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

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.