Source: Cenovus Energy
An external evaluation of Cenovus Energy Inc.’s (NYSE: CVE) oilsands assets by an independent qualified reserves evaluator, McDaniel & Associates Consultants Ltd., has identified “best estimate total bitumen initially-in-place” (BIIP) on Cenovus lands of 137 billion barrels (Bbbls). This amount includes the bitumen production, reserves and economic contingent resources previously reported as well as an estimate of Cenovus’s share of all other bitumen on the company’s lands.
Of that total, 56 Bbbls of bitumen is considered to be “discovered BIIP”. To qualify as discovered BIIP, the evaluator typically requires at least one well drilled per section of land. The BIIP numbers reported by Cenovus are the evaluator’s “best estimate”, which provides the most reasonable assessment of the bitumen resource.
Cenovus’s new ten year business plan outlines how the company expects to reach bitumen production of 300,000 barrels per day (bbls/d) net to Cenovus by the end of 2019, while maintaining capital discipline. That’s a five-fold production increase from current bitumen production levels. Cenovus anticipates achieving that growth at long term estimated average finding and development costs of approximately $8.00 per barrel. The production increase is expected to come from continued expansions at the Foster Creek and Christina Lake operations as well as new projects at Narrows Lake and Grand Rapids. The business plan also includes cash flow growth that will provide Cenovus with the flexibility to consider increased dividends after 2011 and potential share buybacks in future years.
Production from the next phases at Foster Creek (phase F) and Christina Lake (phase E) is expected to begin a year earlier than initially planned, pending timely regulatory and partner approvals. In addition, further assessment of the potential of these two assets has resulted in Cenovus increasing the expected gross production capacity to about 235,000 bbls/d at Foster Creek and about 258,000 bbls/d at Christina Lake by 2019, a combined 15% increase over the previous capacity estimate.
Narrows Lake, located near Christina Lake, is the next project expected to be developed. A regulatory application for the initial phases of that project is expected to be filed in the coming weeks and includes the possibility to apply solvent aided process (SAP) along with steam assisted gravity drainage (SAGD) production.
Grand Rapids is a new project in the Greater Pelican Region. The company plans to test a SAGD well pair at Grand Rapids this fall and possibly submit a regulatory application by the end of 2011. Cenovus’s Greater Pelican Region also includes the current Pelican Lake polymer flood operation in the Wabiskaw formation and a potential future project in the Grosmont carbonate formation.
Evaluation work is underway for several other projects that are expected to start producing after 2019. Additional stratigraphic wells are being drilled to support the current application at the Telephone Lake project in the Borealis Region. Cenovus also plans to gather seismic data and drill stratigraphic wells on seven other promising oilsands assets in the coming years. Cenovus has decided to make public, during its 2010 investor day presentations, ownership information that was previously kept confidential about some of these lands. The goal is to have an inventory of regulator-approved commercial projects with a total capacity of 400,000 – 500,000 bbls/d net to Cenovus by the end of 2015. These projects would be in various stages of development and production.
Foster Creek – Industry’s largest SAGD operation, located on the Cold Lake Air Weapons Range in northeast Alberta. Jointly owned with ConocoPhillips. Currently producing about 51,000 bbls/d net to Cenovus.
Christina Lake – Located about 120 kilometres south of Fort McMurray. Jointly owned with ConocoPhillips. Currently producing about 7,500 bbls/d net to Cenovus.
Narrows Lake – Located near Christina Lake in northeastern Alberta but would be developed as a separate project. Regulatory application is expected to include potential for SAP to be used along with SAGD.
Grand Rapids – Located at Cenovus’s current Pelican Lake operation in the Greater Pelican Region about 300 kilometres north of Edmonton. A SAGD well pilot is planned for the fall of 2010.
Borealis – Located about 90 kilometres northeast of Fort McMurray. Includes Telephone Lake, Steepbank and East McMurray. Nearly 80% of the Borealis lands have no wells drilled.