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Vol. 18, No. 19 Week of May 12, 2013
Providing coverage of Bakken oil and gas

Husky: Canol ‘long-term’

Company hammers home realities of NWT oil shale play after drilling 2 wells

Gary Park

For Petroleum News Bakken

While others start to pump up the Canol oil shale play in the Northwest Territories as a leading candidate to be the next Bakken, Husky Energy hammers home its realities.

With C$386 million in spending commitments on the line for two parcels, Husky has every reason to hope for a breakthrough.

To that end, it drilled two vertical wells last year at Slater River, completing and testing them in the first quarter, and is now evaluating results while holding discussions with local communities on a proposed 2013-14 winter program.

In addition, Husky completed about half of a 25-mile all-weather road last winter and plans to resume work in the third quarter.

For now, Chief Executive Officer Asim Ghosh said it will not discuss when two more wells might be drilled or release results on condensate levels from its initial wells.

To put things in perspective he said the Canol “is a project for the long-term” pending the completion of needed infrastructure, negotiating a regulatory tangle and proving that the shale oil trapped in the source rock of the Norman Wells oil find of the 1920s (which has since yielded millions of barrels) can be economically produced.

MGM: pipelines needed

Of the other Canol players, MGM Energy said both crude oil and natural gas pipelines will be needed out of the Central Mackenzie Valley before crude starts flowing.

But MGM is upbeat about its East MacKay I-78 wells which tested in March at about 140 barrels of fluid during four days — rates company President Henry Sykes said “certainly meet our expectations for a vertical well with small fracs and a limited testing period.”

ConocoPhillips, which has 216,000 net acres of Canol rights, drilled, logged and cored two wells during the first quarter.

“This is a Devonian shale that we believe is in the oil window on trend with the prolific Horn River gas play,” said Matt Fox, the company’s executive vice president of exploration and production.

“We’re planning to go back to this area next winter for a multi-well program, including a horizontal well production test.”

Husky confirms Duvernay estimates

On other resource fronts, Husky confirmed external estimates that it may have 200 million barrels of resources to exploit in northern Alberta’s Duvernay play, making the company one of the first to lift the lid on its Duvernay results.

Ghosh said “those numbers do not sound absurd to us” as Husky probes about 25,000 acres in what he described as the “dense” portion of the formation.

He said there is generally “too much focus” on the acreage held by companies in resource plays, while Husky puts its emphasis on the resource density of its holdings instead of being “seduced” by total land holdings.

Chief Operating Officer Rob Peabody said that although Husky does not release individual well results, “everything we have drilled has had very high liquids yields and we have been able to bring costs way down on the Duvernay. We feel pretty good where we are.”

He said the Duvernay interest, while “not an immaterial resource,” does not yet match Husky’s results from its Ansell play in west-central Alberta, which he said has “hundreds and hundreds of millions of barrels” of resources.

“Because of our operational performance (Husky is) a very attractive operator for other partners to use given that there’s an awful lot of wells that have to be drilled fairly soon for other companies to maintain their acreage positions,” Peabody said.

Ghosh noted that Husky raised its Ansell production to 14,500 barrels per day in the first quarter from 4,000 bpd last year, prompting the company to transfer unspecified amounts of capital into the area after adding 27 million boe of natural gas and gas liquids reserves and booking 398 million barrels of contingent resources.

Husky drilled 18 horizontal and vertical wells in the Ansell last year and is now completing four horizontal and six vertical wells.

The company also reported it drilled 45 gross horizontal wells in the opening quarter on its resource plays in the Bakken, Lower Shaunavon, Viking, Cardium and Rainbow Muskwa plays in Western Canada, with Peabody reporting that the latest Muskwa well cost about C$5 million, down 27 percent from last year.



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