Press release from CNW Group
Athabasca Oil Sands Corp. Reports 2011 Third Quarter Results
Thursday, November 10, 2011
CALGARY, Nov. 10, 2011 /CNW/ - Athabasca Oil Sands Corp. (TSX: ATH) announces it has filed its financial statements and management's discussion and analysis (MD&A) for the three and nine month periods ended September 30, 2011. These documents can be retrieved electronically from AOSC's website (www.aosc.com) and later this morning from SEDAR (www.sedar.com).
Third Quarter 2011 MD&A Highlights:
- Acquisition of Halfway Creek leases completed, Hangingstone regulatory process is advancing, engineering is progressing and procurement of Hangingstone long-lead equipment is underway.
- Dover West Leduc thermal assisted gravity drainage (TAGD) field test progressing and production commenced in late October with encouraging early results. The regulatory application for a TAGD demonstration project of 6,000 barrels per day (bbls/d) was submitted in early October and the clastics (oil sands) steam assisted gravity drainage (SAGD) regulatory application for a 12,000 bbls/d project is on track for a December, 2011 filing.
- MacKay River detailed engineering has commenced and procurement of long-lead equipment is underway.
"Athabasca continues to meet its milestones," says Sveinung Svarte, president and CEO. "We are on schedule with all projects and started TAGD Leduc Carbonate Formation production testing ahead of schedule in Dover West."
- Five Montney and two Nordegg wells have been drilled and completed since the second quarter of 2011.
- Final test rates for the Montney wells ranged from 300 to 2,250 barrels of oil equivalent per day (boe/d) with up to 75% of oil.
- Based on available infrastructure, access and well results to-date, two initial development areas have been identified in Kaybob and Simonette. Athabasca intends to move Placid from the appraisal stage towards development in late 2012.
- A 100% owned, 65-kilometre, 12 inch pipeline with capacity in excess of 150 million cubic feet/day (mmcf/d) will be applied for from the Kaybob area to the Keyera Simonette gas processing facility. Public consultation is underway with a regulatory application to follow shortly.
- Purchased additional Light Oil lands for $113 million, bringing the Deep Basin total to greater than 1.3 million acres with additional land in an undisclosed area of new interest where the Company now holds approximately 400,000 acres.
"Athabasca's Light Oil venture is now directed at developing several highly-prospective plays in the Kaybob, Simonette and Placid areas," says Svarte. "We have demonstrated that we can produce oil and liquids-rich gas at commercial rates from each of these development areas."
During the quarter, the Company acquired 100% working interest (WI) in additional oil sands leases located at Halfway Creek adjacent to Athabasca's existing Hangingstone asset. The leases (24,640 acres) were acquired for a purchase price of $53.6 million. These additional lands will enable optimized developments and full economies-of-scale for the project.
Athabasca has also replied to the first round of supplementary information requests (SIRs) on its 12,000 bbls/d Hangingstone SAGD regulatory application, previously filed with the Energy Resources Conservation Board (ERCB) and Alberta Environment.
Front-end engineering has commenced and is progressing towards a first quarter, 2012 completion. Procurement of long-lead equipment has also begun with proposal requests being sent to fabricators for all major equipment. The selection of equipment manufacturers will start in the fourth quarter of 2011 with internal sanction, regulatory approval and the commencement of construction anticipated in 2012. First production at Hangingstone is targeted for 2014.
Dover West (100%)
Athabasca continued operations at its TAGD field test site at the Dover West property where it is testing bitumen recovery from the Leduc Carbonate Formation. Heating operations commenced in April, 2011 through two, 250-metre horizontal wells drilled approximately 10 metres apart vertically and placed near the base of the formation. Heater performance has exceeded expectations.
Production from the heater/producer well commenced in late October ahead of schedule. "Although it is early in the test, I am pleased that the results so far are meeting our high expectations," says Svarte. "We are very encouraged by the results and the test is an important step in our disciplined approach to demonstrate that we can deliver attractive economic returns via gentle heating technology in this world-class resource." The Company expects to continue test operations through the end of the first quarter, 2012.
Athabasca also filed a regulatory application for a two-phase 6,000 bbls/d TAGD demonstration project in October, 2011. The Company expects this test to provide sufficient confidence to proceed with full-scale commercial development of its Leduc property that contains approximately 17 billion barrels (best estimate) of bitumen-in-place (approximately 13 billion barrels of low estimate bitumen-in-place and approximately 19 billion barrels of high estimate bitumen-in-place) according to GLJ Petroleum Consultants most recent estimates of total Petroleum Initially in Place.
