Nov 9, 2010
Drilling results on British Columbia Montney support long-term, economic
growth
CALGARY, Nov. 9 /CNW/ – (TSX – PRQ) - Progress Energy Resources Corp. (“Progress” or the “Company”)
announced, in advance of its inaugural investor day, that it will move
forward on six commercial development pods that position the Company to
more than double its natural gas production and reserve base over the
next five years. The pace of capital investment over this period will
be flexible to the changing gas price environment, balancing the dual
objectives of growing the underlying value of the Company while
maintaining balance sheet strength.
“We are identifying six commercial development pods today, but this only
scratches the surface of the potential on our Montney land base,” said
Michael Culbert, President and Chief Executive Officer of Progress.
“In addition, of significance in our announcement today, is a material
successful step-out at Caribou on a recently completed and tested
horizontal well. Caribou extends the Montney play another 55
kilometers to the north of our Town South development.”
Montney Gas Potential
Progress has amassed approximately 900,000 net acres of land within the
commercially productive Montney fairway which represents one of largest
land positions among all North American natural gas resource players.
The focus of the Company’s exploration and development efforts has been
on the North Montney play in the Foothills of northeast British
Columbia. In the North Montney, Progress holds approximately 680,000
net acres of largely contiguous rights in an area that spans 190
kilometers from south to north and 50 kilometers from east to west.
Since mid-2008, Progress and industry competitors have completed over
25 vertical and over 25 horizontal wells in the North Montney region
with rates on par or better than other areas of the fairway. In
addition to this well data, and in conjunction with an independent U.S
based consultant, the Company has also actively collected and analyzed
extensive core, openhole logs, 3D seismic and microseismic information.
Based on the aforementioned analysis across its North Montney holdings,
Progress has identified a potential drilling inventory of 2,500 to
7,500 locations, encompassing both the Upper and Lower Montney
formation on its North Montney holdings. This well inventory represents
up to $40 billion of potential capital investment opportunity over a
multi-decade development program.
Six Montney Development Pods
Based on the positive results of its capital investment to date, the
Company is now in a position to identify six commercial development
pods. In addition to Town South, where eight horizontals are now
successfully on production, the other five identified pods are:
Progress expects that each of these pods can be developed into a 50 mmcf
per day asset, with sufficient well inventory remaining to maintain
that production level for 10 years. With only 20 sections of land
required to support each pod, the six identified pods
represent approximately 10 percent of the Progress land position in the
North Foothills area.
2011 Capital Program
For 2011, Progress will target an initial base capital spending program
of $250 million with plans to increase to as much as $400 million as
the year progresses. An investment of approximately $155 million in the
first half of the year will result in an active drilling program
primarily focused on the Company’s Montney development pods. The
capital program over the second half of 2011 will initially be set at
$100 million with an additional $100 to $150 million to be invested
contingent upon the success of multiple initiatives the Company is
undertaking that may include asset dispositions or joint ventures.
Of the $155 million planned for the first half of 2011, approximately
$100 million will be invested in Montney activities which include the
drilling of 14 horizontal wells and three vertical tests.
Approximately $12 million will be invested in compression facilities to
handle growing production volumes from new development pods.
Approximately $30 million will be invested in the Company’s Deep Basin
assets which includes the drilling of 15 wells on its low-risk,
multi-zone, liquids rich opportunities in the Gold Creek, Wapiti and
Elmworth areas. Approximately $10 million will be invested in the
Company’s tight gas opportunities in the Foothills.
“Our capital program is weighted towards our Montney opportunities in
2011 but also directs a portion of our capital to our highly economic
Deep Basin opportunities,” said Mr. Culbert. “Maintaining a consistent
pace of drilling activity will allow us to take advantage of the
drilling credits provided under the Alberta government’s incentive
programs which result in an average drilling expenditure credit of
approximately $500,000 per well.” The Alberta Drilling Royalty Credit
Incentive Program remains in place until April 2011 and provides a
drilling credit of $200 per meter drilled.
Progress maintains a strong and flexible balance sheet and expects to
support the first half of 2011 capital program through its cash flow
and current credit facility. The Company has a $650 million credit
facility with a syndicate of banks of which $430 million was available
as at September 30, 2010.
Asset Dispositions/Joint Ventures
In order to fund an expanded capital program, Progress is undertaking an
asset disposition program to further focus its asset base in the Deep
Basin of northwest Alberta and the Foothills of northeast British
Columbia. Assets representing less than 10 percent of the Company’s
production base or approximately 1,500 to 3,000 boe per day could be
divested in 2011. Concurrently, Progress will be evaluating various
joint venture alternatives on portions of its land base in the North
Montney fairway. It is expected that funds generated from either
dispositions or joint ventures will position the Company to expand its
capital investment program for 2011.
Production Targets
Progress expects to exit 2010 as planned with a production rate of
between 45,000 to 46,500 boe per day Current production is
approximately 44,500 boe per day with a number of other wells shut in
for pressure build up and wells awaiting completion operations. Based
on the $250 million base capital program in 2011, an exit rate modestly
higher than the 2010 exit rate is targeted. Capital expenditures over
the $250 million base capital program will provide production growth at
or better than Progress’ historical capital efficiency level of $20,000
per boe per day. Annual 2011 production will be impacted by a scheduled
plant turnaround at the third-party owned McMahon natural gas
processing facility in northeast British Columbia.
