South­ern Al­berta sim­ply fit for IPC

Swedish com­pany of­fers in­sight into its think­ing be­hind a pur­chase of 900K acres of oil and gas leases from Cen­ovus

Medicine Hat News - - FRONT PAGE - COLLIN GAL­LANT

A re-en­try to the Cana­dian oil patch was not as­sured, says the head of Swiss-based In­ter­na­tional Petroleum Com­pany, which this week bought the Suffield drilling range for C$512 mil­lion.

The firm, man­dated to man­age and grow pe­riph­eral as­sets of global pro­ducer Lundin Petroleum, is ma­jor­ity con­trolled by SwedishCana­dian fam­ily in­vestors.

It was cre­ated last spring and listed on the Toronto Stock Ex­change, where shares in the Lundin fam­ily’s min­ing and other var­ied in­ter­ests are traded.

CEO Mike Ni­chol­son told the News Thurs­day via tele­phone from Geneva that his only man­date was to find oil­fields around the world that were con­sid­ered un­der-cap­i­tal­ized since the 2015 oil price col­lapse.

The tar­get with the big­gest up­side, from his per­spec­tive, just hap­pened to be in south­east Al­berta.

“We had a very broad in­ter­na­tional arena from our board,” said Ni­chol­son, 46, a na­tive of Scot­land, who pre­vi­ously worked as an econ­o­mist for CIBC and Marathon Oil in Lon­don be­fore join­ing Lundin in 2008.

“We spent a lot of time look­ing at more than 15 (in­ter­na­tional) op­por­tu­ni­ties. The Suffield prop­erty was one from a qual­ity per­spec­tive that had the best first­strike op­por­tu­nity we saw.”

The pur­chase of nearly 900,000 acres of oil and gas leases was an­nounced Mon­day. It gives ma­jor longterm base op­er­a­tor Cen­ovus cash to fund its re­cent oil­sands ex­pan­sion.

It triples IPC’s world pro­duc­tion and dou­bles re­serves, and will be paid off via op­er­a­tional prof­its on sched­ule de­pen­dent on world petroleum prices.

The news is some re­lief to the lo­cal oil­patch, which hasn’t seen much in­vest­ment on the base or drilling since global oil prices fell sharply.

Ni­chol­son said the com­bi­na­tion of lit­tle re­cent ex­plo­ration or ex­pan­sion and a well-main­tained prop­erty is the main at­trac­tion. The idea is new or re­worked con­ven­tional wells could boost the al­ready low-cost pro­duc­tion.

Canada’s sta­ble po­lit­i­cal and rel­a­tively low tax en­vi­ron­ment is an­other bonus.

Com­pany of­fi­cials met with of­fi­cials from the De­part­ment of De­fence, pro­vin­cial reg­u­la­tors and of­fi­cials ear­lier this month, and also in­spected field op­er­a­tions.

“‘Well run, well main­tained, spot­less,’ were the com­ments we got back,” said Ni­chol­son.

“There’s clearly a lot of pride and ex­pe­ri­ence run­ning that oper­a­tion. The big pos­i­tive on our side is that we don’t have peo­ple or a com­pany on site right now, and we’ll start in a good po­si­tion.

“The in­ten­tion in Canada is pretty much busi­ness as usual with per­haps more ac­tiv­ity in years ahead.”

The com­pany will main­tain the op­er­a­tional base in Red­cliff and hopes to hire over most staff and lo­cal man­agers in all op­er­a­tional areas.

A cor­po­rate of­fice will also be set up in Cal­gary but Ni­chol­son said it’s too early to put a firm num­ber on those staffing re­quire­ments.

It’s also too early to dis­cuss a cap­i­tal or ex­plo­ration bud­get, he said. A full sur­vey of cur­rent field op­er­a­tions and re­serves will take place.

The com­pany’s orig­i­nal state­ment on the sale points to po­ten­tial poly­mer flood­ing to boost re­cov­ery and new drill tar­gets for fu­ture years.

Ni­chol­son said the com­pany’s phi­los­o­phy is to main­tain re­serves with tar­geted drilling and well re­work­ings.

The prop­erty pro­duced about 6,900 bar­rels of oil per day in 2017, along with 102 mil­lion cu­bic feet of gas

He says the break-even rate is C$10 per bar­rel of world price. It is sit­ting at about US$50 this week.

Cen­ovus’s other ma­jor range in south­ern Al­berta, the much larger Pal­liser Block, west of the base, is still for sale, though news is ex­pected be­fore mid­win­ter.

Ni­chol­son said at this point his com­pany is not con­sid­er­ing bid­ding on that range, which is much larger in terms of pro­duc­tion as well as ge­og­ra­phy.

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