EnCana outlines bold expansion in the oil sands
The Globe and Mail: EnCana outlines bold expansion in the oil sands
By DAVE EBNER
Tuesday, November 8, 2005 Page B1
CALGARY -- EnCana Corp., best known as a natural gas producer, wants to increase its oil sands production to 500,000 barrels a day by 2015 and hopes to partner with major international players to make it happen.
The predicted cost is $5-billion (U.S.) up front and $7.5-billion over the quarter-century life of the oil sands expansion. EnCana's current oil sands production is 42,000 barrels of bitumen a day so its expansion is among the most aggressive plans yet for the Fort McMurray region of northern Alberta.
Unnamed international oil companies, both publicly listed firms and state-controlled entities, have made unsolicited pitches to EnCana in the past several months about potential deals.
EnCana has asked for "indicative bids and business concept proposals" by Nov. 30 and said it would pursue a short list of ideas early next year.
Advertisements
Mortgage Rates
Compare national rates by lender: See Chart
EnCana's incoming chief executive officer said everything will be considered, including equity stakes in the expansion.
"It's all possible," Randy Eresman, currently chief operating officer of EnCana Corp. and CEO as of Jan. 1, told reporters yesterday. "It really depends on what they have to offer. The least attractive thing they can offer us is cash."
The Calgary company made a day-long presentation to analysts and investors yesterday and used the time as a platform to present its oil sands ambitions, which until this week have been kept relatively quiet and whose stated goal had been 200,000 barrels of bitumen a day.
The cost of EnCana's project is roughly half that of the $25-billion (Canadian) in plans outlined by rival Canadian Natural Resources Ltd. last week because it involves only production of raw bitumen. Canadian Natural is spending more initially because it wants to build facilities to upgrade its crude output to more valuable synthetic oil.
That's where EnCana is looking for help.
At a minimum, Mr. Eresman said he wants long-term deals to supply bitumen to a refiner and EnCana is considering taking equity stakes in those operations. The company is currently in talks over such a deal with the largest refiner in the United Sates, Houston-based Valero Energy Corp.
EnCana said it would also consider assets swaps -- handing over oil sands exposure in exchange for promising natural gas properties.
"You have to realize what you're good at," said Ari Levy, a vice-president at TD Asset Management Inc., a large EnCana shareholder, noting that the company does not have expertise in refining.
EnCana uses what is called in-situ recovery, where wells are drilled and steam is injected to get viscous bitumen to flow to the surface, rather than mining the resource like Suncor Energy Inc. and Canadian Natural.
Numerous international players have visited Alberta this year, scoping out opportunities. Total SA of France has said it is looking for a third investment to complement a project under construction and its recent takeover of upstart Deer Creek Energy Ltd..
There had been speculation last month that Royal Dutch Shell PLC was considering a bid for EnCana. Mr. Eresman would not confirm if that chatter and yesterday's announcement about potential oil sands partners were related.
Stock of EnCana fell $2.30 or 4.1 per cent to $53.70 on the Toronto Stock Exchange as oil prices fell. The TSX energy index slid 2.3 per cent lower.
The market valuation of oil sands assets has risen "remarkably" in the past year or so, said Gwyn Morgan, outgoing CEO of EnCana, and that partly spurred the company to give investors details of its oil sands exposure.
"We believe it hasn't been reflected in the stock price," Mr. Morgan said.
International oil companies have been forced to look at Canada, Mr. Morgan said, after plans in places such as Russia have been partly scuttled.
"A lot of those doors have either closed or become very risky," Mr. Morgan said.
The goal of 500,000 barrels a day of bitumen production rivals the size of EnCana as a whole today. Output in the third quarter was the equivalent of about 690,000 barrels a day, almost 80 per cent of it natural gas.
Additional oil sands output could push EnCana's production per share growth to about 14 per cent through 2009, the company said yesterday, higher than it's long-term target of 10 per cent.
EnCana plans to get most of its oil sands production from south of Fort McMurray but yesterday highlighted a new area called Borealis northeast of Fort McMurray.
EnCana also introduced a play called Bighorn, which it hopes will be a successful natural gas production zone in the Deep Basin west of Edmonton.
The company for several years has been working to secure rights to drill wells in France and a decision there is expected within several months.
While almost all of its focus is on North America, EnCana is still pursuing several international angles and is appraising a discovery in Chad.
About a half dozen more wells are set to be drilled by the end of next year.
Adding it up
EnCana's latest forecast for oil sands production will make Canada a giant in 10 years in terms of production of millions of barrels per day.