The Dover West project area also includes planned SAGD development for the McMurray and Wabiskaw formations and the Company intends to file a regulatory application for a 12,000 bbls/d SAGD project by end of 2011. The design and execution strategy for this project will be very similar to that of Hangingstone and first steam could occur as early as 2015. Several other larger SAGD phases will follow thereafter.
MacKay River Joint Venture
The joint venture operator, Dover Operating Corp. (Dover OPCO), owned by Cretaceous Oilsands Holdings Limited (60% interest) and Athabasca (40% interest), received internal approval for the field development plan for its MacKay River commercial oil sands project, with a production target of 150,000 bbls/d at peak production (gross). With this approval, Dover OPCO started moving forward with project execution plans, including reserving a drilling rig, beginning detailed engineering and bidding on long-lead equipment. It also began evaluating a variety of bitumen and diluent transportation options. Government and regulatory approval is anticipated in December, 2011 or January, 2012.
Athabasca's land acquisition strategy has been to acquire large tracts of land in the oil prone parts of the prolific Deep Basin. During the third quarter, 2011 Athabasca continued to explore/appraise the Montney and Nordegg formations throughout the southern portion of its lands. The program was specifically designed to evaluate the quality and productivity of these reservoirs in each of the Company's core Light Oil properties in Kaybob, Simonette, Placid and Waskahigan to formulate a comprehensive development plan for the region.
After initially evaluating a two-well pad in Kaybob in the second quarter 2011 and achieving economic rates from both the Montney and Nordegg formations, Athabasca was confident that its first Light Oil development would occur in this area. A holding application was filed for development of its Kaybob acreage and a 65-kilometre, 12 inch pipeline with capacity in excess of 150 mmcf/d is being planned, tying the area into the Keyera Simonette gas processing facility.
The Company drilled and completed another Kaybob Montney Formation well at 14-27-63-20W5M during the third quarter, 2011 and the well is currently being tested. After 72 hours, the well is producing over 2,250 boe/d (1,150 bbls/d oil and 6.6 mmcf/d gas) at a flowing casing pressure of 737 pounds per square inch gauge (psig). It is anticipated the well will be tied into a third party gathering system and should be on production by mid-December at a restricted rate.
Athabasca currently owns more than 210 sections of prospective acreage in the Kaybob area with a drilling inventory of over 500 locations for the Montney Formation assuming four horizontal wells per section. The Company plans to continue appraisal drilling in the Nordegg Formation in the Kaybob area as follow-up to its successful well 100/13-14-063-20W5M drilled earlier this year, with one additional well planned for 2011. Athabasca also owns more than 200 sections of prime Duvernay Formation acreage within the Kaybob area and will begin exploration drilling later this year. The Company is acquiring almost 400 square kilometres of 3D seismic in the Kaybob area to optimize the choice of production well locations.
In the Simonette area, two Montney Formation wells have been drilled and completed to-date (102/02-02-63-25W5M and 04-01-64-25W5M). Based on the inflow performance, the first well (102/02-02) is anticipated to initially produce 300 to 350 boe/d total fluids (70% oil and > 37o API). The second well (04-01), located nine kilometres further north, was flow tested for approximately eight days and, based on the inflow performance, it is expected the well will initially produce up to 450 boe/d (75% oil with > 37o API). It is anticipated this well will be placed on pump, but will not be brought on-line before year-end as the Company plans to drill two more wells from this pad site. Both wells tested to date have exceeded the Company's threshold for economic development.
Athabasca has also drilled and completed a Nordegg Formation horizontal well at Simonette (100/02-02-63-25W5M). After the initial frac clean-up, the well was placed on pump and has been brought on production. The well performance will be monitored over the next couple of months. Final results will be evaluated once further rates have been obtained, but initial production results suggest the well will not meet the Company's economic threshold of investment. While the Company remains optimistic about the potential of the Nordegg Formation at Simonette, in the near term Athabasca will pursue the Nordegg Formation in the Kaybob and Placid areas where results have been encouraging to date.
The Company currently holds 38 gross (> 31 net) sections of prospective Montney and Nordegg formation acreage in the Simonette area with a drilling inventory for the Montney Formation of over 100 wells assuming four horizontal wells per section. In addition, Athabasca owns 25 sections of prime Duvernay Formation acres in the area. The Company is acquiring 110 square kilometres of 3D seismic to optimize the choice of production well locations for these formations.
In the Placid area, Athabasca recently drilled and completed its first Montney Formation well (102/13-33-60-23W5M). The well was stabilizing at a production rate greater than 700 boe/d (> 50% condensate) at a flowing casing pressure of 520 psig at the end of a four-day flow test. It will be tied into a third party gathering system and should be on production by early December. A second well (100/13-33-60-23W5M) targeting the Nordegg Formation was drilled and completed from the same pad. After the initial frac clean-up, the results are encouraging and the well will be placed on pump and will be brought on production at restricted rates to evaluate the performance.
