FIELD ACTIVITIES / Alberta Energy Company reports Fantastic Results
CALGARY, Jan. 29 /CNW/ -
- RESERVES ADDED: 1.1 TRILLION CUBIC FEET EQUIVALENT
- 360% CONVENTIONAL PRODUCTION REPLACEMENT
- EXPLORATION LAND BASE UP 43% TO 6 MILLION NET ACRES
- PRODUCTION UP 13%
ALBERTA ENERGY COMPANY LTD. today announced record reserve additions and
reduced finding and development costs for the Company's largest ever
exploration program. In reporting on 1997 operations, AEC also announced
record exploration land assembly and oil and gas production.
Western Canadian conventional reserve additions, excluding the growth in
AEC's Syncrude proven reserves, were 1.1 trillion cubic feet equivalent, or
28% of AEC's entire conventional reserves base, all achieved through the
drillbit. Of that total, the Company recorded 880 billion cubic feet
equivalent on a proven-only basis. Two independent consultants, Gilbert
Laustsen Jung Associates Ltd. and McDaniel and Associates Consultants Ltd.
evaluated the reserves.
''Our exploration success is clear evidence of AEC's transition to a high
performance, growing exploration and production company. This represents a
conventional production replacement of 360%, and our 1997 additions alone
equal the total reserves of many intermediate oil and gas companies,'' said
Gwyn Morgan, AEC President and Chief Executive Officer.
''To be successful on a sustained basis, companies must demonstrate an
ability to grow through grassroots exploration. After the successful
integration of Conwest Exploration in 1996, we stayed away from the overheated
acquisition market in 1997 and provided our exploration and production teams
with the support and the capital to demonstrate their capabilities,'' said Mr.
Morgan. He added that 77% of the 1997 reserve additions were natural gas.
Finding and Development Costs Reduced
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Finding and development costs dropped more than 10% despite a substantial
increase in new exploration land and industry-wide supply and service cost
increases.
On a proven and probable basis, AEC's 1997 Western Canadian finding and
development costs were $5.80 per barrel of oil equivalent (BOE), while on an
established (proven and half-probable) basis, the costs were $6.60. Costs on
a proven only reserve basis were $7.60 per BOE. AEC invested $178 million, or
27% of finding and development costs, in building its land base to 6 million
net acres. The Company reported ongoing finding and development costs, net of
land purchases, of $5.55 per BOE, on a proven only basis.
''These competitive finding and development costs were achieved in a year
when our exploration teams were among the most active land buyers in Canada,
adding 1.8 million net acres. This positions AEC's exploration program for
further success in 1998 and beyond,'' said Mr. Morgan.
The Company's 477-well drilling program had an overall success rate of
89%, resulting in 242 gas and 147 oil wells, with an average working interest
of 82%. AEC also disposed of non-core properties containing reserves of 8
million barrels of liquids, and 54 billion cubic feet of gas into the hot
asset disposition market, for proceeds of $91 million.
Production Records
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Gas production averaged 588 million cubic feet per day for 1997, up 16%
with 575 million cubic feet per day being sold and the balance delivered to
storage at the Company's AECO C Hub and Market Centre. Gas storage inventory
at year-end 1997 was 18 billion cubic feet, up 45% over 1996 levels. Liquids
sales were up 11% to 58,938 barrels per day.
Reserves Further Strengthen Asset Base
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AEC's year-end 1997 conventional proven and probable reserves include 3.7
trillion cubic feet of gas, with a Reserve Life Index of 17 years; and 117
million barrels of oil and NGLs, with a Reserve Life Index of 11 years.
These figures exclude AEC's 381 million barrels of proven light oil
reserves at Syncrude, up 42% due to the recently announced expansion plans
that will double Syncrude production by the year 2007.
Total proven and probable liquids reserves at year-end 1997 were 845
million barrels, with more than 90% being light oil and NGLs.
''These reserve and exploratory land additions represent a substantial
increase in AEC's asset base, and provide a strengthened platform for future
production growth,'' said Mr. Morgan.
Increased Efficiency
--------------------
AEC again reported in as one of the lowest cost operators in the
industry. General and administrative costs for conventional production
decreased 33% to $0.55 per barrel of oil equivalent, while cash operating
costs increased slightly to $4.60 per barrel of oil equivalent. The Company
anticipates further cost reductions in 1998.
1998 --- Focus on Gas; Growth in Production, Assets
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Mr. Morgan forecast that AEC's 1998 gas sales will increase 22% to 700
million cubic feet per day, while total 1998 liquids will increase 7% to
63,000 barrels per day.
''Almost 90% of our 1998 production will be natural gas and light
liquids. AEC's strategy is to have the strongest possible gas reserves,
production capacity, exploration land and gas storage position as the
transition to a continental gas market occurs later this year,'' said Mr.
Morgan. He said 46% of the Company's $800 million capital budget is earmarked
for natural gas.
AEC will also invest 22% of its capital to grow domestic light oil and
NGLs production and reserves, and 9% in heavy oil. About 10% will be invested
in building AEC's international exploration efforts and 13% in the
Transportation, Storage and Processing Business Units. The Company's TSP
business is a source of cash flow not affected by fluctuating commodity
prices. TSP's 1998 operating cash flow is forecast to reach $110 million.
''The 1998 capital budget of $800 million is about $100 million less than
originally planned, due mainly to heavy oil prices. Approximately 6,000
barrels per day of new production has been deferred until prices improve,
leaving 1998 heavy oil production at 1997 levels. AEC's heavy oil production
is resilient to price reductions due to operating costs of under $4.00 per
barrel,'' said Mr. Morgan.
AEC's long-term growth potential for heavy oil is outstanding due to
AEC's assets at Suffield, Pelican Lake, and Primrose. The SAGD pilot project
at Primrose is proceeding well. The project will have three well-pairs on
test during 1998. The Company reported very good production results on the
first well-pair and the identification of enough resource to support several
commercial projects with total production potential exceeding 100,000 barrels
per day. Positive results were also achieved at Pelican Lake. A partial
development program is underway with full development awaiting stronger
prices. These resources will be developed when the time is right for heavy
oil markets.
''We achieved success in 1997 by every financial and operational measure,
except share price. We believe our 1997 performance will help investors
recognize the degree to which AEC offers growth, value and upside potential.
This commodity pricing environment also presents opportunities to companies
with strong financial resources. In challenging times, relative strengths
become much more evident. AEC's approach is to build growth upon a foundation
of strong value,'' said Mr. Morgan.
Audited financial results for 1997 are expected to be available in
mid-February. No material change is expected to the operating results
reported today.
Alberta Energy Company Ltd., one of Canada's largest oil and gas
exploration and production companies, has a current stock market value
exceeding C$3 billion. Common Shares trade on the Toronto and Montreal stock
exchanges (AEC) and the New York Stock Exchange (AOG).
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ADVISORY
Certain information regarding the Company set forth in this document and
attached graphs, including management's assessment of the Company's
future plans and operations, may constitute forward-looking statements
under applicable securities law and necessarily involve risks associated
with oil and gas exploration, production, marketing, and transportation
such as loss of market, volatility of prices, currency fluctuations,
imprecision of reserves estimates, environmental risks, competition from
other producers and ability to access sufficient capital from internal
and external resources; as a consequence, actual results may differ
materially from those anticipated in the forward-looking statements.
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