"Vero Energy Inc. (TSX – VRO) of Calgary, Alberta ("Vero" or the "Corporation") is pleased to announce that it has recently acquired a drilling license in the Cordova Embayment area of Northeast British Columbia, representing a new prospective growth area for the Corporation. The lands were specifically chosen because of Vero's belief in the excellent resource potential and close proximity of the lands to midstream infrastructure"
"Vero is in the early stage of assessment and development of this new asset and future drilling, seismic, and testing is required in order to provide information to help assess the full potential of these lands. The Corporation has been technically evaluating and actively monitoring this area for two years and is excited to be involved in the early stages of its development. Vero had posted these and other lands in the area and paid $4.0 million for 2598 net acres. The option value on the purchase price of these lands in the best estimate prospective resource is $ 0.02/mcf. The Corporation will expend minimal capital in 2010, using
the balance of this year to plan and make ready its 2011 capital program for this project. There is considerable term on the lands and assessment and development is proportional and manageable for Vero in upcoming years. Management believes this play has the potential over time to significantly add to our current proved plus probable reserves and is consistent with Vero’s long term strategy of a technical focus emphasizing organic, high rate of return growth. The Corporation plans on leveraging its known technical expertise and low cost structure focus to this new play"
$1500 per acre isn't exactly cheap for acreage that has no previous production and that is located in the middle of nowhere.
Vero's land is located next to Penn West's acreage and infrastructure.
Other producers are moving to that direction as well; The following is from Nexen's Q2-CC:
Andrew Potter - CIBC World Markets
We will try one more time. So the shale gas land acquisition was that in the Horn River or the Cordova Embayment or elsewhere I guess, I wasn’t totaling clear on that?
Marvin Romanow
Good morning, this is Marvin here. We purchased acreage in the Cordova area and we also purchased acreage in the Liard area.
Andrew Potter - CIBC World Markets
What sort of results have you had from the Cordova or have you even drilled there yet?
Marvin Romanow
We have had both vertical and horizontal test there and we are very encouraged by what we see there. I think if we wanted to compare that to Dilly Creek, the way we’d frame that is well costs are going to be a bit cheaper because the formations are a bit shallower. Resource density from the activity that we see today is roughly 80% of what we see in the Dilly area. So in fact with the lower cost and slightly lower resource density, our economics are probably are going to look a little better than the Dilly area.
Without knowing where exactly is the land located in the Liard Basin it's difficult say does the land purchase have anything do with the Maxhamish oil play, but considering the context it's probably shale gas that Nexen is after.
The Southern Liard Basin is situated more advantageously than the HR Basin, when comes to exporting the gas since it's closer to the coast line and closer to existing infrastructure. Apache Corp, that now controls the Kitimat LNG project has been drilling and licensing wells in the Southern portion of the Liard Basin.
The lower picture is from Penn West, the upper from a B.C. government site. As the stratigraphic cross section shows, the Muskwa and Otter Park shales are encountered at shallower depths in the Cordova Embayment, which should mean lower drilling costs per well.
UPDATED 06.08.2010
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