Unconventional Oil

[Tackler]

More selling out ...

Globe says Husky foraging for more refining capacity

2007-07-16 03:56 MT - In the News

The Globe and Mail reports in its Monday, July 16, edition that Husky Energy says it is on the lookout to acquire more North American refining capacity to process future output from its oil sands projects. The Globe's Norval Scott writes Husky still needs more refining capacity despite its acquisition of Valero Energy's 165,000-barrel-a-day refinery in Lima, Ohio, for $1.9-billion (U.S.) this year. While the company has evaluated many options, including purchasing another refinery or building a new greenfield facility, those appear expensive and Husky may seek to swap its oil sands equity for an interest in a United States refinery, as EnCana and ConocoPhillips did last year, said Husky vice-president Gary Mihaichuk. "Quite frankly, there aren't a lot of refineries for sale, so if you try and buy one the price is really high, considering how well the refining industry is doing right now," he said. "A practical solution may be a joint venture with someone, along the lines of the EnCana-ConocoPhillips deal." Husky expects to extract 500,000 barrels of crude a day from its oil sands operations alone by 2020, with the 200,000-barrel-a-day Sunrise development expected on stream in 2010.

[johnlw]

Nice
Just been watching the sand box out of the corner of my eye this week
Been preoccupied elsewhere.

[Tackler]

PBG break $30 today?...

[johnlw]

Oilsands break-even hits $54 per barrel
Project costs up 16 per cent in one year

Ashok Dutta
Calgary Herald

Wednesday, July 04, 2007

The break-even oil price for Alberta's oilsands mining projects has risen an average 16 per cent in the past 12 months -- driven primarily by the high cost of manpower and materials -- a U.S. investment bank said in a report on Tuesday.

"We now think the economic WTI (West Texas Intermediate) break-even for mining projects is about $54 per barrel, up from our previous estimate of $45 last year," said Arlington-based Friedman, Billings, Ramsey Group Inc. "For SAGD (steam-assisted gravity drainage) production, the break-even economics remain better, closer to WTI $30, slightly higher than our previous estimate of $27.50."

Break-even price is a combination of capital costs, along with the cost of servicing the capital.

WTI prices climbed to a new 10-month high of more than $71 per barrel on Tuesday, extending recent gains into a fifth straight session.

"The five-day run-up was fuelled by a combination of technical and fundamental factors, including terror plots in the U.K., falling U.S. petroleum stocks and violence in Nigeria," said the New York Mercantile Exchange daily bulletin. "NYMEX August crude traded 30 cents higher on Tuesday at $71.30."

The past several months have seen some of the province's best known oilsands operators dealing with rising costs. The latest was on June 28, when Petro-Canada unveiled an estimated $14-billion investment for the first phase of its Fort Hills project to include a 160,000-barrel-per-day mining facility.

The planned expenditure was calculated on a base oil price of $45 per barrel.

The FBR report was silent on cost escalations for upgraders, but senior analyst Mark Friesen of FirstEnergy Capital said it constitutes about 45 per cent of an integrated oilsands venture.

"They (upgraders) are long-lead projects and require a great deal of front-end loading and engineering work," said oil and gas equity analyst Justin Bouchard of Raymond James. "Some estimates were done three years ago, but things have changed lots since."

Maroof Shah, managing director of Calgary-based Peggy Enterprises Ltd., felt that multibillion dollar hydrocarbon projects in the Middle East and Far East are prime reasons for prices being driven hard.

"Saudi Arabia is further expanding its supremacy as an oil superpower and also emerging as a leading petrochemical producer," Shah said.

"In China, labour costs and productivity are not issues, but they are importing in large numbers speciality process equipment," he said.

Shah was until recently senior adviser to Riyadh-based pertrochemical giant Saudi Basic Industries Corp. and helped in setting up procedures for best practices.

Rising capital costs may eventually lead to further mergers and acquisitions by 2008, the FBR report pointed out.

"The high level of heavy oil-oilsands activity and decreasing natural gas activity reflects 'fuel switching' at the margin. As more oilsands projects get developed, this will cause a structural uplift in Canadian natural gas prices relative to crude oil, which should bring the long-term oil-gas ratio back from over 10 currently, to under six over the next two to three years."

The report added: "Production growth from the oilsands will not be slowed down by economics alone, as much as from labour shortages and productivity issues, project development delays and optimistic timelines for new take away pipeline capacity."

"Oilsands M&A should increase by 2008 and should attract increased activity once current royalty and emission issues are resolved, especially given the reducing economic interest being offered to large IOCs (international oil companies) elsewhere in Venezuela, Russia, higher political risks in Nigeria and Angola and decreasing reserve lives of IOCs and their need to re-leverage balance sheets to obtain optimal equity returns," it said.

On M&A, Robert Plexman, managing director of equity at Toronto-based CIBC World Markets, felt that the Alberta oilsands patch will witness a migration from asset-rich, but financially challenged firms to large oil and gas companies.

"We have recently seen some of that in the Statoil-North American Oil Sands Corp. play," he said.

"The process will continue probably beyond 2008, as it takes about seven years from the concept stage, to go though the regulatory approvals for a take over, construction of facilities and finally produce first oil."

Bouchard felt that an underlying tone at present is for junior oil companies to "hold their breath" and wait for the opportune moment.

"Some IOCs, like BP, ENI and Repsol are notably absent. They are floating around and looking for the right opportunity. A look at the latest oilsands map indicates several companies with small pieces of land. We will see a consolidation," he added.

[kraftdinner]

Post says Petrocan figures $33.4-billion ought to do it


2007-06-29 06:41 MT - In the News

Also In the News (C-TCK) Teck Cominco Ltd
Also In the News (C-UTS) UTS Energy Corp


The Financial Post reports in its Friday edition that as oil prices sailed past a nine-month high of $70 (U.S.) a barrel Thursday, Petro-Canada and its partners pushed forward with Canada's largest oil sands investment yet -- a $33.4-billion oil sands mining venture. The Post's Claudia Cattaneo and John Harding write the group says it said can generate a reasonable return even with $45 (U.S.) oil. The move casts aside uncertainty about the future of the once-beleaguered project, known as Fort Hills. "The No. 1 message we get is that these companies are willing to go ahead with high levels of oilsands spending because they are very bullish about oil prices," said Mike Tims, chairman of Peters & Co. "It's also reflective of how tough it is for oil and gas companies globally to add oil supply." Fort Hills, a partnership between operator Petro-Canada, UTS Energy and Teck Cominco, is proceeding as a massive commitment that will yield 280,000 barrels of synthetic crude oil a day by 2014, even after its backers stepped back six months ago to evaluate its economics. Ron Brenneman, Petrocan's chief executive officer, told analysts in a conference call, "We fully recognize the execution risk with this venture."

[johnlw]

Statoil gets the OK for oilsands bid
Norwegian firm to acquire NAOSC

Ashok Dutta
Calgary Herald

Wednesday, June 27, 2007

Norway's Statoil announced Tuesday it had crossed the final hurdle to enter Alberta's oilsands sector, with the receipt of final approval under the Investment Canada Act of the federal Department of Industry to acquire Calgary-based North American Oil Sands Corp.

In late April, Statoil had tabled a $2.2-billion offer to buy out NAOSC.

"It is an all-cash transaction and money is being transferred today," Statoil public affairs manager Kai Nielsen said Tuesday, while giving out details for the road map forward.

Under the deal, Statoil gains access to 1,110 square kilometres of oilsands leases in Athabasca with huge recoverable resources. First bitumen production is targeted in late 2009 from the 10,000-barrel-per-day Leismer demonstration project. At its full-blown size, the integrated project will have a capacity to produce 200,000 bpd of synthetic crude through the construction of an upgrader at Fort Saskatchewan.

"Site preparation has already started at Leismer," Nielsen said.

"In 2011, we will initiate engineering works for the main production units. This will include facilities for drilling and steam injection. The aim will be to reach a production capacity of 100,000 bpd by 2015."

The Norwegian firm will use the steam-assisted gravity drainage technology to extract the bitumen, rather than an open mine process.

Although a final decision has not been made on the licensor technology for the proposed upgrader, Nielsen said the facility will be built in two phases.

"Each will be of capacity 100,000 bpd and we will complete the process by late 2020," he said. "At this moment, options are being reserved for the sale of bitumen or heavy oil in the spot market."

Pauline Dingwall, North America and Alaska analyst with Edinburgh-based Wood Mackenzie, said the Statoil-NAOSC deal is part of ongoing efforts by large international oil companies to buy into Alberta's oilsands sector.

"The high cost of development is amply reflected in these deals and is a prime driver for acquisitions," she said.

Statoil Canada Ltd., a holding company of Statoil, will own shares and operate the oilsands project.

"At least until early 2008, it will continue to be called North American Oil Sands Corp. After our merger with Norsk Hydro, there may be a change in the name," Nielsen said.

On Oct.1, fellow Norwegian companies Statoil and Norsk Hydro are due to merge under a new name, StatoilHydro.

Shares of Statoil on the New York Stock Exchange closed at $29.03 on Tuesday, down $1.33.

[e-mail]
© The Calgary Herald 2007

[johnlw]

Hmmmmmm, I can just imagine it.

D'Arcy Ranch
Ceaser's
The Maid

[kraftdinner]

Didn't have a chance to make it, had our own little show with a few visiting companies and I was busy with a tool vendor.

[johnlw]

kd
How was the oil show?

[kraftdinner]

Inter Pipeline buys $760-million Corridor to oil sands


2007-06-15 11:29 MT - News Release

Mr. Jeremy Roberge reports

INTER PIPELINE FUND COMPLETES ACQUISITION OF CORRIDOR OIL SANDS PIPELINE SYSTEM

Inter Pipeline Fund has completed the acquisition of Corridor Pipeline System from an affiliate of Kinder Morgan Inc. Corridor Pipeline is the sole transporter of diluted bitumen produced by the Athabasca oil sands project, a major Alberta-based oil sands mining and upgrading project. The transaction involved the purchase of all outstanding share capital of Terasen Pipelines (Corridor) Inc. for consideration of $760-million before closing adjustments. Financing for the acquisition was provided from Inter Pipeline's existing bank credit facilities and the assumption of approximately $460-million of existing debt held within Terasen Pipelines (Corridor) Inc.

Inter Pipeline has also assumed responsibility for the completion of an estimated $1.8-billion expansion of Corridor Pipeline. This project, currently in construction, will increase diluted bitumen capacity on the Corridor Pipeline system from 300,000 barrels per day to approximately 465,000 barrels per day by 2010. At closing, Inter Pipeline assumed approximately $300-million in additional debt associated with construction in progress.

"Oil sands transportation is an exciting area of growth for Inter Pipeline," stated David Fesyk, president and chief executive officer of Inter Pipeline Fund. "Corridor is a world-scale pipeline system with excellent development potential. This acquisition solidifies Inter Pipeline's position as the dominant oil sands-gathering business in Canada."

Transaction highlights:


Provides transportation service to the Athabasca oil sands project's leases, which are estimated to contain over 10 billion barrels of minable bitumen in place;
Generates highly stable and predictable cash flow through a 25-year ship-or-pay contract with creditworthy shippers;
Strong organic development potential including the current Corridor Pipeline expansion project and future expansion opportunities;
Provides approximately 25 per cent accretion to cash available for distribution to Inter Pipeline's unitholders following completion of the current expansion project;
Materially mitigates the impact of proposed new tax legislation on Inter Pipeline's cash available for distribution to unitholders, as outlined in the federal government's tax fairness plan.

We seek Safe Harbor.

