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Quicksilver, EnCana Agree to Split Assets, Pursue Separate CBM Strategies in Canada
EnCana Corp. and MGV Energy Inc., the Canadian subsidiary of Quicksilver Resources Inc., are calling it quits on a joint coalbed methane (CBM) venture that to date has successfully drilled 175 wells in southern Alberta.
Without disclosing the financial details, the two companies agreed to divide both their property and CBM assets, and said that going forward, they will pursue independent CBM strategies.
Quicksilver, based in Fort Worth, will hold an interest or option to drill and earn in about 667,000 acres of Alberta where it is conducting a variety of CBM projects. The lands contain a mix of coals, with initial commercial development underway and delivering natural gas. With the completion of the Asset Rationalization Agreement with EnCana, Quicksilver will hold drilling rights on more than 350,000 net acres in Alberta where it operates 94% of its property. In addition to the CBM rights, the company also holds natural gas rights on more than half of the acreage in all formations to a depth of at least the deepest target coal.
Glenn Darden, Quicksilver’s CEO, said that an independent strategy would help the company streamline its operations and “better control our pace” in developing the assets.
The first independent Quicksilver CBM development project, to be located in the Gayford area of the West Palliser block, is producing 2.7 MMcf/d from 18 net wells with five more wells to be added by mid-month. The company continues to see “negligible” water volumes in this Gayford area, precluding the need for water handling facilities. Quicksilver also will have the ability to connect into existing infrastructure and the Canadian pipeline system to ensure the control and priority of gas sales. The company will book an estimated 35 Bcf of proved reserves from this area with the release of its year-end 2002 reserve report.
Quicksilver has a US$35 million capital budget for development and exploration in Canadian CBM for 2003, with a target year-end production rate of 15 MMcf/d. It also plans to complete more than 175 wells in all of its areas during 2003.
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