast Asia and in the Gulf of Mexico shelf and
the U.S. Permian Basin, which will allow us to take advantage of higher
expected natural gas realizations."
Embarking on what it calls its biggest exploration program ever, Calgary-based
Talisman Energy purchased more than 475,000 net acres for $66 million in
Canada this year, with most targeting natural gas exploration.
"We have the people, opportunities, rigs and capital to support
the largest drilling program we have ever undertaken in Canada," said
CEO Dr. Jim Buckee. "We plan to drill 650 wells next year, up 20%
Nearly 95% of Talisman's spending on land targets natural gas prospects:
about 38% of the new Canadian land is in the Peach River Arch region of
Alberta, while 14% is in Alberta's Rocky Mountain foothills and 11% is
in the Alberta deep basin region.
In another of the more ambitious announcements from Canada, Calgary-based
independent Alberta Energy Company Ltd. plans to grow its natural gas sales
by 23% next year. AEC will invest a net $1.9 billion in 2001 core capital
programs to drive its daily sales to more than 1.3 Bcf and liquid sales
to more than 140,000 bbl.
"In 2001, AEC expects to maintain its position as Canada's largest
natural gas producer, and we will continue our strong domestic and international
oil growth," said CEO Gwyn Morgan. "Total production is expected
to ramp up by more than 20% in 2001, to exceed 360,000 boe/d." Morgan
said that AEC had built one of "North America's strongest storehouses
of natural gas" in the past five years and said that now, nearly two-thirds
of its total production is natural gas.
AEC also has allocated $185 million to "new ventures" exploration
next year, directed toward establishing the company's next "growth
platforms." In the first quarter of 2001, AEC will drill its first
Alaskan well, and it also plans "extensive seismic programs"
for Alaska and the Mackenzie River Delta.
Along with its investments in E&P, AEC will put another $2.1 billion
in other company operations, and expects to sell nearly $225 million in
non-core assets in 2001 (which reduces its net core spending to the $1.9
billion figure). It also will drill 1,225 wells, up 25 from this year,
with 900 gas wells and 325 oil wells.
Another Calgary-based independent, Gulf Canada Resources Ltd., is setting
aside $1.2 billion in its capital spending budget, with 67% of the total
going to exploration and production in Western Canada. The company's primary
operations are in Western Canada, Indonesia, the Netherlands and Ecuador.
Of the total planned budget for next year, 68% is earmarked for Gulf
Canada's worldwide development and exploitation projects, and another 32%
of the money will be spent on exploration. Production volumes are expected
to grow next year to 817 MMcf/d and 148,000 bbl/d of liquids. Almost 75%
of the gas production will come from North American development alone.
"The acquisition of Crestar has doubled our North American gas
production and we will be focusing on gas in our exploration and development
programs," said CEO Dick Auchinleck.
Carolyn Davis, Houston