The Company holds 70 sections of Montney and Nordegg formation rights in the area, in addition to the 25 sections of prime acreage in the Duvernay Formation. With continued success in the Montney Formation, Athabasca's current land holdings could support up to 280 drilling locations for the Montney, assuming four horizontal wells per section. The Company is currently drilling a vertical well where a core will be cut in the Duvernay Formation.
Athabasca has just started the exploration/appraisal program of the Waskahigan area which is immediately offsetting other successful third-party tests in the Montney Formation. A Montney well was drilled and the well is currently being prepared for completion. The area is considered promising for commercial development, based on near-by wells and the Company has decided to acquire 3D seismic to be utilized in the future development of the area.
Land acquisition, exploration and budgeting
"The Company's land acquisition strategy of seeking oil prone acreage in selected promising locations seems to have been a success," says William Gallacher, chairman of the board. "The team has done a terrific job in identifying and capturing these lands and has also demonstrated that all areas they have tested so far are well suited for commercial low gas-oil-ratio (GOR) light oil production.
"I am looking forward to following the results as Athabasca starts developing the Kaybob, Simonette and Placid areas and continues to explore other parts of its land base," Gallacher adds.
Based on the encouraging results of this initial drilling program, Athabasca continued its strategic growth by acquiring additional land, most of which the Company considers highly prospective Montney and Duvernay formation acreage contiguous with Athabasca's existing position in the Kaybob area. The Company now holds more than 1.3 million acres of Deep Basin Petroleum and Natural Gas (P&NG) rights, including 170,000 acres of prospective Duvernay Formation acreage with more than 20 metres of net pay thickness.
Athabasca has also been successful in acquiring a large amount of land in a new area of interest outside the Deep Basin/Peace River Arch and now holds 400,000 acres of land in this new emerging light oil resource play where it expects to start exploration in 2012.
The Company has approved a $73.0 million budget increase for the remainder of 2011 and will be increasing its operating rig count to six rigs. With this increase, Athabasca plans to accelerate development in the Kaybob and Simonette areas and initiate exploration drilling in the northernmost part of the Deep Basin land base. Athabasca will also drill and core three vertical Duvernay Formation wells throughout its prospective southern Deep Basin acreage. One of these wells will also continue with a horizontal Duvernay Formation completion - the results of which are expected by the end of January, 2012.
With its latest increase, Athabasca has revised its Light Oil 2011 budget to $170.8 million, excluding land, which includes $125.5 million for operations and $18.5 million for the procurement of pipe and processing equipment for facilities to be constructed in 2012. The Company expects the 2011 program to reach 21 wells, with some drilling and completion operations extending into 2012. The Company expects to have the necessary infrastructure to control and accommodate its planned production growth at Kaybob and Simonette on-stream by early third quarter, 2012.
At September 30, 2011, Athabasca had working capital of $1.34 billion (net), consisting mostly of cash, cash equivalents and short-term investments.
Athabasca is a dynamic company focused on the development of oil resource plays including Athabasca bitumen and light oil and liquids-rich gas in Alberta, Canada. It was incorporated in 2006 with a goal to use the latest technology to produce crude oil and bitumen in a sound and safe manner. It has excellent assets, talented people and is well financed. It is traded on the TSX under the symbol ATH.
Conference Call and Webcast Today November 10, 2011
7:30 am Mountain Time (9:30 am Eastern Time)
Athabasca Oil Sands Corp. will host a conference call and webcast today, November 10, 2011 at 7:30 a.m. MT (9:30 a.m. ET). To participate, please dial 1-888-231-8191 (toll-free in North America) or 1-647-427-7450 approximately 15 minutes prior to the conference call.
An archived recording of the call will be available from approximately 2:00 p.m. MT on November 10 until midnight on November 23, 2011 by dialing 1-855-859-2056 (toll-free in North America) or 1-416-849-0833 and entering conference password 24011317.
