NatPost Article, ReduxOilexco strikes light oil in North Sea
UP TO 100M BARRELS
Jon Harding
Financial Post
Wednesday, May 30, 2007
CALGARY - Oilexco Inc., one of a handful of mid-sized Canadian oil and gas explorers successfully scavenging for reserves in the U.K. North Sea, has made a significant light oil discovery that could wind up being the company's largest find yet.
A discovery well at Oilexco's Huntington prospect in the Central North Sea 200 kilometres east of Aberdeen, Scotland, found two oil-bearing zones of "significant" size, the company said yesterday.
Calgary-based Oilexco's wholly owned subsidiary, Oilexco North Sea Ltd., which has been the most active North Sea driller for two straight years, said it will test the well's flow rates over the next two to three weeks.
Further wells will be drilled into two Huntington field reservoirs by the fourth quarter to confirm their size against company estimates that the upper formation spans 14 square-kilometres and the deeper reservoir covers seven square kilometres.
London-based Tristone Capital Inc. analyst Toby Pierce said the find appears significantly larger than other recent North Sea discoveries.
Mr. Pierce estimates the Huntington resource at between 50 million to 100 million barrels, enough oil to support a project with daily production of between 30,000 barrels and 50,000 barrels.
"Overall, and among all the companies active in the North Sea, recent discoveries have been significantly smaller," Mr. Pierce said .
"This, particularly the possible size and surprising information about the upper formation, is certainly what moved the Oilexco stock today."
Oilexco trades on the TSX and on London's AIM Market. Despite world oil prices plunging more than US$2 a barrel yesterday, Oilexco shares in Toronto rose 3.5% to a 52-week high of $11.18.
Oilexco president and CEO Arthur Millholland suggested Mr. Pierce's estimate may be conservative and that volumes of between 50 million barrels to 100 million barrels might be those "net to Oilexco," which is the operator at the Huntington field with a 40% stake.
Other partners are Germany's Ruhrgas with 25%, Norway's Altinex Oil UK Ltd. with 20% and U.S.-based junior explorer Carrizo Oil and Gas Inc. with 15%.
Oilexco, whose market value has grown from under $20-million four years ago to roughly $2.4-billion, is one of the handful of smaller Canadian firms that followed larger Canadians explorers such as Talisman Energy Inc., Canadian Natural Resources Ltd., Nexen Inc., EnCana Corp. and Petro-Canada into the North Sea starting in the 1990s after the international majors began vacating, having tapped out the giant finds made decades ago. Other smaller Canadian players active in the region include Antrim Energy Inc., Bow Valley Energy Ltd. and Ithaca Energy.
In its most recent report on the U.K. upstream sector, global energy research firm Wood Mackenzie noted the influx of Canadian companies and that they accounted for 39% of the exploration and appraisal well spuds in 2006. Of the 82 exploration and appraisal wells drilled last year in the North Sea, Oilexco drilled 20.
"When we started, much of the mantra in the U.K. was that the North Sea was finished," said Mr. Millholland. "It was the same thing you heard about Western Canada in the 1980s, when all the big majors pulled out and redeployed their capital elsewhere. We've stepped in and filled a vacuum that was created here."