Oil production in 2004 from major OPEC members:
Iran: 2
Kuwait: 2.4
UAE: 2.7
Venezuela: 3
Canadian oil production in 2015:
3.9 (2.7-million from oil sands)
By DAVE EBNER
Tuesday, November 8, 2005 Page B1
CALGARY -- EnCana Corp., best known as a natural gas producer, wants to increase its oil sands production to 500,000 barrels a day by 2015 and hopes to partner with major international players to make it happen.
The predicted cost is $5-billion (U.S.) up front and $7.5-billion over the quarter-century life of the oil sands expansion. EnCana's current oil sands production is 42,000 barrels of bitumen a day so its expansion is among the most aggressive plans yet for the Fort McMurray region of northern Alberta.
Unnamed international oil companies, both publicly listed firms and state-controlled entities, have made unsolicited pitches to EnCana in the past several months about potential deals.
EnCana has asked for "indicative bids and business concept proposals" by Nov. 30 and said it would pursue a short list of ideas early next year.
Advertisements
Mortgage Rates
Compare national rates by lender: See Chart
EnCana's incoming chief executive officer said everything will be considered, including equity stakes in the expansion.
"It's all possible," Randy Eresman, currently chief operating officer of EnCana Corp. and CEO as of Jan. 1, told reporters yesterday. "It really depends on what they have to offer. The least attractive thing they can offer us is cash."
The Calgary company made a day-long presentation to analysts and investors yesterday and used the time as a platform to present its oil sands ambitions, which until this week have been kept relatively quiet and whose stated goal had been 200,000 barrels of bitumen a day.
The cost of EnCana's project is roughly half that of the $25-billion (Canadian) in plans outlined by rival Canadian Natural Resources Ltd. last week because it involves only production of raw bitumen. Canadian Natural is spending more initially because it wants to build facilities to upgrade its crude output to more valuable synthetic oil.
That's where EnCana is looking for help.
At a minimum, Mr. Eresman said he wants long-term deals to supply bitumen to a refiner and EnCana is considering taking equity stakes in those operations. The company is currently in talks over such a deal with the largest refiner in the United Sates, Houston-based Valero Energy Corp.
EnCana said it would also consider assets swaps -- handing over oil sands exposure in exchange for promising natural gas properties.
"You have to realize what you're good at," said Ari Levy, a vice-president at TD Asset Management Inc., a large EnCana shareholder, noting that the company does not have expertise in refining.
EnCana uses what is called in-situ recovery, where wells are drilled and steam is injected to get viscous bitumen to flow to the surface, rather than mining the resource like Suncor Energy Inc. and Canadian Natural.
Numerous international players have visited Alberta this year, scoping out opportunities. Total SA of France has said it is looking for a third investment to complement a project under construction and its recent takeover of upstart Deer Creek Energy Ltd..
There had been speculation last month that Royal Dutch Shell PLC was considering a bid for EnCana. Mr. Eresman would not confirm if that chatter and yesterday's announcement about potential oil sands partners were related.
Stock of EnCana fell $2.30 or 4.1 per cent to $53.70 on the Toronto Stock Exchange as oil prices fell. The TSX energy index slid 2.3 per cent lower.
The market valuation of oil sands assets has risen "remarkably" in the past year or so, said Gwyn Morgan, outgoing CEO of EnCana, and that partly spurred the company to give investors details of its oil sands exposure.
"We believe it hasn't been reflected in the stock price," Mr. Morgan said.
International oil companies have been forced to look at Canada, Mr. Morgan said, after plans in places such as Russia have been partly scuttled.
"A lot of those doors have either closed or become very risky," Mr. Morgan said.
The goal of 500,000 barrels a day of bitumen production rivals the size of EnCana as a whole today. Output in the third quarter was the equivalent of about 690,000 barrels a day, almost 80 per cent of it natural gas.
Additional oil sands output could push EnCana's production per share growth to about 14 per cent through 2009, the company said yesterday, higher than it's long-term target of 10 per cent.
EnCana plans to get most of its oil sands production from south of Fort McMurray but yesterday highlighted a new area called Borealis northeast of Fort McMurray.
EnCana also introduced a play called Bighorn, which it hopes will be a successful natural gas production zone in the Deep Basin west of Edmonton.
The company for several years has been working to secure rights to drill wells in France and a decision there is expected within several months.
While almost all of its focus is on North America, EnCana is still pursuing several international angles and is appraising a discovery in Chad.
About a half dozen more wells are set to be drilled by the end of next year.
Adding it up
EnCana's latest forecast for oil sands production will make Canada a giant in 10 years in terms of production of millions of barrels per day.
Oil production in 2004 from major OPEC members:
Iran: 2
Kuwait: 2.4
UAE: 2.7
Venezuela: 3
Canadian oil production in 2015:
3.9 (2.7-million from oil sands)
posted by Marcel at 2:09 AM
0 Comments:
Post a Comment
<< Home