[Arctec]

Total talk lifting oil sands target


Friday, June 15, 2007

Investors are snapping up shares of Western Oil Sands Inc. Friday after published reports in France linked Total SA, Europe’s No. 3 oil company, as gearing up for a possible run at the Syncrude oil sands partner.
The stock is trading at $37.51 on the TSX, up $2.01 or 5.6 per cent, giving the company a market value of $6-billion.
The jump isn’t all that surprising because Western Oil put itself on the block last February, when the stock was hanging around $30.

[johnlw]

You can read between the lines in these releases in a manner unlike anyone else.

[Tackler]

Ya top of the list they would legalize hookers for the workers, bring in some girls from Amsterdam, that would boost productivity.

[johnlw]

Sounds like these guys have something to offer:

Dutch trade mission offers to clean up oilsands
'We are very organized and very clean'

Gordon Jaremko
The Edmonton Journal

Tuesday, June 12, 2007

Dutch trade mission visits Edmonton, trying to break into oilsands. Shown with the Dutch flag are, from left: Marco Van der Jagt, Arthur Magnee, Mick McAward and Piet Derikx.
CREDIT: Bruce Edwards, The Journal
Dutch trade mission visits Edmonton, trying to break into oilsands. Shown with the Dutch flag are, from left: Marco Van der Jagt, Arthur Magnee, Mick McAward and Piet Derikx.

EDMONTON - A Dutch treat on offer to the oilsands by a Netherlands trade mission this week promises to make industry tidy, efficient and safe.

"We are very organized and very clean," Dovianus B.V. general manager Marco van der Jagt said in an interview Monday as the 22-company group began visits to Edmonton, Fort McMurray and Calgary.

"For everything there is a procedure. Typically in Holland, if there is an issue, we set up a commission to find a solution," van der Jagt said in describing the Dutch industrial style.

The Netherlands places more emphasis on order than Alberta and big oil areas of the United States such as Texas, he said.

"In Holland it's totally different and we're used to that," van der Jagt said.

A nation of 17 million living in 41,526 square kilometres -- less than one-third the 140,200-square-kilometre area of the oilsands -- has no remote places for sprawling industrial sites to operate out of public sight and mind, he said.

That goes a long way toward explaining why Canadian environmental concern has been mild by Dutch standards, van der Jagt said. "The country is so large that a lot of things were not issues until people became directly involved."

Now an emerging "elevated awareness" of industry effects is creating an Alberta market for services and supplies such as the production-line sampling systems his firm exports to oil, gas and chemical plants around the world, he says.

"In a technical sense, the sky is the limit," said Piet Derikx, whose Eijkelkamp Agrisearch Equipment B.V. has worked in environmental services such as soil reclamation and land restoration for nearly a century.

Products on offer to the oilsands include water use and quality monitoring programs for industry and communities, Derikx said.

Complete systems keep track of river or lake levels, monitor plant emissions and generate detailed records, Derikx said.

"We are interested in the oilsands because of the industry's large scale and the impact it can have on the environment."

He hopes to establish long-term service relationships in Alberta, he says.

The number of industrial injuries in the province also point to opportunities for Dutch expertise, said Arthur Magnee of Arger, an international firm specializing in safety services for the oil, gas and petrochemical industries.

"If you don't have a plan, you get dead people," Magnee said.

With about five times the population of Alberta and an array of hazardous industries from offshore oil to seaports and heavy trucking, Holland had only 27 on-the-job fatalities last year. But even that was considered too high and stirred new workplace safety improvements, Magnee said.

Professionals in any technical field are available from global Dutch networks, said Mick McAward of international recruiting firm Burdock Project Consultants B.V.

An oilsands developer only has to ask for a specialist, McAward promised. "If he calls me, I've solved the problem."

The hard part of finding scarce experts for Alberta industry is working through Canadian immigration red tape, he said. "It's not the quickest moving country in the world."

Putting a foreign specialist to work in Alberta takes two months. In Saudi Arabia importing an industry expert can be done in two weeks, said McAward.

Like peers on the trade mission, McAward said his firm has a toehold in Alberta, thanks to Royal Dutch Shell. Burdock has recruited foreign technical specialists for Shell's Athabasca Oil Sands Project.

The global oil giant spreads Dutch products and services around the world by hiring firms from its homeland to work overseas, said van der Jagt.

Alberta industrial connections to the Netherlands include an international blue-collar trades network, said Henk ten Wolde.

His Dutch Western Canada Connection Ltd. brings in foreign talent such as heavy equipment operators, cooks, welders and truck drivers to Alberta.

"But it's very important to know how the red tape works," he said. To obtain work permits for skilled jobs in Alberta, the Dutch have to work through Canada's embassy in Germany, said ten Wolde.

Dutch Prime Minister Jan Pieter Balkenende is scheduled to join the trade mission today for meetings in Edmonton with Mayor Stephen Mandel and Premier Ed Stelmach followed by a trip to Fort McMurray.

[johnlw]

Suncor upgrader on expensive hiatus
50 days to tie upgrader to expansion facilities

Ashok Dutta
Calgary Herald

Friday, June 08, 2007

CALGARY - Suncor Energy Inc. has started a 50-day shut-down of the second upgrader serving its Firebag oilsands project in Fort McMurray -- with production declining by an estimated 135,000 barrels per day.

"Work started on May 31 and production is targeted to resume in the third week of July," said Brad Bellows, manager of external communications at Suncor.

"The work impacts upgrader 2, which began operations in 2001. Production levels will go up and down this year, but our output averaged 270,000 bbl./d in May." The other upgrader is expected to operate at its normal production capacity of about 125,000 bbl./d.

Bellows did not put a figure on what would be the loss in revenue due to the shut-down, but Esa Ramaswamy, at the global oil markets unit of New York-based Platts said it could be "substantial." At current prices, it would mean a loss of about $10 million each day.

Ramaswamy added shutdowns in production facilities or delays in start-up of oilsands upgraders has helped increase Western Canadian synthetic crude prices. "Syncrude's third upgrader was due to resume production on Thursday, but that has been delayed until June 11. This is due to hiccups in (plant) start-up," he said. On a bottom-line cash flow basis, the projected losses in revenues will have little impact on Suncor's balance sheet.

Hugh Mosher, an analyst with Calgary-based AJM Petroleum Consultants, said that the loss in production is part of a normal oilsands operations. "It affects in the sense that there will not be revenues for that period, but in the overall scheme the impact will be minimal," he said.

Bellows said that the shutdown had been long planned and was factored in when Suncor had earlier issued its production guidelines.

At the end of May, year-to-date production averaged 246,000 bbl./d. Suncor is targeting an average oil sands production of 255,000-to-265,000 bbl./d in 2007 -- a downward revision from the original target of 260,000-to-270,000 bbl./d.

On May 30, Suncor announced plans of the shutdown to tie-in with the new expansion facilities that would raise its production capacity to a targeted 350,000 bbl./d in 2008 from current levels of about 260,000 bbl./d.

Nearly 2,000 contractors will be involved in the work, which embraces a number of facilities including the upgrader's cokers, vacuum unit, sulphur plant and cooling tower.

"We will focus on completing the tie-in work in a safe manner while minimizing impacts to the environment," said Suncor.

"Although it may result in periods of increased flaring and the potential of odours, we intend to minimize these impacts and ensure emissions levels remain within regulated limits."
© The Edmonton Journal 2007

[johnlw]

The money is no biggie kd
I/E guys at the top of the maintenance ladders are making that in the plants in civilization.

[kraftdinner]

hmmm....$44 an hour eh - $91,520/yr. hmmmm...

[johnlw]

Young guys maybe....

why go up there at our age?

[Tackler]

Whoever is gonna go there has already gone. To be honest even $50/hr and double time would not do it for me.

[johnlw]

Ho hum

Canadian Oil Sands Trust (2) (C-COS) - In the News

Globe says Cdn Oil Sands comes up empty on workers

2007-05-14 09:32 ET - In the News
Shares issued 479,114,728
COS.UN Close 2007-05-11 C$ 31.50

The Financial Post reports in its Saturday, May 12, edition that Canadian Oil Sands Trust's Syncrude Canada is asking potential employees to "Think big -- think Syncrude." The Post's Claudia Cattaneo writes that the company is also asking the new recruits to think money. In a St. John's ballroom two recruiters offer a presentation with generous-sounding benefits, and then finish with the icing on the cake: $44 per hour base pay for experienced journeymen, a 20-per-cent retention bonus for Fort McMurray, Alta., employees, shift premiums and overtime pay at $88 per hour. This is all in addition to tens of thousands of dollars in moving allowances and extras. For experienced recruits this all adds up to more than six figures in base pay. Companies from all over the world, including Total SA of France and Statoil ASA of Norway, are setting up multibillion-dollar projects to harvest Alberta's oil sands. Recruiting the manpower to build and operate them is becoming more difficult, even with the offered salaries. Despite the Syncrude pitch, only about 35 people showed up for the weekend recruitment drive. Hundreds of expectant seats are empty. Some wonder if the market is tapped out.

[johnlw]

Italian firm lands refinery pact
Herald News Services
Published: Saturday, June 02, 2007

Florence, Italy-based GE Oil & Gas has been awarded a contract for the fabrication and supply of compressors, pumps and industrial air coolers for a new heavy oil refinery to be built at Sturgeon County, northeast of Edmonton. Worth over $80 million, the order was placed by Calgary-based North West Upgrading.

The 231,000-barrel-per-day upgrader will be built in three phases, with regulatory approval due soon for the first phase of construction. The facility will be based on conventional upgrading processes, including heavy hydrocracking and hydrotreating.

Deliveries of the new GE equipment will begin in the third quarter of 2008 and will be completed during the second quarter the following year.


"We have provided equipment for a number of oilsands projects (in Alberta), but the agreement with North West is the first supplier deal under which we will provide a portfolio of products," Claudia Santiago, GE Oil & Gas' president, said.

[kraftdinner]

Southern Pacific to acquire 80% Fort McMurray interest


2007-06-01 07:32 MT - News Release

Mr. Dave Antony reports

SOUTHERN PACIFIC ADDS SIGNIFICANT ACREAGE TO ITS HOLDINGS

Southern Pacific Resource Corp. has signed a binding letter of intent, dated May 31, 2007, to acquire an 80-per-cent interest in 76 sections (38,912 acres net to Southern Pacific) of land in the Fort McMurray area of the Athabasca oil sands fairway. This area is very active with SAGD (steam-assisted gravity drainage) projects in various stages of development. This land adds to the existing 25 sections that Southern Pacific currently holds. Southern Pacific will acquire the interest in the project for total consideration of $16-million. The consideration to be paid includes a cash payment of $9.6-million and the issuance of Southern Pacific shares with a deemed value of $6.4-million.

The land is being acquired from Bounty Developments Ltd. which holds greater than 10 per cent of the issued and outstanding common shares of the corporation; in addition, Jon Clark is both an employee of Bounty Developments and a director of the corporation.

The lands have been evaluated by the corporation and based on the management evaluation; the corporation is very excited about the prospectivity of this new acquisition. There has not been an independent resource evaluation prepared on the newly acquired lands, but the corporation intends to have this completed as soon as possible. Once National Instrument 51-101-compliant reports on the prospects are completed, additional information will be released relating to the lands and the future exploration and development plans.

The corporation has plans to continue to expand its land base through future Crown land sales as well as through the continuing evaluation of other acquisition opportunities.

Following the closing of the transaction, the first stage of the project is to shoot an extensive 2-D seismic program and to offset existing oil sand pay on the land by drilling a number of vertical test wells. The objective is to delineate the size and number of oil sands resources for future SAGD development plans.

Southern Pacific recently completed its winter drilling program. The drilling, coring and logging of all wells in the 17 well program were completed on March 22, 2007. The wells covered only eight sections out of the total of 25 sections held by the corporation. The information from the winter drilling program is being evaluated by Degolyer and MacNaughton, the independent reservoir engineering firm chosen by the corporation. The results of this evaluation will be part of the updated reserve report which is being prepared by Degolyer and MacNaughton. It is anticipated that this evaluation will be completed in June.

