Although some analysts are posting dire warnings for falling natural gas production in Canada, first quarter reports from some of the leading producers are proving a conundrum. Talisman Energy Inc. drilled six successful wells in the first three months of the year, and its production is up 6% from a year ago. Oil-heavy Husky Energy also came through production wise in its upstream operations, up 4%. Meanwhile, Shell Canada Ltd. and Imperial Oil Ltd. both saw production declines.

Reports are only beginning to emerge from the North, but overall Lehman Brothers analysts Thomas R. Driscoll and Philip R. Skolnick are forecasting that natural gas volumes in Canada will fall 2-4% this year compared to 2002. “Production trends in Canada continue to deteriorate,” they said in a report issued Thursday. “Despite high rig utilitization during the first quarter, current production data indicates that the industry was not successful enough to offset production declines.”

However, with four of the largest Canadian independents reporting, the tally sheet for now is 50-50.

Calgary-based Talisman Energy Inc. drilled successful wells in its Alberta foothills program, contributing to a new record for North American natural gas production, the company said Thursday. Overall production was up 6% in the quarter over a year ago.

“Although the industry in aggregate is finding it difficult to stem production declines, Talisman’s strategic positioning in the Foothills and in the deeper parts of the [Western Canadian Sedimentary] Basin continue to provide reserves and production growth,” said CEO Jim Buckee. “We have established a North American natural gas production record for the company of 870 MMcf/d, 6% above last year at this time.”

In the Alberta foothills, Talisman’s natural gas production remains at near record levels, currently averaging between 125-130 MMcf/d, an increase of 9% from a year ago. And through this year, Talisman’s production guidance remains unchanged, with the company expecting to reach 395,000- 415,000 boe/d. Estimates for North America are 860-880 MMcf/d and 58,000-60,000 bbls/d of oil and natural gas liquids (NGLs).

Meanwhile, Husky Energy, an integrated independent based in Calgary, recorded record first quarter profit as well on strong commodity prices. CEO John Lau said the company benefited from strong oil and gas prices as well as increased production in the quarter.

In the upstream, Husky averaged 312 Mboe/d for the quarter, 8% higher than the 289 Mboe/d achieved for 1Q02. Total crude and NGLs increased 10% to 214 Mboe/d, compared with 194 Mboe/d last year. Natural gas production in the quarter increased in the quarter by 4% to 591 MMcf/d, compared with 566 MMcf/d in 1Q02.

Lau said the increase in gas production came from tie-ins in the Alberta foothills and a “full quarter of production from the Shackleton development, which averaged 31 MMcf/d” in the quarter. Going forward, Husky estimates its production will average between 310-330 Mboe/d. Gas production is expected to average 590-620 MMcf/d.

Like all of the producers in North America, Shell Canada Ltd.’s earning were up for the quarter, but production compared with last year was down. Production volumes were lower as field declines in Western Canada and reduced Sable Offshore Energy Project (SOEP) production more than offset increased Peace River bitumen production. The company said resources depreciation charges increased over the same period last year due to higher SOEP unit depreciation rates, consistent with the previously announced reserves revisions.

Shell’s share of natural gas production from SOEP averaged 136 MMcf/d for the first quarter, down from an average rate of 153 MMcf/d for the fourth quarter of 2002, mostly because of “production issues” at several wells. “Remedial work is ongoing and initial results from this well workover program are encouraging. Current and planned investments will help to maintain production over the longer term,” and Shell said the Alma field development is progressing toward its planned start-up in late 2003. In addition, the development of the South Venture field (the second of the SOEP Tier II fields) has been approved for start-up near the end of 2004.

Toronto-based Imperial Oil Ltd., which is majority-owned by ExxonMobil Corp., reported that its first quarter natural gas production drastically fell compared with last year, with gross production standing at 487 MMcf/d, compared with 557 MMcf/d in 1Q02. The decrease, said the company, was mainly because of reservoir decline and production timing.

Total production of crude and natural gas liquids increased, however, to 240 thousand bbl/d, up from 238 thousand bbl/d for the same period of 2002. Production of NGLs for sale was 27 thousand bbl/d during the first quarter, compared with 29 thousand bbl/d in 2002. Natural reservoir decline in the Western Canadian Basin was named as the culprit for reduced production.

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