By OGJ editors
HOUSTON, Oct. 31 -- Paramount Resources Ltd., Calgary, took a farmout from Chevron Canada Ltd. and BP Canada Energy Co. on 1,019,000 acres and plans a major exploratory initiative in northwestern Canada.
At the same time, Paramount's board proposed to spin out its Mackenzie Delta and Colville Lake assets into a new public corporation, initially owned by Paramount and its shareholders, by yearend subject to approvals.
The new firm would pursue acquisition of more interests in the Mackenzie Delta and Valley and become a major producer into the proposed gas pipeline there. Paramount would provide services until the new company obtains its own personnel.
Paramount said it supports the development of the proposed Mackenzie Valley pipeline and believes that taking the farmout "demonstrates confidence in, and will provide a positive contribution to, the proposed pipeline's success."
NWT farmout
Under the farmout, Paramount would become operator of Northwest Territories exploratory properties EL 394, EL 427, and Inuvik Concession Blocks 1 and 2.
Paramount can earn a 50% interest in the properties by drilling 11 wells and gathering 3D seismic data in 4 years and making required extension payments to the lessor.
If it satisfied the drilling commitments in full, it would earn a 50% interest in prior discoveries Langley K-30, Olivier H-01, and Ellice I-48. Langley and Ellice were production tested at rates of 18 MMcfd and 34 MMcfd, respectively. Olivier production test results are confidential.
Chevron Canada applied for significant discovery status for Langley and is preparing such submissions for Ellice and Olivier. Chevron Canada will continue to operate the properties through the 2006-07 winter.
Paramount will earn a smaller interest in the properties if it doesn't satisfy the farmout requirements in full and would earn no interest in the discoveries.
Paramount noted that a gas resource evaluation prepared by independent petroleum engineers for regulatory hearings on the proposed pipeline estimated an undiscovered resource potential in the 7.1 million acre onshore and shallow-water portion of the Mackenzie Delta at up to 21.3 tcf in place (high case).
Paramount has been working in Canada's far north for 27 years, and its Colville Lake properties cover 1.48 million acres (951,000 acres net).
Paramount and its joint venture partner have drilled ten wells, of which eight have been cased and two abandoned. Paramount's net outlay at Colville Lake is $80 million.
A separate, updated evaluation by consulting engineers of the Nogha discovery made by Paramount and its JV partner at Colville Lake estimated Paramount's share of raw contingent resources to be 56 bcf midcase and 182 bcf high case (see map, OGJ, Oct. 18, 2004, p. 36).
The Nogha C-49 and M-17 discovery wells were production tested from the Cambrian Mount Clark A and C zones at combined rates of 5.1 MMcfd and 3.5 MMcfd, respectively. The Mackenzie evaluation estimated an undiscovered resource potential for the Colville Lake Cambrian sandstone, which covers 13 million acres in the Mackenzie Valley, of up to 8.6 tcf of gas in place at the high case.