We seek Safe Harbor.

[Tackler]

Globe says Petrobank seen poised for gains

2007-06-01 05:42 MT - In the News

The Globe and Mail reports in its Friday edition fund manager Daniel Bain is playing it very conservatively with the Thornmark Alpha Fund and one of his favourite stocks is Petrobank Energy Petrobank Energy & Resources. The Globe's Angela Barnes, writing in Best Bets, says the $6-million pooled fund, which began in December, 2005, returned 11.57 per cent in the three months to April 30 and 30.98 per cent over six months. Its one-year return was 23.01 per cent. The fund makes concentrated bets on individual stocks. Petrobank is a Calgary energy business operating through three units: conventional oil and gas exploration and production in Alberta and Saskatchewan, production contracts and exploration opportunities in Columbia, and heavy oil technology being tested at its Whitesands development in Alberta. Mr. Bain thinks Petrobank's patented THAI (toe-to-heel air injection) heavy oil sands recovery technology will leapfrog other oil sands technologies. He has a target of $30 on the shares but believes there is significant upside beyond that because of the THAI technology. The shares ended Thursday at $26.05. Over all, Mr. Bain sees the global economy growing by about 4 per cent plus this year.

[Tackler]

Petrobank Energy earns $3.73-million in Q1

2007-05-15 04:40 MT - News Release

Mr. John Wright reports

PETROBANK ANNOUNCES FIRST QUARTER RESULTS

Petrobank Energy & Resources Ltd. has released its financial results for the three months ended March 31, 2007.

Highlights of the first quarter of 2007 include:


-production increased by 26 per cent to 6,139 barrels of oil equivalent per day from 4,869 barrels of oil equivalent per day in the first quarter of 2006. Canadian business unit production increased by 17 per cent to 4,097 barrels of oil equivalent per day while production from the Latin American business unit increased by 51 per cent to 2,042 barrels of oil per day and in early May has increased to approximately 3,200 barrels of oil per day;
-capital expenditures were $72.6-million -- $31-million in Canada; $32.3-million in Latin America; and $9.3-million in the heavy oil business unit;
-funds flow from operations increased to $18.2-million, 59 per cent higher than the first quarter of 2006. On a per-diluted-share basis, funds flow from operations increased by 47 per cent to 25 cents in the first quarter of 2007 from 17 cents in the first quarter of 2006;
-recorded net income of $3.7-million, compared with $3.2-million in the same period a year earlier. On a per diluted-share basis, net income remained constant period over period at five cents per share. Continued to achieve positive results at the company's Whitesands Thai project;
-increased the estimated gross discovered resources of gross bitumen-in-place on its Whitesands oil sands leases by 63 per cent to 2.6 billion barrels and increased contingent recoverable bitumen resource by 21 per cent up to 799 million barrels;
-drilled 12 (10.5 net) successful conventional oil wells in Canada;
-achieved industry-leading results from Bakken horizontal wells;
-increased its land position on the Bakken light oil resource play by 132 per cent to 114,000 net acres;
on April 2, 2007, issued four million common shares at $21 per share for gross proceeds of $84-million;
-and on May 4, 2007, issued $250-million (U.S.) of 3-per-cent convertible notes.

Operational update

Heavy oil business unit

Resource delineation

In the first quarter of 2007, Petrobank drilled eight delineation wells on the Whitesands lands and increased the gross discovered resources of bitumen-in-place on the company's oil sands leases to 2.6 billion barrels, as estimated in a March, 2007, McDaniel & Associates Ltd. report. This represents a one-billion-barrel increase from the 1.6 billion barrels first announced in May, 2006. McDaniel Associates assigned a recoverable bitumen resource of up to 799 million barrels at March 1, 2007, which compares with 660 million barrels estimated at Dec. 31, 2006. Further drilling is expected to add additional recoverable volumes and since these reports have been based only on SAGD technology, the incorporation of the Thai process into this evaluation is also expected to materially increase future estimated recoverable bitumen resources.

Whitesands operations

Combustion operations continued on the first two well pairs during the first quarter. The preignition heating cycle (PIHC) began on the third well pair in late December, 2006, which was initially targeted for air injection by the end of the first quarter. Air injection operations on the third well pair were delayed by mechanical problems with the company's rental steam generator used in the PIHC. The repairs by the supplier took approximately six weeks to complete. The elapsed time of the PIHC for the third well, excluding the temporary steam generator downtime, should be similar to the second well pair and the company expects to be initiating air injection and in situ combustion shortly.

The company has been continuously injecting air on the first well since July 20, 2006, and on the second well since Jan. 10, 2007. During the first quarter, the first two well's unrestricted gross fluid production capability rates were demonstrated to be over 1,000 barrels per day each, with oil cuts over 50 per cent. Due to higher-than-anticipated sand production; however, the company has had to run the wells on a very low choke setting in order to achieve higher on stream factors through the surface facilities. A sand knock-out vessel was installed on the first well which has demonstrated that the sand can easily be removed from the produced fluids and enabled the company to design a larger vessel that would allow it to operate the wells at their demonstrated capacity. These facilities have been ordered for each of the three wells and are expected to be installed in the third quarter.

In addition to the retrofitting of the facilities for sand handling, the company has also initiated a debottlenecking and expansion engineering project to be able to process production from up to three additional well pairs anticipated to be drilled later this year. These wells will incorporate the Capri process in which an upgrading catalyst is added around the outside of the wellbore to enhance the upgrading of the oil in situ and a modified liner completion to reduce sand production. Lessons learned from the current project will be incorporated into the design of a 10,000-barrel-per-day facility. The company expects to be filing an application for the 10,000-barrel project in the third quarter of 2007.

Upgraded Thai oil

Some of the positive secondary benefits of the Thai process include the potential to upgrade the oil in situ and a higher quality of produced water. During the first quarter, the company began to see evidence of upgraded oil from both of the producing wells. While the majority of the company's early production remains similar to raw bitumen (500,000-centipoise, 7.6 API gravity), quality is variable, and the company's upgraded samples have ranged between viscosities of 2,000 to 75 centipoise with API gravities ranging between 10.6 degrees and 14.1 degrees. Asphaltenes were also significantly reduced and the content of light components increased compared with raw bitumen. The produced water has also been of a higher quality (low in total dissolved solids) and management believes that with minor additional processing it could be of a quality suitable for value- added industrial use. The combination of oil and water quality has also led to cleaner oil/water separation and a lack of difficulties associated with treating the produced fluids.

Increasing Whitesands ownership

On May 11, 2007, the minority shareholder of the company's Whitesands Insitu Ltd. subsidiary exercised their exchange right pursuant to the Whitesands unanimous shareholders agreement (USA). As a result, the company will acquire all of the remaining shares of Whitesands, increasing Petrobank's ownership from 84 per cent to 100 per cent, for $120-million. Petrobank has the option to finance the acquisition with cash or through a combination of cash and the issuance of Petrobank common shares. In the event Petrobank chooses to issue common shares to the minority shareholder to finance all or part of the acquisition, the issue price will be set at $22.496 per Petrobank common share, pursuant to the terms of the United States. The transaction is expected to close on or about June 11, 2007. The minority shareholder has also indicated that it is reserving all rights to challenge this valuation amount.

Canadian business unit

The Canadian business unit produced 4,097 barrels of oil equivalent per day in the first quarter of 2007 an increase of 17 per cent over the 3,513 barrels of oil equivalent per day produced in the first quarter of 2006. The majority of this increase relates to new Bakken light oil which continues to be brought on stream. In addition, the company completed the tie-in of several natural gas wells that were drilled in 2006, which contributed to this production increase. The Canadian business unit drilled 12 (10.5 net) successful oil wells during the quarter with the majority of the activity focused on the Bakken light oil resource play in southeast Saskatchewan.

Bakken light oil resource play

The Bakken formation is found in the Williston basin, underlying much of North Dakota, eastern Montana and extending up into Southern Saskatchewan. The Mississippian-aged Bakken is an extensive regional resource play with the oil contained mostly in siltstones and thin sandstone reservoirs with low porosity and permeability. The Bakken formation is capable of high initial production rates of sweet, light, 41-plus degree API gravity oil, and liquid-rich solution gas. This resource is significant with approximately 4.5 million barrels of original oil-in-place per section of land within the defined play area. The key to unlocking the potential in the Bakken has been recent advances in horizontal well techniques, particularly the application of new horizontal fracturing and completion technologies. Horizontal wells allow maximum exposure to the reservoir, and new completion techniques allow fracturing of the siltstone along the full extent of the wellbore to maximize production. These technologies have unlocked the production and recovery potential of the Bakken resource. The company's horizontal drilling and fracture stimulation technique allows it to avoid fracturing out of the Bakken zone, thereby minimizing associated high water production common in other recent Bakken horizontal wells, and thereby significantly improving Bakken oil productivity. Ultimately, the company expects this to lead to substantially improved recovery rates. Petrobank's independent reserve evaluator, Sproule Associates Ltd., currently assigns a proved-probable-plus-possible (3P) reserves estimate of 125,000 barrels per Bakken well. With the company's high initial production rates from the company's 100-per-cent working interest wells, it is producing in excess of the forecast-type curves used in this preliminary evaluation. Petrobank's internal estimate is that each Bakken well will recover 150,000 barrels. With continued positive Bakken results, the company anticipates updating the company's reserve evaluation later in 2007.

Following the success of the company's Bakken drilling program in late 2006, the company proceeded, in early 2007, to drill a series of exploration wells to extend the boundaries of the Bakken resource play prior to the major April, 2007, Saskatchewan Crown land sale. By the end of 2006, the company's land base on the Bakken light oil resource play stood at 62,448 (49,105 net) acres. Since the beginning of 2007, through Crown land sales and acquisitions, the company has increased its acreage to a total of 138,000 (114,000 net) acres. The majority of this increase was Crown land purchased at the April Crown land sale, where it spent $59.5-million to acquire 41,800 (41,800 net) acres. In addition, the company closed an acquisition of a 50-per-cent working interest in certain producing properties in the Viewfield/Stoughton area of southeast Saskatchewan, with extensive undeveloped acreage and an continuing farm-in with a third party, for $8.5-million. The acquisition included four (two net) Bakken horizontal oil wells that were producing at unstimulated rates of 80 (40 net) barrels of oil per day and 9,426 (4,813 net) acres of undeveloped land with the potential to earn a further 13,598 (6,799 net) acres with additional drilling. In a reserve report effective Dec. 31, 2006, McDaniel and Associates Consultants assigned total proved reserves of 251,000 barrels, and total proved-plus-probable reserves of 730,000 barrels, to these acquired lands. Recompletion of these wells using Petrobank's fracture stimulation technique is expected to significantly improve both production and reserves.

The company's Bakken results have allowed it to confidently pursue this land acquisition strategy, and an aggressive Bakken drilling program for 2007. Prior to spring breakup, the company's two rigs had drilled nine wells this year. The company has recently added two new drilling rigs bringing the company's active Bakken rig count to four with a goal to drill 60 Bakken wells by the end of the year. The expansion of the company's Bakken land base and the company's 2007 drilling program enable it to build critical operating mass in the area. This will allow it to optimize the company's facilities for production of oil and to recover significant volumes of solution gas and natural gas liquids, positively impacting the company's Bakken production and reserve base.

The majority of the company's Bakken land base is expected to yield four horizontal wells per section. Currently, the company estimates its Bakken drilling inventory at 550 (500 net) locations. With these recent acquisitions, the Bakken light oil resource play is expected to be the Canadian business unit's primary focus area in 2007 and for years to come. The company's highly effective Bakken drilling and stimulation program, along with the addition of a significant land base has strategically positioned Petrobank to be a key Bakken light oil player.

