Northern Alberta And British Columbia
A Prime Trust Asset
Northern Alberta and B.C. is ARC's largest core area and represents approximately one-third of ARC's production. Northern Alberta and B.C. is a prime Trust asset due to the relatively low-risk drilling targets, low operating costs, high netbacks and a diverse base of operated and non-operated assets. The area became a major growth center in 2000 with the acquisition of producing assets at Ante Creek. Through the Star acquisition in 2003, ARC gained the new area of Dawson that is a relatively immature, tight Montney natural gas development which was brought on stream by Star in 2001. Northern Alberta and British Columbia was an active area in 2005 for ARC. Average daily production for the area increased slightly to 19,797 boe/d in 2007 compared to 18,897 boe/d in 2006.
ARC has developed significant expertise in developing tight low permeability oil and gas formations through its operational activities in Ante Creek and Dawson. To successfully produce from these formations, large hydraulic fracture stimulations are required along with sophisticated completion techniques. The higher capital costs required for these types of resource plays generally require a higher commodity price than more conventional projects but deliver a stable long-term return. After an initial period of steep decline, these wells will produce at stable rates and will have a long-life reserve life index (RLI).
Recent Acquisition
Jan 8/2008: ARC Energy Trust announces two new gas discoveries and a large land acquisition in the Dawson area. To download a pdf version please click here.
Area In Detail
Key Property - Dawson
The largest portion of our capital program in 2007 was devoted to our Dawson area in northern British Columbia. We spent $58 million (excluding land and seismic) to drill six successful horizontal wells and six vertical Montney wells in Dawson that directly contributed to an 80 per cent increase in daily production. With the completion of a third-party gas processing facility, we were able to achieve an exit production of 44 mmcf per day. As discussed in the President’s message of this report, the Dawson area is one of the hottest natural gas plays in western Canada, with many major oil and gas producers vying for lands. This tight gas reservoir is characterized as having low permeability with high initial deliverability of natural gas, followed by a steep decline and then delivering stable, long-term production. In 2008, we plan to spend over $85 million in the Dawson area – our largest expenditure of all our major properties. We plan to drill an additional four horizontal Montney wells and four vertical wells within the Dawson core area to further define pool edges and to help us determine optimum drilling density.
ARC made two important new gas discoveries in the Dawson area during 2007. A discovery well was drilled in west Dawson where we encountered 75 metres of greater than three per cent porosity gas bearing rock. This new well provides a significant western extension to ARC’s Montney gas pool at Dawson. Twelve kilometers further west, we drilled a discovery well at Sunrise where we encountered 150 metres of greater than three per cent porosity gas bearing rock in the Montney formation. This well is currently being tested with early results confirming the presence of large gas resources associated with our Sunrise lands. ARC has significantly increased its land holdings in this highly prospective area having spent $100 million since August 2006 to double our land base to 90,000 acres, including 57,000 net undeveloped acres. Half of the 2008 capital budget will be focused on developing and testing those new areas with a combination of seismic and horizontal and vertical drilling. The Dawson area is processing capacity constrained in the short-term however, we have made preliminary commitments to some new facilities to increase production in this area in 2009.
Key Property - Ante Creek
ARC purchased its initial working interest in Ante Creek in early 2000. With subsequent acquisitions, ARC has become the dominant owner in this light oil and gas play with a working interest of 97 per cent. Current production at Ante Creek is over 5,000 boe per day. The production split in this area is approximately 52 per cent oil and NGLs and 48 per cent natural gas. In 2007 ARC spent $26 million in the area – primarily on drilling new Montney wells. Twelve new wells were placed on production, all drilled in the fourth quarter of 2006 and first quarter of 2007. These new wells added 1,000 boe per day of production contributing to record production of over 5,000 boe per day for the area. We installed a 16 km gas pipeline from the north to our recently acquired southern plant to remove capacity constraints.
ARC is forecasting a $36 million capital budget for Ante Creek in 2008, targeting a further eight infill and step-out drilling locations and dedicating capital to the expansion of the horizontal waterflood.
Information updated to year end 2007
Field Office
Superintendent: Dave Harris
9909 - 102 Street, Grande Prairie, Alberta T8V 2V4
Tel: (780) 402-3300-----Fax: (780) 402-3341