Building Long-term Underlying Value
Over the past nine years, we have established an enviable asset base in
two of the premier natural gas plays in North America. We have amassed
large contiguous land blocks in both the Foothills and Deep Basin
regions, both capable of generating strong returns on invested capital
in the current natural gas price environment. As we have built our
asset position, we have concentrated on maintaining high working
interests and operatorship which allow us to control the cost and the
pace of development. As well, the maintenance of a healthy balance
sheet has been important to ensure that we have the flexibility to take
advantage of opportunities which add long-term value for shareholders.
Our asset base provides our shareholders with unique exposure to
large-scale, long-term natural gas development, normally associated
with a much larger company. Our investor day is an important
opportunity to showcase the scope and scale of our opportunities.
Although we will need to remain flexible to the changing natural gas
price environment, we will control the pace of our capital investment.
We believe our assets can provide multiple years of potential double
digit growth at robust economic rates of return.
Investor Day
Progress Energy will be hosting its inaugural investor day today,
Tuesday, November 9, 2010 in Calgary and on Wednesday, November 10,
2010 in Toronto. The Toronto event will be webcast and interested
investors may listen in using the following link to the slides and
presentations. Presentations will begin at 8:30 (EST) in Toronto.
URL:http://event.on24.com/r.htm?e=263177&s=1&k=DCBC1C9850B8BE914288546FA33D31E6
Progress is a Calgary based, energy company primarily focused on natural
gas exploration, development and production in northwest Alberta and
northeast British Columbia. Common shares of Progress are listed on the
Toronto Stock Exchange under the symbol PRQ.
This press release and financial highlights table (collectively the
“press release”) contains forward-looking statements and
forward-looking information within the meaning of applicable securities
laws. The use of any of the words “expect”, “anticipate”, “continue”,
“estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”,
“believe”, “plans”, “intends” and similar expressions are intended to
identify forward-looking information or statements. In particular,
forward looking statements in this press release include, but are not
limited to, statements with respect the effect of the development pods
on the Company’s natural gas production and reserve base over the next
five years; the pace of capital investment; the focus of capital
expenditures, the timing of capital spending and the results therefrom;
the focus of the Company’s exploration and development efforts;
expected capital spending program; potential capital investment
opportunities; potential drilling inventory; test rates; expected
sources of funding for capital program in the first half of 2011;
Progress’ planned asset disposition program including the timing
thereof and the use of proceeds received therefrom; Progress’ estimated
2010 exit production rate; potential drilling credits and the
advantages to be received therefrom; effect of capital expenditures on
production; effect on production of scheduled plant turnaround at
third party owned McMahon natural gas processing facility; growth
potential and rates of return of Progress’ assets; pace of development;
projections of future land holdings; and future drilling plans and
programs, the timing thereof and the results therefrom.
The forward-looking statements and information are based on certain key
expectations and assumptions made by Progress, including expectations
and assumptions concerning prevailing commodity prices and exchange
rates, applicable credits, royalty rates and tax laws; future well
production rates; test rates and reserve and resource volumes; the
performance of existing wells; the success obtained in drilling new
wells; the sufficiency of budgeted capital expenditures in carrying out
planned activities; and the availability and cost of labour and
services and future operating costs. Although Progress believes that
the expectations and assumptions on which such forward-looking
statements and information are based are reasonable, undue reliance
should not be placed on the forward looking statements and information
because Progress can give no assurance that they will prove to be
correct.
Since forward-looking statements and information address future events
and conditions, by their very nature they involve inherent risks and
uncertainties. Actual results could differ materially from those
currently anticipated due to a number of factors and risks. These
include, but are not limited to, the risks associated with the oil and
gas industry in general such as operational risks in development,
exploration and production; delays or changes in plans with respect to
exploration or development projects or capital expenditures; the
uncertainty of reserve and resource estimates; the uncertainty of
estimates and projections relating to test rates, reserves, resources,
production, costs and expenses; health, safety and environmental risks;
commodity price and exchange rate fluctuations; marketing and
transportation; loss of markets; environmental risks; competition;
incorrect assessment of the value of acquisitions; failure to realize
the anticipated benefits of acquisitions; ability to access sufficient
capital from internal and external sources; changes in legislation,
including but not limited to tax laws, royalties and environmental
regulations.
Management has included the above summary of assumptions and risks
related to forward-looking information provided in this press release
in order to provide security holders with a more complete perspective
on the Company’s future operations and such information may not be
appropriate for other purposes. The Company’s actual results,
performance or achievement could differ materially from those expressed
in, or implied by, these forward-looking statements and, accordingly,
no assurance can be given that any of the events anticipated by the
forward-looking statements will transpire or occur, or if any of them
do so, what benefits that the Company will derive there from. Readers
are cautioned that the foregoing lists of factors are not exhaustive.
These forward-looking statements are made as of the date of this press
release and the company disclaims any intent or obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or results or otherwise, other than as
required by applicable securities laws.
Readers are cautioned that the foregoing list of factors is not
exhaustive. Additional information on these and other factors that
could affect the operations or financial results of Progress are
included in reports on file with applicable securities regulatory
authorities and may be accessed through the SEDAR website (). The forward-looking statements and information contained in this
press release are made as of the date hereof and Progress undertakes no
obligation to update publicly or revise any forward-looking statements
or information, whether as a result of new information, future events
or otherwise, unless so required by applicable securities laws. www.sedar.com
Barrels of Oil Equivalent
“Boe” means barrel of oil equivalent on the basis of 1 boe to 6,000 cubic feet of natural gas.
Boe’s may be misleading, particularly if used in isolation. A boe
conversion ratio of 1 boe for 6,000 cubic feet of natural gas is based
on an energy equivalency conversion method primarily applicable at the
burner tip and does not represent a value equivalency at the wellhead.
%SEDAR: 00020978E