Additional Canadian business unit focus areas

In addition to the company's Bakken light oil asset, the company continues to develop its long-term legacy shallow gas and CBM asset at Jumpbush with an inventory of over 175 low-risk development drilling locations. Petrobank is also aggressively moving forward on new, potentially high-impact exploration prospects in two key areas of northwestern Alberta where it planned to test multizone oil and gas prospects with at least two exploration wells in 2007. The first of these two wells was recently completed and cased as a potential light oil well. This initial result has led to an expanded northwest Alberta drilling program and it now plans to drill at least two additional wells in this area by the end of 2007. Petrobank continues to leverage its large undeveloped land base into exciting new opportunities.

Latin American business unit

During the first quarter of 2007, the activities of Petrobank's Latin American business unit, operated through the company's 80.7-per-cent-owned subsidiary, Petrominerales Ltd., were focused on continuing development in Orito, and commencing the 2007 exploration drilling program in the Llanos basin.

First quarter 2007 production averaged 2,042 barrels of oil per day, compared with 1,356 barrels of oil per day in the first quarter of 2006 and 2,372 barrels of oil per day in the fourth quarter of 2006. The significant increase from the prior-year period is mainly due to the success of the Orito-117 and 118 completions at the end of the first quarter of 2006 which proved up a significant southwest extension to the Orito field. The decrease from the prior quarter is mainly a result of certain wells being shut in during the period for workovers, delays in bringing new production on-line and also due to natural declines. Of particular note, the Orito-118 well was offline for 38 days in the quarter while the field operator, Ecopetrol performed a pump replacement operation. Production in early May has now increased to approximately 3,200 barrels of oil per day.

Orito

Since closing the initial public offering at the end of the second quarter of 2006, Petrominerales has now drilled seven new wells at Orito, but was delayed in bringing production on-line due to limited access to equipment and services and downhole mechanical problems. Since the end of the first quarter, the company has now started to see the effects of this drilling program with increasing production. There is still one additional well awaiting completion and fracture stimulation and the company continues to optimize its recent production additions. Access to equipment, services and manpower remain a significant challenge for its operations group given the record activity levels in the Colombian oil industry. Upon completion of the Llanos basin drilling program, the company will have two drilling rigs working in the Putumayo basin, where it expects to continue to generate significant increases in production.

Neiva

At Neiva, production has increased as a result of the company's first phase of fracture stimulations along with initial success from the company's pilot waterflood program. Due to the results from these fracture stimulations, the company has considering deferring drilling the six wells the company had planned for the second half of 2007 in favour of performing additional fracture stimulations. Early results from its pilot waterflood show pressure and production response in nearby wells quicker than originally anticipated. Accordingly, it is also evaluating an expanded waterflood program that could be implemented by the end of 2007.

Two thousand seven exploration program

Petrominerales is in the process of executing a five-well 2007 exploration program with four wells in the Llanos basin and one well at Las Aguilas in the Putumayo basin adjacent to the Orito block.

Joropo block

The Ojo de Tigre 2 well on the Joropo block in the Llanos basin was initially drilled to a total depth of 8,309 feet and logged and evaluated. Based on the company's evaluation, and the geological and hydrocarbon indications in this initial well, a decision was made to side track to a more favourable bottom-hole location. This second well, Ojo de Tigre-2 Side-Track, was drilled to a total depth of 8,419 feet and was cased as a potential oil well. The well was cored through certain prospective intervals with indications of high-quality oil-bearing sands, which was confirmed by subsequent logs indicating a primary target with net oil pay in excess of 25 feet. The well was completed and initial production testing commenced, but was suspended with the onset of the rainy season. Initial test rates reached 450 barrels of fluid per day with a water cut of 20 per cent and a gravity of 29-degree API. The test interpretation indicated very high skin damage which was likely caused by the gravel pack completion. The company will be returning to remediate the skin damage and conduct further testing of the well after the end of the rainy season in late 2007 or early 2008. The ultimate size of the prospect will be determined through long-term production testing and follow-up drilling. Successful development of this discovery will most likely include upgraded surface access, which will support year-round production.

This initial result at Joropo is very encouraging as the company has only evaluated a very small part of the 72,257-acre Joropo block to date, and it has now submitted applications for two blocks adjoining Joropo totalling an additional 69,122 acres. These two blocks, Jabali and Jaguar, are in the final stage of negotiations with the ANH.

Casimena block

Drilling and logging operations were completed at the Mapuro-1 exploration well on the Casimena block in the Llanos basin, which was drilled to the planned depth of 8,530 feet. Logs indicated that the sands in the Tertiary Carbonera and Mirador formations as well as the Cretaceous Guadalupe, Gacheta and Ubaque formations are predominantly wet or contain non-commercial hydrocarbon accumulations. As a result, the Mapuro-1 well was plugged and abandoned. Despite the results from this first well, this area of the Llanos basin continues to be highly prospective and the company is in the process of identifying its next Casimena location which can be drilled early in 2008.

Casanare Este block

The Casanare Este-1 exploration well, was spudded on April 25, 2007, the company is currently drilling at 8,125 feet and the company expects to reach a total depth of 10,000 feet on this well in late May.

Corcel block

The Corcel-1 exploration well was spudded on April 8, 2007, the company is currently drilling at 9,929 feet and it expects to reach a total depth of 12,800 feet in mid-June. Upon completion of this well, the drilling rig will move to Orito to drill additional development wells and the Las Aguilas exploration well.

Exploration summary

The company has either executed or the company is finalizing 13 exploration block contracts totalling 1.5 million acres in the Llanos and Putumayo basins, making Petrominerales one of the largest exploration landholders in Colombia. To date, Petrominerales has acquired 357 square kilometres of 3-D seismic and reprocessed all available 2-D seismic data. The company now has 20 leads and prospects on these lands and in 2007, it plans to acquire an additional 190 square kilometres of 3-D seismic and 576 kilometres of reconnaissance 2-D seismic which are expected to result in an expanded exploration drilling program for 2008 and beyond.

 
  
        CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) 
                (in thousands of dollars, except per-share amounts) 
  
                                                               For the three months  
                                                                  ended March 31,  
                                                               2007            2006  
 Revenues 
  
 Oil and natural gas                                     $   29,471      $   21,593 
 Royalties                                                   (2,992)         (3,208) 
 Interest income                                                 81              71 
 Expenses                                                    26,560          18,456 
 Production                                                   4,497           2,726 
 Transportation                                                 124             144 
 General and administrative                                   2,537           2,098 
 Stock-based compensation                                     1,090             471 
 Interest                                                       136           1,516 
 Foreign exchange loss                                          117              79 
 Other                                                           17              47 
 Depletion, depreciation and accretion                       11,854           6,193 
                                                         -----------     ----------- 
                                                             20,372          13,274 
                                                         -----------     ----------- 
 Income before taxes and non-controlling interests            6,188           5,182 
 Taxes                                                          860             663 
 Future income taxes                                          1,161           1,277 
 Income before non-controlling interests                      4,167           3,242 
 Income applicable to non-controlling interests                 428               - 
 Net income                                                   3,739           3,242 
 Retained earnings (deficit), beginning of period            19,030          (4,076) 
 Retained earnings (deficit), end of period                  22,769            (834) 
 Basic and diluted earnings per share            
 

[Tackler]

Petrobank Energy to acquire Whitesands

2007-05-14 00:24 MT - News Release

Mr. John Wright reports

PETROBANK STRENGTHENS OIL SANDS ASSET BY INCREASING WHITESANDS OWNERSHIP FROM 84% TO 100%

Petrobank Energy and Resources Ltd. will be acquiring all of the shares of its Whitesands Insitu Ltd. subsidiary currently held by minority shareholders, increasing Petrobank's ownership of Whitesands from 84 per cent to 100 per cent, for $120-million.

Pursuant to the Whitesands unanimous shareholders agreement (USA) the minority shareholders had the right, annually, to request a valuation of Whitesands, and to exchange their ownership position. This exchange right was exercised on May 11, 2007. Petrobank has the option to finance the acquisition with cash or through a combination of cash and the issuance of common shares in Petrobank. In the event Petrobank chooses to issue the minority shareholders common shares to finance all or part of the acquisition, the issue price will be set at $22.496 per share, pursuant to the terms of the United States. The $250-million (U.S.) of Petrobank convertible bonds issued on May 4, 2007, provides the flexibility to finance up to the entire acquisition price with cash. The transaction is expected to close on or about June 11, 2007. The minority shareholder has also indicated that it is reserving all rights to challenge the valuation amount.

By owning 100 per cent of the Whitesands assets and the THAI and CAPRI technologies, the company will be able to enhance its flexibility to efficiently move forward with its development plans for the Whitesands oil sands leases and the commercialization of the THAI technology on a global basis.

Nice spin!

[johnlw]

Total files plans for Fort Sask. upgrader
Multi-billion-dollar plant will employ thousands of construction workers for up to four years

Gordon Jaremko
The Edmonton Journal

Tuesday, May 08, 2007

EDMONTON - French oil giant Total has set a target date of 2013 or 2014 for completion of a multibillion-dollar bitumen upgrader to be built east of Fort Saskatchewan in Strathcona County.

The project is part of a larger plan to inject up to $15 billion into Alberta's oilsands, and extract as much as 300,000 barrels of crude per day, Total E & P Canada president Michael Borrell said in an interview Monday.

The subsidiary of Paris-based Total SA will employ up to 4,000 construction workers starting in 2010 to build the plant, after about two years doing the engineering work and seeking regulatory approval.

When completed, the upgrader will employ a permanent staff of 300 to 400 operators.

ON REGULATORY ROAD

The firm embarked on the regulatory process by announcing the Strathcona site and distributing a public disclosure document with provincial authorities led by the Alberta Energy and Utilities Board.

The plan calls for construction of a 200,000-barrels-daily bitumen upgrader in two stages.

The first phase will process 130,000 barrels a day. A second, 70,000-barrels-daily stage will be built when required, depending on bitumen supplies and oil markets, the company indicated.

No cost forecasts were disclosed. It is too early in the project's planning to make reliable estimates, Borrell said.

But industry analysts predicted the price tag for the first phase of Total's mammoth plant will be in a range of $5 billion to $6.5 billion.

A similar but smaller project by NorthWest Upgrading, now seeking AEUB approval at hearings northeast of Edmonton in Redwater, is forecast to cost $2.9 billion for the first of three 50,000-barrels-daily stages.

The Total plant will process bitumen extracted from 914 square kilometres of northern Alberta oilsands leases, where the 95,000-employee French firm -- the world's fourth-largest investor-owned oil company -- has accumulated ownership shares of 50 to 100 per cent since the mid-1990s.

Production is now in early stages, starting with initial flows of about 27,000 barrels per day from a partnership with ConocoPhillips on a lease called Surmont south of Fort McMurray.

Surmont output is scheduled to grow to 100,000 barrels daily soon after 2010. Total has also made a 10,000-barrels-daily start on a property known as Joslyn that the firm acquired with a $1.6-billion takeover of Deer Creek Energy in mid-2005.

KUDOS FROM THE HEARTLAND

Total won applause for its upgrader plan from the Alberta Industrial Heartland Association of local governments and Employment Minister Iris Evans, a former Strathcona County reeve.

"This project adds to their current oilsands extraction investment in the province and supports the government's strategy of increasing the value of our bitumen resource in the province," Evans said in a statement.

Total's move followed three years of consultation between industry, Strathcona County and the Heartland group, association executive director Larry Wall said.

Plans to expand local roads, utilities and pipelines are well advanced.

The Edmonton area won the project over two potential Fort McMurray sites. Better supply of skilled workers, service "infrastructure" and land zoned for heavy industry by co-operative local governments drove the site selection, Borrell said.

