Calgary, AB-based Canadian Superior Energy Inc. said last week that it has entered into an agreement with the Canadian division of El Paso Corp. to acquire El Paso’s Drumheller Area oil and gas assets, production facilities, gas plants and undeveloped lands located in Central Alberta.

The net C$59 million deal had an effective date of Oct. 1, 2002. It includes approximately 2,800 boe/d of company operated sweet gas and light crude oil production and high working interests in 170,000 gross acres of land (106,693 net acres). The transaction also includes extensive seismic data and infrastructure assets consisting of interests in three gas plants, three oil batteries, 20 production facilities and 130 kilometers of company-operated pipelines.

Production from the area is currently 75% natural gas and 25% light sweet crude. The acquisition price equates to C$21,071 per flowing boe/d using a 6:1 conversion ratio. Canadian Superior said approximately 40 high working interest drilling locations have been identified for drilling during 2003 on the undeveloped lands, with an estimated risked potential to add 1,945 boe/d of net production to the company. Before the acquisition, Canadian Superior produced approximately 4,000 boe/d.

According to a study done by Gilbert Laustsen Jung Associates Ltd., the transaction includes proven reserves of 4.4 million boe of which 96% are proved producing. Estimated established reserves (proved + 1/2 probable) are 4.9 million boe, which results in a cost of C$12.04 per established boe.

“The transaction adds high quality production, reserves, extensive infrastructure and undeveloped lands easily accessible for development on a year-round basis,” said Dan MacDonald, Canadian Superior’s land manager. “El Paso has successfully targeted primarily the shallow opportunities on its lands. In addition to continuing to develop low risk shallow opportunities, we believe that deeper horizons can be targeted to add reserves and production on a cost effective basis. The potential exists to enhance the value of these assets through:

Canadian Superior said it would fund the transaction through bridge financing and the company’s existing credit facilities.

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