A live audio webcast of the conference call will also be available via Athabasca's website, www.aosc.com, or via the following URL: http://event.on24.com/r.htm?e=374458&s=1&k=965862650B1A38C2DF233900E0504D45
This News Release contains forward-looking information that involves various risks, uncertainties and other factors. All statements other than statements of historical fact are forward-looking statements. The use of any of the words "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", "predict", "pursue" and "potential" and similar expressions are intended to identify forward-looking statements. The forward-looking information is not historical fact, but rather is based on AOSC's current plans, objectives, goals, strategies, estimates, assumptions and projections about AOSC's industry, business and future financial results. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this News Release should not be unduly relied upon. These statements speak only as of the date of this News Release. In particular, this News Release may contain forward-looking statements pertaining to the following: AOSC's capital expenditure programs; AOSC's drilling plans; AOSC's plans for, and results of, exploration and development activities; AOSC's estimated future commitments; business plans; AOSC's plans with respect to the Corporation's oil sands and light oil assets; and the timing for receipt of regulatory approvals. With respect to forward-looking statements and forward-looking information contained in this News Release, assumptions have been made regarding, among other things: future well production rates, well drainage areas, success rates of future well drilling ; AOSC's ability to obtain qualified staff and equipment in a timely and cost-efficient manner; the regulatory framework governing royalties, taxes and environmental matters; the applicability of technologies for the recovery and production of AOSC's reserves and resources; future capital expenditures to be made by AOSC; future sources of funding for AOSC's capital programs; geological and engineering estimates in respect of AOSC's reserves and resources; the geography of the areas in which AOSC is conducting exploration and development activities; and AOSC's ability to obtain financing on acceptable terms. Actual results could differ materially from those anticipated in these forward-looking statements as a result of the risk factors set forth above and in the Company's Annual Information Form dated March 28, 2011, which is available on the SEDAR website at www.sedar.com ("AIF"), including: fluctuations in market prices for crude oil, natural gas and bitumen blend; general economic, market and business conditions; variations in foreign exchange and interest rates; factors affecting potential profitability; uncertainties inherent in estimating quantities of reserves and resources; AOSC's status and stage of development; uncertainties inherent in Steam Assisted Gravity Drainage ("SAGD"), Cyclic Steam Stimulation ("CSS"), Thermal Assisted Gravity Drainage ("TAGD") and other bitumen recovery processes; the potential impact of the exercise of the Put/Call Options (as defined in the AIF) on AOSC; failure to meet development schedules and potential cost overruns; increases in operating costs can make projects uneconomic; the effect of diluent and natural gas supply constraints and increases in the costs thereof; gas over bitumen issues affecting operational results; environmental risks and hazards and the cost of compliance with environmental regulations, including greenhouse gas regulations and potential Canadian and U.S. climate change legislation; failure to obtain or retain key personnel; the substantial capital requirements of AOSC's projects; the need to obtain regulatory approvals and maintain compliance with regulatory requirements; extent of, and cost of compliance with, government laws and regulations and the effect of changes in such laws and regulations from time to time; changes to royalty regimes; political risks; failure to accurately estimate abandonment and reclamation costs; risks inherent in AOSC's operations, including those related to exploration, development and production of oil sands, crude oil and natural gas reserves and resources, including the production of oil sands reserves and resources using SAGD, CSS, TAGD or other in-situ technologies and the production of crude oil and natural gas using multistage fracture and other stimulation technologies; the potential for management estimates and assumptions to be inaccurate; long term reliance on third parties; reliance on third party infrastructure for project facilities; failure by counterparties to make payments or perform their operational or other obligations to AOSC in compliance with the terms of contractual arrangements between AOSC and such counterparties and the possible consequences thereof; the potential lack of available drilling equipment and limitations on access to AOSC's assets; aboriginal claims; seasonality; hedging risks; risks associated with establishing and maintaining systems of internal controls; insurance risks; claims made in respect of AOSC's operations, properties or assets; competition for, among other things, capital, the acquisition of reserves and resources, export pipeline capacity and skilled personnel; the failure of AOSC or the holder of certain licenses or leases to meet specific requirements of such licenses or leases; risks arising from future acquisition activities;; volatility in the market price of the common shares. In addition, information and statements relating to "reserves" and "resources" are deemed to be forward-looking information and statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves and resources described exist in the quantities predicted or estimated, and that the reserves and resources described can be profitably produced in the future. The assumptions relating to AOSC��s reserves and resources are contained in the reports of GLJ Petroleum Consultants Ltd. dated effective December 31, 2010 and DeGolyer and MacNaughton Canada Limited dated effective December 31, 2010. The risks and uncertainties referred to above are described in more detail in AOSC's AIF which is available on the SEDAR website at www.sedar.com. See also AOSC's financial statements and Management's Discussion and Analysis for the year ended December 31, 2010 and for the current interim financial period, which are also available on SEDAR. Readers are cautioned that the foregoing list of risk factors should not be construed as exhaustive. The forward-looking statements included in this News Release are expressly qualified by this cautionary statement. AOSC does not undertake any obligation to publicly update or revise any forward-looking statements except as required by applicable securities laws.
"BOEs" may be misleading, particularly if used in isolation. A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 Mcf: 1 bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
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