"This project is exactly the type of development we envisioned when our neighbouring municipalities came together in 1999 and formed the Alberta Industrial Heartland Association," Strathcona Mayor Cathy Olesen said in a statement.

Total's plant is the third in Strathcona's share of the budding upgrader row east of Edmonton, which also includes projects in adjacent Sturgeon County.

Oleson's municipality also has an expanding Shell plant at Scotford and the Heartland Upgrader under construction nearby.

Total's 3.6-square-kilometre Strathcona site is big enough to expand its upgrader beyond 200,000 barrels daily as bitumen production spreads to about 150 square kilometres of untouched oilsands leases beyond Surmont and Joslyn, he said.

The French firm will mature into a mainstay of Alberta industry and employment, Borrell predicted. In two years Total Canada grew from about a dozen staff to nearly 200 employees and recruitment continues, he said.

[e-mail]
© The Edmonton Journal 2007

[johnlw]

Clouds on the horizon

By NEIL WAUGH, EDMONTON SUN




A 66% approval rating in the polls going into your first party meeting this weekend, following the often-bitter Alberta PC leadership race, is not a bad position.

And since the latest Ipsos Reid survey revealed that Ed Stelmach is within striking distance of Ralph Klein - the premier who walked on water until his own party cynically sunk him but still held a 71% approval rating days before his shelf life expired last November - life is even better for Steady Eddy.

The only dark cloud is his 57% approval in Calgary, a number any premier would die for in the rest of Canada.

But while Stelmach is riding a wave of success, the seeds of doubt continue to be sown.

For one, the Alberta Tories' deeply flawed oilsands policy continues to unravel like a cheap curling sweater.

The first mega-project bit the dust last week when Synenco Energy announced a "strategic repositioning."

Instead of charging ahead with its Northern Lights oilsands mine and processor north of Fort McMurray and the $6.3-billion upgrader on Upgrader Alley, the plans have now been "retracted."

Sure Synenco's bizarre scheme to fabricate the Fort Mac plant in Korea then barge it in giant modules up the Mackenzie River will apparently continue.

But in the meantime, company brass will ask the EUB to "implement a timeout" while they "maximize the shareholder value" for what they call "world-class assets".

In other words, they're going to flip the leases and cash out. Because the PCs' goofy oilsands strategy has no use-it-or-lose-it clause.

This is the second proposed fire sale in less than a week after North American Oil Sands Corp. sold 257,200 acres of lease south of Fort McMurray for $2.2 billion to the Norwegian government's oil company Statoil.

Statoil called it an "important strategic move." But what happens to the 250,000 barrel-a-day heavy oil upgrader that North American was going to build at Scotford?

Upgrading was to be part of Stelmach's new Alberta when he was talking tough on the campaign trail last fall. Comparing shipping raw Alberta bitumen stateside to stripping the "topsoil" off a farm.

EnCana first tested Stelmach's resolve when it linked up with ConocoPhillips to ship raw bitumen to refineries in Illinois and Texas. Last week, two more oilsands firms clearly indicated they have the Alberta Tories figured out as all bluff and no bite.

First, Husky Energy president John Lau announced a "significant step" and an "ongoing strategic move"and then forked over $1.2 billion to Valero Energy for a 165,000 barrel-a-day refinery in Ohio.

Lau also revealed that Husky will "review options for reconfiguring and expanding the refinery to process heavy crude oil and bitumen." He also mused about "additional future investments in the community." In other words, an upgrader.

More jobs head down the pipeline while Albertans get a penny-on-the-dollar royalty and oil companies inflict severe environmental damage on the pristine boreal forests of northeastern Alberta.

Canadian Natural Resources Limited brass - short days after the death of two Chinese workers on its Horizon site - was updating shareholders on its latest troubles.

"The increased cost pressures, the outcome of the royalty review and the impact of environmental regulations," last week's CNRL shareholders' report gloomed, "may adversely impact the company's future net earnings, cash flow and capital projects."

It talked about a company "focus" to develop a "blending strategy" and "working with refiners to add incremental heavy crude conversion capacity." Which sounds like more stateside upgraders as CNRL tries to move processing south of the line to avoid the feds' punitive carbon tax and emissions rules.

The document reveals CNRL was already shipping 135,000 barrels a day of blended heavy crude in the first quarter.

The naive Edmonton Economic Development Corporation and the Alberta Tories' equally disconnected Employment, Immigration and Industry Department issued a breathless study last week which claimed there are "six upgrader projects under development" and "several more under serious consideration" in the Edmonton area.

Once running, the plants will require supplies, services and capital upgrades that could "very easily exceed" $100 billion over their life cycle. And upfront procurement costs will range from $18.8 to $32 billion. Sadly two of the plants on the EEDC's wish list are the Synenco and North American projects.

Meanwhile Ed Stelmach is a hugely popular premier. At least for now.

[johnlw]

May 8, 2007
It's all about bitumen
By NEIL WAUGH, EDMONTON SUN

Finally the Alberta Tories' goofy oilsands policy is starting to make sense. Unfortunately the clear thinking and sound reasoning has to come from a Frenchman. Or at least an Englishman working for a French company.

This certainly brings into question the rush to the border by Canadian energy companies like EnCana and Husky, although Husky is technically Chinese owned.

Yesterday Total E and P Canada filed a "public disclosure" document for its $6-billion heavy oil upgrader.

Not in Borger, Texas. Or Wood River, Illinois. Or Great Falls, Montana. But good old Scotford.

Expect a hard core submission to be filed with the Energy and Utilities Board by the fall. Engineering is to begin in 2008 with construction to commence when all the ducks are in a row and the regulators sign off.

The timing was clearly right with Synenco Energy's tough - but hardly unexpected - announcement last week that it was undergoing a "strategic repositioning." Instead of building its Northern Lights upgrader in Sturgeon County, company brass are now "committed to maximizing shareholder value."

That basically means flip the oilsands leases and get out of Dodge.

Husky also announced last week it has bought a refinery in Lima, Ohio, and was reviewing options to "reconfigure" it to process bitumen from its Tucker Lake project. In other words, build an upgrader to run Alberta bitumen while paying a-penny-on-the-dollar royalty under the Alberta Tories bizarre oilsands give-away. EnCana is zipper lining its bitumen to ConocoPhillips refineries in Illinois and Texas.

Ironically, Total got its foot in the Athabasca oilsands door when it bought out Deer Creek Energy and acquired the Joslyn project. Which is part mine and part huff and puff. The French energy giant also has 50% interest in another in-situ operation at Surmont southeast of Fort McMurray. The Joslyn play alone will see two billion barrels of bitumen extracted over the next 30 years.

Total E and P Canada president Michael Borrell didn't mess around about where his company is coming from.

"Total is committed to upgrading the bitumen we produce," Borrell stressed. Then he got down to the politics that Premier Ed Stelmach compared to selling the "top soil" from a farm when he was campaigning for the PC leadership last fall, but has done diddly squat about since.

Companies clearly sensing the Tories' confusion and lack of commitment have schemes underway to ship millions of barrels a day of raw bitumen south of the line for upgrading and refining. That sends thousands of high-paying Alberta jobs down the pipeline.

"We believe the best place to do it is in the Industrial Heartland so that Albertans experience the benefits of that activity," Borrell said.

Meanwhile Total's disclosure document talked about the "major benefits and sustained value for Albertans and specifically identified "employment, contracting and supply opportunities and government income through taxes" when the 130,000 barrel-a-day plant comes on stream as early as 2013.

There are plans to ramp up output by another 70,000 barrels a day with 4,000 construction workers on the job and another 300-400 hired to operate the plant.

The disclosure document also talks of how Total wants to work with community and industrial groups to "maximize social and economic benefits." Works for me.

After weighing the options, "the Industrial Heartland made the best sense," Borrell added. "We believe there is sufficient depth in the market for synthetic crude in and around Edmonton for us to be comfortable to take the risk."

The syncrude gets shipped south but the jobs stay in the greater Edmonton area.

The Fort MacKay First Nation clearly has it figured out. Yesterday the band signed a "comprehensive framework" with the federal government which lets the Alberta government's environmental, health and safety standards apply in oilsands projects on band lands.

Chief Jim Boucher talked about having a "level playing field with industry" and how the deal "establishes the path" to developing "large-scale commercial projects" on reserve lands.

Those lands just happen to be smack dab in the middle of the tarsands and if things work out it could make the Fort MacKay band the richest First Nation in the country.

Why can't we make a guy like Chief Boucher premier for a day to squeeze the value-added out of our resources?

"With our planned mining and in-situ activities in the Athabasca oilsands and the new upgrader in Strathcona County," Borrell said, "we intend to make Alberta home for a long time to come."

Which is the way it should be. But, sadly, isn't under the Alberta Tories misguided oilsands policy.

[Tackler]

If these guys were awake they would have thought about it long ago and have a position
rather than saying they are highly skeptical.

[johnlw]

Just pulled it out of the article you posted........
Here is what the Liberals had to say.
"It feels like the Tories have let the nuclear genie out of the bottle, and not bothered to tell the public about it," said Taft, who said he's highly skeptical of the nuclear option.

The Greens are probably trying to gauge public opinion before they open their yaps.

[Tackler]

I stand corrected 800 full time jobs so probably about 1000 more families.

What an assinine quote, you couldnt find one from the Green Party?

[johnlw]

Go for it.
No tax dollars at any stage.

"I saw them at Earth Day celebrations, for God's sake," quipped NDP environment critic David Eggen. "They're trying to soften up the public. But people have reason to be skeptical."

[Tackler]

Think again, $6,200,000,000.00 project, 5000 full time employees, excuse the pun KABOOOMMMMM!!!!!!
Probably 15,000 people, new homes, new schools, new hospitals, new facilities, new subdivisions :)
Not to mention the construction phase, massive.

[Tackler]

The gov't cant keep up with the power line requirements for windpower yet alone nukes
Alberta getting way ahead of itself slow the puck down already

[johnlw]

Wow
Power for export to California, Oregon and Wash.
Sounds like the new powerline is a given now.

If I lived in Whitecourt I would get on the bandwagon and tell them to piss off.

[Tackler]

Whitecourt bids for nuclear plant

Upstart Calgary firm prepares to file applications for $6.2-billion Candu project

Jason Markusoff
The Edmonton Journal

Friday, May 04, 2007

EDMONTON - An upstart Calgary energy firm is thrusting Alberta headlong into the nuclear debate, with plans to apply next month to build a $6.2-billion twin reactor in northern Alberta that would become the largest -- and most controversial -- power plant in the province.

Energy Alberta Corp. is in talks with the town of Whitecourt and at least two other communities as potential sites of the mammoth 2,200-megawatt facility designed to meet the ravenous electricity needs of Alberta's oil sector, Wayne Henuset, the company's president, said Thursday.

It has teamed up with Atomic Energy Canada Ltd., the federal Crown corporation which makes the Candu reactor, and intends to file site applications with Canada's federal nuclear regulator on June 15.

Henuset said the reactors could begin operating as early as 2016.

Energy Alberta has also stepped up its promotional campaign in Alberta, making a private presentation with AECL to Alberta Conservative MLAs Thursday. This weekend, it will fly Whitecourt's mayor and other local leaders to visit a Candu reactor in New Brunswick.

"The communities are helping us decide which ones want the facility, and that's where we are right now," Henuset said, outside a Tory caucus meeting.

The Tories could also take a serious step forward on going nuclear at their annual convention Saturday, when party members vote on a resolution to set up a committee to hold public consultations and study nuclear energy.

Energy Minister Mel Knight and nuclear proponents said the presentation was only an information session.

"There was no sales pitch," Knight said.

While the minister said nuclear is just one possible new energy source alongside hydroelectricity and biomass, he noted that a report from the United-Nations-backed Intergovernmental Panel on Climate Change due out today is expected to recommend using nuclear power to curb greenhouse gas emissions.

