Englewood, CO-based MarkWest Hydrocarbon Inc. reported that its wholly owned subsidiary, MarkWest Resources Canada Corp., has completed its third-quarter exploration program with a 90% success rate. MarkWest engineers estimate that the nine wells drilled and completed contain net proved reserves of between 5 and 6 Bcfe of natural gas.

MarkWest said production from these discoveries is expected to be placed on-stream late in the fourth quarter. These reserves are in addition to the 26 Bcfe of net proved reserves reported by Gilbert Laustsen Jung Associates at the time of the August 2001 acquisition of Leland Energy Canada Ltd. and Watford Energy Ltd., which have since been renamed MarkWest Resources Canada Corp. The capital cost of the program was US$1.6 million for drilling and completion, thus adding proved reserves for a cost of $0.25 per Mcf, the company said.

There are currently 16 wells drilled, cased and/or completed awaiting pipeline connection. In the Bantry area of southeastern Alberta, MarkWest is installing a new 23-mile gathering system with a capacity of 17 MMcf/d, expected to be on-stream late in the fourth quarter. It will include dehydration and compression facilities with capacity for MarkWest wells, along with significant opportunity to serve third-party wells. MarkWest estimates that this midstream project will require a capital investment of $4 million.

MarkWest said that during the third quarter it acquired an additional 6,400 acres on a 100% farm-in basis, adding a minimum of six new drill sites with follow-up potential. During the fourth quarter, MarkWest said it plans to drill up to 16 more exploitation wells, which are part of an inventory of over 300 identified drilling locations. The program — estimated at $3.5 million — will also include several recompletion efforts. In addition, MarkWest will conduct a 15-square-mile, $500,000 3-D seismic program that is expected to yield numerous additional drillable locations. MarkWest said it is targeting a first quarter 2002 production rate of 25 MMcfe/d, or 60% above the rate in August 2001.

Immediately after closing the acquisition, MarkWest hedged through 2004, 70% of proved producing production at an average price of US$3.02/MMBtu.

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