"When that body declares that this is perhaps a way forward for the world, we can't put on blinders and just pretend it's not happening," Knight said.

Liberal Leader Kevin Taft expressed alarm that Energy Alberta is already at the application stage, before the provincial government has gauged Albertans' comfort level with having Western Canada's first reactor.

"It feels like the Tories have let the nuclear genie out of the bottle, and not bothered to tell the public about it," said Taft, who said he's highly skeptical of the nuclear option.

Energy Alberta's applications to the Canadian Nuclear Safety Commission will propose two possible sites, although only one would actually be built, Henuset said. He expects environmental and technical approvals to take about five years, and insisted his firm will raise money through private equity rather than government cash.

Whitecourt, about 180 kilometres northwest of Edmonton, already has a heavy forestry and paper industry and would embrace a plant on its doorstep, the local MLA said.

"What community could host 1,000 workers in 10 years and plan for it? Well, Whitecourt's a perfect community," George VanderBurg said.

Under the plan, AECL would build in Alberta a pair of its new "advanced" Candu reactors. The project would dwarf any other electrical plant in Alberta.

Henuset, who's worked in petroleum services and liquor retailing, formed Energy Alberta in 2004 expressly to construct a nuclear plant in Alberta. Veteran oil-patch entrepreneur Hank Swartout came on later as a fellow director, and AECL signed on last fall. This spring, the firm signed former Calgary Sun publisher Guy Huntingford to do public relations.

"I saw them at Earth Day celebrations, for God's sake," quipped NDP environment critic David Eggen. "They're trying to soften up the public. But people have reason to be skeptical."

[e-mail]

[johnlw]

Synenco sends dire signal

Deborah Yedlin
Calgary Herald

Thursday, May 03, 2007

The oilsands landscape became more interesting this week when a relative newcomer to the game, Synenco Energy, caught everyone off guard and said it was "reviewing strategic alternatives." That's code in the business world for hanging out the "for sale" sign.

Say what?

Wasn't the oilsands supposed to be the one "sure thing" in the energy world because it's the last, non-politicized, large oil deposit on the planet that every major player wants a piece of? It's certainly what Albertans have been hearing the last few years.

But this week, it was thrown into question.

Synenco apparently made this decision as a result of a confluence of events -- rising capital costs, ongoing labour issues and the changing tax treatment at the federal level.

Truth be told, it was perceived as one of the weaker sisters within the oilsands landscape.

When company management finally finished crunching the numbers, the rate of return on the mining project (which also included an upgrader) was just over nine per cent. That's nowhere near enough for a project of this size, not to mention the kind of operational risk that comes with it.

Canadian Natural Resources did a similar analysis on the costs and returns associated with the planned upgrader at its Horizon project and decided to put it on ice until things came back into balance from a cost perspective. But CNRL, unlike Synenco, has the advantage of having a staged project that doesn't hinge entirely on an upgrader being built; it has other places to allocate capital. Synenco is essentially a one-trick pony.

When Synenco first went public in late 2005 at $17.50 per share, the company said the Northern Lights Project would cost about $1.9 billion to develop the 1.3 billion recoverable barrels of oil. That was enough for about 30 years of production.

This week the new number for development was revealed: $6.3 billion.

The fact the company is looking at its options pretty much says it doesn't have the cash to develop Northern Lights.

Making things more interesting is that this is happening at the same time the Alberta government is reviewing the existing royalty regime. Synenco's circumstances are the most dire signal to date on the out-of-control costs to develop the billions of barrels trapped in northern Alberta. All of a sudden, Premier Ed Stelmach should be very worried.

As Statoil's Peder Sortland reiterated several times during an interview with the Herald this week, fiscal and political stability are absolutely critical for companies making billion dollar bets on oilsands projects; it was this stability that was one of the drawing cards for Statoil to write a cheque for $2.2 billion and snap up another fledgling oilsands company, North American Oilsands, last week.

Stelmach might want to re-think the royalty review.

Synenco's announcement shows that even with high oil prices, the myriad pressures pushing the price tag for oilsands projects beyond reasonable is evidence enough there is no additional economic rent to be had. And at some point economic pressures could very well be such that other projects will be set aside because the rate of return no longer justifies the risk.

So now it becomes a game of who is going to bid -- and how Synenco's assets stack up against those of another company, Western Oil Sands, which is also for sale.

There are a few ways to look at this.

First of all, because Synenco's 40 per cent partner is the China Petrochemical Corp. (Sinopec), the question needs to be asked whether this move is a way to legitimize a sale process that ultimately sees the assets in Sinopec's hands. Also important, as FirstEnergy's Mark Friesen points out, is Sinopec's lack of operating expertise to carry on without a partner who knows what's going on.

Conversely, if Sinopec opts not to come to the table with a bid, it suggests the assets really are not as good as initially thought, oilsands or not. It also throws a bit of cold water on the widely held notion that national oil companies come with unlimited chequing accounts.

Then there's the Synenco versus Western Oil Sands in terms of which is a better option on the price of crude oil. Western's new partner in the Athabasca oilsands project, and the logical buyer, is Royal Dutch Shell.

As Friesen noted late Tuesday afternoon, Royal Dutch can afford to set Western aside for a while and come back to it when the conditions are not as heated.

At this point, analysts are saying Western is wearing the prettier dress; its project is more straightforward while Synenco's is viewed as being technically challenging from both topographical and geological perspectives.

On that point, it's interesting to note that Synenco's chief executive comes from Norsk Hydro -- a company well-acquainted with complicated projects.

How this unfolds will be very interesting to watch. Whether it's Italy's ENI that finally inks a deal for a beachhead position in the oilsands, Sinopec or another player, based on the $1 per barrel valuation paid by Statoil last week, Synenco's investors are set to do well; the debt-free company could fetch a price of $1.6 billion.

[e-mail]
© The Calgary Herald 2007

[johnlw]

Upgraders worth $130B to region, study says

The Edmonton Journal

Thursday, May 03, 2007

EDMONTON - More than $130 billion will be injected into the local economy by the nine bitumen upgrader plants planned for the area, a new study reveals.

Basic procurement needs during the 2008 to 2015 construction years will be between $19 billion and $33 billion, while at least another $100 billion will be spent on supplies and services once they are in operation, the study by Colt Engineering says.

Bitumen production will grow from the current one million barrels a day in the province to 3.5 million by 2020, with most of it upgraded in the Edmonton area, says the study prepared for Edmonton Economic Development Corp. and the province.

EEDC president Ron Gilbertson said the study shows the scope of opportunities for local manufacturers, suppliers and planners.

Three upgraders already are being built or are in the detailed engineering stage, while another three have submitted proposals to the Alberta Energy and Utilities Board.

Two other groups have said they plan facilities, and Colt believes a ninth will emerge from numerous other plans now in the proposal stage.
© The Edmonton Journal 2007

[johnlw]

Market muscle will power area upgrader projects
NorthWest COO says conditions are right

Gordon Jaremko
The Edmonton Journal

Wednesday, May 02, 2007

REDWATER - Free markets will fuel Alberta oilsands processing, the next Edmonton-area upgrader project predicted Tuesday in rejecting political intervention to curb bitumen exports.

"We don't seek government help," NorthWest Upgrading chief operating officer Gary Vassie said in an interview as regulatory hearings opened on the firm's proposed 150,000-barrels-daily plant near Redwater.

"It's a business decision," Vassie said. "Business conditions more than justify bitumen producers considering this option."

As a "merchant upgrader" or independent manufacturer of refinery-ready light oil, NorthWest is offering to create a better outlet than the United States for low-grade initial oilsands output.

The plant will buy bitumen or process it for a fee, saving oilsands developers export pipeline tolls and strengthening prices by expanding limited markets for the tarry raw material.

NorthWest will live on a quality differential or gap between bitumen and light oil prices. The difference is still 30-35 per cent or more than $20 a barrel despite recent reductions of the spread, Vassie estimated.

The province, prompted by forecasts that one-third or more of bitumen will go to expanding U.S. refineries, is considering new policies to keep multibillion-dollar investments and thousands of jobs in Alberta.

But prospects that Northwest's business model will naturally fuel new construction of nine or more proposed mega-plants in an emerging Redwater upgrader row prompted Edmonton to make its first intervention in an oilsands case before the Alberta Energy and Utilities Board.

"Development will transform this region," city litigation chief Mark Young told the AEUB as a scheduled two weeks of hearings on the NorthWest project started about 60 kilometres northeast of Edmonton in Redwater.

"Look what's happened to Fort McMurray. They're overheated with development. The same thing could happen here," Young warned.

He pointed to strained local services, inflated construction costs and growing shortages of affordable housing in Edmonton even though the development wave is only in early stages.

"The City of Edmonton is in favour of all the proposed upgraders" but wants the AEUB to ensure "a strong regional plan" emerges to cope with up to $40 billion worth of projects announced by industry, Young said.

NorthWest should only be allowed to kick off the development wave if conditions are put into its plant approval to require co-operation with Edmonton on coping with cumulative effects of all projects in the Redwater upgrader lineup, says a written city submission to the AEUB. The Edmonton region's population will grow by up to 200,000 over the next 10 years and 140,000 or 70 per cent of the new residents will settle in the city, the document predicts. In 20 years, the development wave is forecast to increase the regional population by up to 500,000.

But Vassie told reporters "this isn't a Fort McMurray," where industrialization requires building a community from scratch in remote northern woods.

Upgrader projects are choosing the Edmonton region because it has a large skilled workforce, strong local services, capacity to expand them and organized growth planning by the Alberta's Industrial Heartland Association of municipalities beside the city, the NorthWest chief operating officer indicated.

The project is on schedule for about 2,000 construction personnel to build its first 50,000-barrels-daily stage for $2.9 billion by late 2010, Vassie said.

When complete, the plant is expected to create 300 permanent operating jobs.

Edmonton is using the wrong arena by resorting to AEUB hearings for making its move into regional planning, Heartland executive director Larry Wall said in an interview.

He urged the city to work with its neighbour municipalities in an eight-year-old local government group known as the "greater Edmonton economic growth team."

About 10 towns and districts are urging the AEUB to approve NorthWest's plant. But about two dozen rural households near the site are questioning potential air and water pollution, while the Saddle Lake and Alexander Indian bands seek reviews of effects on claimed traditional native territories.

[e-mail]

[kidl]

Petrobank Closes Southeast Saskatchewan Acquisition

ccnm



CALGARY, ALBERTA--(CCNMatthews - May 1, 2007) - Petrobank Energy and Resources Ltd. ("Petrobank" or the "Company") (TSX:PBG)(OSLO:PBG) is pleased to announce that it has closed the acquisition (the "Acquisition") of land and reserves previously disclosed in our press release dated April 9, 2007 relating to the expansion of our asset base in the Bakken light oil resource play. Today, Petrobank acquired a 50% working interest in certain producing properties in the Viewfield/Stoughton area of southeast Saskatchewan, with extensive undeveloped acreage and an ongoing farm-in with a third party, for $8.5 million.


The Acquisition enhances the core of Petrobank's recently expanded position on the Bakken light oil play in southeast Saskatchewan. Under the original farm-in agreement related to the Acquisition, the previous operator drilled four (2.0 net) Bakken horizontal oil wells which are currently producing 80 (40 net) barrels of oil/day. The Acquisition includes 9,426 (4,813 net) undeveloped acres and we have the potential to earn a further 13,598 (6,799 net) acres with additional drilling. In a reserve report dated effective December 31, 2006, McDaniel and Associates Consultants Ltd. assigned total proved reserves of 251,000 barrels, and total proved plus probable reserves of 730,000 barrels, to these acquired lands.


Petrobank plans to fracture stimulate the existing four producing wells and drill additional Bakken horizontal oil wells to earn the remainder of the lands. These lands are located within the core of our Bakken fairway, and are contiguous with our existing land position. Inclusive of the 41,800 acres acquired at the Saskatchewan crown land sale in April 2007, our acreage position on the Bakken fairway is now approximately 138,000 (114,000 net) acres.


The addition of these lands obtained through the Acquisition further enhances our ability to build critical operating mass in the area, which allows us to optimize our facilities for production of oil and also the ultimate recovery of significant volumes of solution gas and natural gas liquids from our Bakken wells. Petrobank currently has two drilling rigs working our Bakken lands and we plan to increase this to four rigs by the third quarter of this year.


All recently acquired lands are highly prospective for Bakken light oil and are expected to yield up to four horizontal wells per section (one section equals 640 acres). Currently, we estimate our Bakken drilling inventory at 550 (500 net) wells. With these recent acquisitions, the Bakken light oil resource play is expected to be our Canadian Business Unit's primary focus area in 2007 and for years to come. Our highly effective Bakken drilling and stimulation program, along with the expansion of our land base, has strategically positioned Petrobank to be a key Bakken light oil player.


Petrobank Energy and Resources Ltd.


Petrobank Energy and Resources Ltd. is a Calgary-based oil and natural gas exploration and production company with operations in western Canada and Colombia. The Company operates high-impact projects through three business units. The Canadian Business Unit is developing a solid production platform from low risk gas opportunities in central Alberta and an extensive inventory of Bakken light oil locations in southeast Saskatchewan, complemented by new exploration projects and a large undeveloped land base. The Latin American Business Unit is operated by Petrobank's 80.7% owned, TSX-listed subsidiary, Petrominerales Ltd. (trading symbol: PMG), which produces oil through two Incremental Production Contracts in Colombia and has exploration contracts covering 1.5 million acres in the Llanos and Putumayo Basins. WHITESANDS Insitu Ltd., Petrobank's 84% owned subsidiary, owns 39,680 acres of oil sands leases with an estimated 2.6 billion barrels of gross bitumen-in-place and operates the WHITESANDS project which is field-demonstrating Petrobank's patented THAI(TM) heavy oil recovery process. THAI(TM) is an evolutionary in-situ combustion technology for the recovery of bitumen and heavy oil that integrates existing proven technologies and provides the opportunity to create a step change in the development of heavy oil resources globally.


Forward-Looking Statements


Certain statements in this release are "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Specifically, this press release contains forward-looking statements relating to, prospects and technologies which remain unproven and the expected amount and timing of capital projects. The reader is cautioned that assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be incorrect. Actual results achieved during the forecast period will vary from the information provided herein as a result of numerous known and unknown risks and uncertainties and other factors. Such factors include, but are not limited to: the ability to economically test, develop and utilize the technologies described herein, the feasibility of the technologies, general economic, market and business conditions; fluctuations in oil and gas prices; the results of exploration and development of drilling and related activities; fluctuation in foreign currency exchange rates; the uncertainty of reserve estimates; changes in environmental and other regulations; risks associated with oil and gas operations; and other factors, many of which are beyond the control of the Company. There is no representation by Petrobank that actual results achieved during the forecast period will be the same in whole or in part as those forecast.



FOR FURTHER INFORMATION PLEASE CONTACT:

Petrobank Energy and Resources Ltd.
John D. Wright
President and Chief Executive Officer
[phone]




or

Petrobank Energy and Resources Ltd.
Chris J. Bloomer
Vice-President Heavy Oil and Chief Financial Officer
[phone]




or

Petrobank Energy and Resources Ltd.
Corey C. Ruttan
Vice-President Finance
[phone]
[phone] (FAX)
Email: [e-mail]
Website: www.petrobank.com

[Tackler]

that and the shipping of bitumen
pissing me off, selling out our kids

[johnlw]

Stelmach and company should put a stop to SYN with this scheme:

The company also will continue to develop its overseas modularized construction strategy for Upstream.

Nip this bullshit in the bud right now.

[Tackler]

PBG just turned north

[johnlw]

Synenco Energy looks into other business options

2007-05-01 07:08 ET - News Release

Mr. Scott Ranson reports

SYNENCO ENERGY INITIATES REVIEW OF OPTIONS TO MAXIMIZE SHAREHOLDER VALUE

Synenco Energy Inc. plans to assess options for a strategic repositioning of the company. The plan has a range of possible outcomes including: restructuring the Northern Lights Partnership's downstream business to capture economies of scale by including other partners, alternative downstream commercial ventures, and other corporate-level options that enhance shareholder value.

Synenco Energy today also released an updated capital cost estimate of $6.3-billion for the downstream (upgrader) portion of the Northern Lights oil sands project planned for Sturgeon county, Alberta.

The upgrader capital cost estimate is based on a thorough examination by the company of a wide range of design and technology options, including coker and hydroprocessing technologies. The upgrader estimates range from $4.4-billion to $6.3-billion, while the real internal rates of return range from 8.5 per cent to 9.5 per cent (based on a long-term oil price assumption of $55 (U.S.) per barrel). The option with the highest capital cost, which includes gasification, produces the greatest real rate of return. However, Synenco's management and board of directors have determined that the expected rates of return for any of the examined upgrader options are incompatible with Synenco's weighted average cost of capital, which is higher.

"We have world-class assets in our Northern Lights resource and, as operator, our outstanding and experienced work force," said Synenco chairman and chief executive officer, Mike Supple. "We remain very optimistic about the long-term potential of these assets and are committed to maximizing the shareholder value inherent in them. At the same time, however, we recognize that our current path needs to be adjusted to achieve this goal."

"The fundamentals of a capital-intensive business are straightforward," said president and chief operating officer, Todd Newton. "Every company has a cost of capital, and value is created when the company invests its capital in assets that provide a return that exceeds this cost of capital. Synenco Energy's cost of capital is greater than that of more established companies, which are producing operating cash flow, and our investment criteria will naturally be higher as well. We will review all options including those that reduce our cost of capital or increase project returns."

In conjunction with the announced options review and downstream capital cost guidance, Synenco Energy is also updating other previously disclosed guidance pending the outcome of the options review:

* The development schedule for Northern Lights, announced in December, 2006, and which anticipated first oil by mid-2011, is retracted.
* The company's 2007 cash expenditure level is estimated to be approximately $100-million after reprioritization of Northern Lights and corporate activities. The previously announced 2007 cash expenditure budget was $235-million.

"The combination of our strong cash position of more than $300-million, oil sands lease expiration dates that are more than a decade away, and our low level of contractual commitments support the timing of today's decision to formally seek and assess all available alternatives," said Mr. Newton.

Design and engineering activities in support of the Northern Lights upgrader will be put on hold during the assessment period and Synenco will meet with Alberta regulators to discuss how best to implement a time out in their regulatory reviews for the upgrader application while strategic options for the company are being assessed.

Work in support of Northern Lights upstream development will be reprioritized to initiatives that reduce execution and operational risk. These initiatives include progressing the Northern Lights mining and extraction application, which is now well into the regulatory review process; mine planning; and the pilot testing of extraction technology. The company also will continue to develop its overseas modularized construction strategy for Upstream.

TD Securities Inc. and Merrill Lynch Canada Inc. have been retained as financial advisers to Synenco as the company conducts its options review. There can be no assurances that any transaction will occur or, if one is undertaken, its terms or timing. Synenco Energy does not expect to update its progress or disclose developments with respect to the exploration of options until the board of directors authorizes any transaction or when required by law.

We seek Safe Harbor.

[johnlw]

And here is Pescod's damage control:

http://www.siliconinvestor.com/readmsg.aspx?msgid=23499942

[Tackler]

Teck Cominco Chief Says Nationalization Trend Makes Companies Hesitant

By Craig Wong
25 Apr 2007 at 06:38 PM GMT-04:00

VANCOUVER (CP) -- Teck Cominco [TSX:TCK-B; NYSE:TCK] chief executive Don Lindsay says a trend toward nationalization of resources in some countries around the world may make companies ''a little hesitant'' when deciding to invest.

Lindsay, who is sitting on a massive pile of cash at Teck Cominco and is looking to spend some of it, says while he would wouldn't rule out any country, there were some that he would look very closely at before deciding to invest.

''I think you'll see companies a little hesitant to make major investments even in areas where we have tax treaties and stability agreements,'' Lindsay said after the company's annual meeting.

Teck Cominco has been looking for ways to spend its growing cash hoard after failing in its hostile bid for Inco, which eventually was acquired by Brazilian miner CVRD [NYSE:RIO; TSX:N].

With billions in cash, the Vancouver-based company has made several smaller investments and spent C$200 million this week for a 50% stake in a new oilsands lease.

Lindsay said the company now has three possible oilsands projects it can pursue.

''It will take capital and a lot of it, but we have a lot of capital and it will take skills for large open-pit mining and we have a lot of that too,'' he said.

''But it is very doable and is in one of the best and safest places on earth to invest and that's Alberta, right next door. So over time we could in fact replicate the entire market value of Teck Cominco in this one growth division over a period of eight-to-10 years.''

Lindsay also pointed to the potential of a copper exploration project in Australia, Carrapateena, where the company has had positive drill results.

''If the mining industry is all about a license to dream, then boy is this terrific material to dream about,'' he said.

RBC Capital Markets analyst Fraser Phillips called the Australian drill result ''spectacular.''

''It is early days but this is a lot to work with, and could provide a near-term boost to the share price,'' he wrote in a note to clients.

Teck Cominco reported earlier this week earnings of C$360 million or C$1.67 per share on revenue of C$1.3 billion for the three months ended March 31. That compared with a profit of C$448 million or C$2.19 per share on revenue of C$1.27 billion in the first quarter of 2006.

Teck Cominco attributed the lower earnings to pricing adjustments and a one-time non-cash charge of C$30 million related to the sale of the Cajamarquilla zinc refinery in Lima, Peru, in 2004.

Phillips said Teck Cominco offers investors the potential for ''continued superior returns within the mining industry.''

Our positive outlook for zinc and copper and strong earnings from Red Dog, Highland Valley and Antamina have the potential to drive further share price appreciation.

''Elk Valley and Trail should also remain significant contributors. The strong balance sheet and free cash flow hold out the potential for growth through acquisition as well as the direct return of cash to shareholders.''

The company announced a plan earlier this year to buy back up to 20 million or roughly 10% of its class-B shares.

Shareholders of the company voted at their annual meeting on Wednesday to approve a plan to split its stock two for one.

Teck Cominco's class-B shares closed up C$1.10 to C$87.20 on the Toronto Stock Exchange Wednesday.

[johnlw]

Canadian Oil Sands Trust (2) (C-COS) - News Release

Cdn Oil Sands earns $262-million in Q1 2007

2007-04-25 17:28 ET - News Release
Shares issued 479,114,728
COS.UN Close 2007-04-24 C$ 28.99

Mr. Marcel Coutu reports

CANADIAN OIL SANDS TRUST ANNOUNCES 2007 FIRST QUARTER RESULTS AND A QUARTERLY DISTRIBUTION INCREASE TO $0.40 PER TRUST UNIT AND 2007 FIRST QUARTER RESULTS

Canadian Oil Sands Trust has released first quarter 2007 results and declared a 33-per-cent increase in the Trust's quarterly distribution to 40 cents per trust unit for unitholders of record on May 8, 2007, payable on May 31, 2007. Net income in the first quarter of 2007 increased to $262-million, or 55 cents per unit, from $91-million, or 20 cents per unit, during the previous year's same period. First quarter 2007 cash from operating activities was $202-million, or 42 cents per unit, compared with $187-million, or 40 cents per unit, in 2006. Non-cash operating working capital requirements, primarily a result of higher accounts receivable, reduced first quarter 2007 cash from operating activities by $94-million.

Net income and cash from operating activities reflect higher revenues as a result of incremental stage 3 production, less turnaround and maintenance activity, compared with the prior year, and a larger Syncrude working interest. As well, net income and cash from operating activities benefited from a 41-per-cent reduction in per barrel operating costs quarter over quarter, offset somewhat by a higher Crown royalty expense.

Crown royalties increased to $9.58 per barrel in 2007 from 67 cents per barrel in 2006 with the shift to the higher royalty rate of 25 per cent of net revenues from the minimum 1 per cent of gross revenue, which occurred in the second quarter of 2006. In the first quarter of 2007 Syncrude paid royalties totalling $256-million to the Province of Alberta. The Syncrude project began paying the higher rate at roughly the same time as the stage 3 expansion was completed as a result of robust crude oil prices, which increased revenues from the base plant and accelerated project payout.

"Reflecting our constructive view of our free cash flow over the next several quarters and our intention to move to fuller payout of that free cash flow, we are very pleased to announce our third distribution increase since our stage 3 project funding began to diminish," said Marcel Coutu, president and chief executive officer. "Reduced capital spending, growing volumes from our recently expanded facilities and a renewed focus on costs and operational reliability are cornerstones of our current operation. These form the foundation upon which our next growth stages will be launched."

First quarter highlights

The trust's 2007 financial results reflect a 36.74-per-cent working interest in the Syncrude joint venture, which represents the trust's increased ownership following its previously announced acquisition of a 1.25-per-cent Syncrude interest from Talisman Energy Inc. on Jan. 2, 2007. Prior year comparative information is based on the trust's previous ownership of 35.49 per cent.

* Sales volumes increased 46 per cent, averaging about 109,000 barrels per day, in the first quarter of 2007 compared with the same 2006 period. The trust's larger Syncrude ownership, incremental production from stage 3, and less turnaround and maintenance activity quarter over quarter contributed to higher volumes in 2007.
* Operating costs averaged $23.56 per barrel in 2007, down from $40.26 per barrel in 2006 as a result of lower turnaround and maintenance activity, a decrease in the value of Syncrude's long-term incentive plan, and lower purchased energy costs in 2007 compared with 2006.
* Quarterly capital expenditures in 2007 declined to $33-million from $137-million in 2006 with the completion of the stage 3 project in August, 2006.
* Net debt-to-book capitalization of 25 per cent at the end of the first quarter of 2007 remained the same as at 2006 year-end.
* The trust is maintaining its single point estimate for 2007 production of 110 million barrels, or 40.4 million barrels net to the trust. On March 13, 2007, the trust announced a reduction to the upper end of its production range by five million barrels with the current range now between 105 million to 115 million barrels, or 39 million to 42 million barrels net to the trust. The change reflects constrained production rates from Coker 8-3 since late 2006. Syncrude plans to perform maintenance on Coker 8-3 during the second quarter of 2007 to restore production throughput.
* The Syncrude joint venture owners have approved the recommendations of an opportunity assessment team as part of the management services agreement between Syncrude Canada Ltd. and Imperial Oil Resources Ltd., previously announced in Stockwatch on Nov. 1, 2006. Implementation of the recommendations will be led by Tom Katinas, who has been appointed to the consolidated role of president and chief executive officer of Syncrude Canada, effective May 1, 2007.

Effective April 25, 2007, Walter O'Donoghue will be retiring from Canadian Oil Sands' board of directors. Commencing as chairman in 1995 of Athabasca Oil Sands Trust, one of the predecessors of Canadian Oil Sands Trust, Mr. O'Donoghue has served as a board member since the trust's inception.

2007 outlook

The trust's single point estimate for 2007 production is unchanged at 110 million barrels, or 40.4 million barrels net to the trust, which reflects maintenance on coker 8-3 in May to remove coke residue build-up. Once coker 8-3 is operating at its design capacity, Syncrude should be able to reduce throughput in cokers 8-1 and 8-2 and thereby slightly extend these cokers' run lengths. The result is that Syncrude is planning to defer the turnaround of another coker previously scheduled for the fall of 2007 into early 2008 and the trust's annual production target remains unchanged at 110 million barrels. While Syncrude anticipates that the coker 8-3 maintenance will enable that coker to produce at higher rates, the high-end production range of 120 million barrels is less probable, given the reduced run rates for coker 8-3 for the first part of the year. Consequently, on March 13, 2007, the trust reduced the high end of its production range by five million barrels from the guidance provided on Jan. 29, 2007, with the current range now between 105 million to 115 million barrels, or 39 million to 42 million barrels based on the trust's 36.74-per-cent interest. The low end of the production range continues to reflect the possibility that another coker turnaround could occur later this year. Syncrude had planned to modify the new hydrogen plant steam generation system in the fall of 2007, but now expects to perform this work coincident with a coker turnaround in order to optimize the efficiency of maintenance work. As a result, the transition of Syncrude's production volumes to the higher Syncrude sweet premium quality is expected to be delayed into 2008.

The unscheduled coker 8-3 maintenance work, together with other scheduled maintenance work, is expected to result in Syncrude production totalling 23 million barrels in the second quarter. The trust estimates production in each of the third and fourth quarters of 2007 to total 30 million barrels.

Canadian Oil Sands Trust has increased its WTI (West Texas Intermediate) crude oil price estimate for the year to average $60 (U.S.) per barrel and reduced the discount to Canadian dollar WTI to $2.50 per barrel from $4.00 per barrel. The revision to the trust's differential is based on the differentials realized in the first quarter of the year, and the trust is estimating positive differentials in the second quarter because of the reduced supply from various oil sands producers undergoing turnarounds and tie-ins, as well as lower relative WTI prices compared with other crude oil benchmarks as a result of market dynamics in the U.S. These estimates, together with a stronger average foreign exchange rate of 87 U.S. cents:Canadian dollar are expected to result in 2007 revenues totalling $2.7-billion.

Operating costs are estimated at $25.56 per barrel, which includes $7.34 per barrel for purchased energy based on an average AECO natural gas price of $7.75 per gigajoule for 2007. The trust's practice is to expense turnaround and maintenance costs in the period they are incurred. Accordingly, operating costs are expected to be higher in the second quarter as a result of the coker 8-3 and other maintenance work. The trust expects Crown royalties expense to total $333-million, or $8.22 per barrel, in 2007.

Canadian Oil Sands expects cash from operating activities to total $1,098-million, or $2.29 per unit, including an increase in operating non-cash working capital of $36-million. Capital expenditures are estimated at $251-million with approximately 90 per cent directed to sustaining capital, including $78-million for the SER project. The remaining 10 per cent pertains to stage 3 completion and modification costs. Free cash flow, defined as cash from operating activities less capital expenditures and reclamation trust contributions, is estimated to be $1.76 per unit in 2007.

Canadian Oil Sands estimates that virtually all of the distributions paid in 2007 will be taxable as other income. The actual taxability of the 2007 distributions will be determined and reported to unitholders prior to the end of the first quarter of 2008. The trust's 2006 distributions were 97 per cent taxable.

Conference call

Canadian Oil Sands Trust's annual and special meeting of unitholders will be held on April 25, 2007, at 2:30 p.m. A live audio webcast of the meeting will be available on its website under investor information, presentations and webcasts. An archive of the webcast will be available approximately one hour following the meeting.

 
          CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME 
                       (in millions of dollars) 
                                                           Three months ended 
                                                           March 31,  March 31, 
                                                               2007       2006 
  
 Revenues                                                 $     783  $     516 
 Crude oil purchases and transportation expense                (109)       (43) 
                                                          ---------  --------- 
                                                                674        473 
                                                          ---------  --------- 
 Expenses 
 Operating                                                      231        271 
 Non-production                                                  18         25 
 Crown royalties                                                 94          5 
 Administration                                                   4          5 
 Insurance                                                        3          2 
 Interest, net                                                   24         25 
 Depreciation, depletion and accretion                           82         50 
 Foreign exchange loss (gain)                                    (7)         2 
 Large corporations tax and other                                 1          2 
 Future income tax recovery                                     (38)        (5) 
                                                          ---------  --------- 
                                                                412        382 
                                                          ---------  --------- 
 Net income                                               $     262  $      91 
 Other comprehensive income, net of income taxes 
 Reclassification of derivative gains to net income              (2)         - 
                                                          ---------  --------- 
 Comprehensive income                                     $     260  $      91 
                                                          =========  ========= 
 Net income per trust unit(*) 
 Basic                                                    $    0.55  $    0.20 
 Diluted                                                  $    0.55  $    0.20

(*) Unit information has been adjusted to reflect the 5:1 unit split, which
occurred on May 3, 2006.

We seek Safe Harbor.

[Tackler]

Topped up the tank with PBG.

[Tackler]

Scores die in Ethiopia oil attack

http://news.bbc.co.uk/2/hi/africa/6588055.stm

Rebel gunmen have killed at least 74 people in an attack on an oil field in Ethiopia's remote Somali region, the Ethiopian government says.

Sixty-five Ethiopians and nine Chinese oil workers were killed, while seven Chinese were also taken captive in the incident, an official said.

Ethiopian Prime Minister Meles Zenawi called it a cold-blooded "massacre".

A spokesman for a separatist group, the Ogaden National Liberation Front, said it had launched the attack.

The clashes took place at an oil field in Abole, a small town about 120km (75 miles) from the regional capital, Jijiga.

'Atrocious attack'

Ethiopia's Prime Minister Meles Zenawi quickly condemned the attack. "Something of a massacre has happened," he said.

"It was a cold-blooded murder, we are pursuing the perpetrators and will see to it that it doesn't happen again."

A Chinese foreign ministry spokesman said: "The Chinese government strongly condemns this atrocious armed attack."

An adviser to the Ethiopian prime minister, Berekat Simon, blamed the ONLF, which he said had the backing of the Eritrean government.


OGADEN NATIONAL LIBERATION FRONT (ONLF)
ONLF fighters
Want Somali-speaking region to break away from Ethiopia
Founded in 1984
Has been accused of bomb attacks in Somali region and the capital, Addis Ababa
Fought major battles with Ethiopian government in 2006

ONLF statement
Q&A: ONLF rebels

A spokesman for the ONLF in London, Abdirahman Mahdi, said Ethiopian troops had been forcing nomadic tribes to leave their traditional grazing areas. "Because of that we had to take action," he said.

"We have warned the Chinese government and the Ethiopian government that... they don't have a right to drill there," he told the BBC's Focus on Africa programme.

"Unfortunately nobody heeds our warning and we have to defend our territorial integrity."

He disputed the government's figures, saying seven Chinese were killed and five seized.

The captives were not being treated as hostages and would be handed over to appropriate authorities, he said.

"We will treat humanely all those under our protection."

A Chinese oil worker said about 200 gunmen attacked the oil field.

The workers were employed by the Zhongyuan Petroleum Exploration Bureau, part of China Petroleum and Chemical Corporation, China's Xinhua news agency reported.

Gunmen briefly took control of the field after a 50-minute fire fight with soldiers protecting it, Xu Shuang, a manager for the oil group, told the agency.

Violent politics

In recent years, China has been working to increase its influence and investment in Africa as it looks to secure energy supplies for the future.

The Somali region - known locally as the Ogaden - is known for its often violent clan politics, the BBC's Amber Henshaw reports from Addis Ababa.

The ONLF has in the past made threats against foreign companies working with the Ethiopian government to exploit the region's natural resources.

The ONLF has been waging a low-level insurgency with the aim of breaking away from Ethiopia.

The incident will also step up tensions in the region, which borders Somalia - where there are often clashes between Ethiopian troops and Islamists, our correspondent adds.

[johnlw]

Looks like its time for Pescod to put out a soothing update on CLL in the Late Edition.