RE: IFR article Calgary HeraldHerald Energy: Oil & Gas - Electricity Alternative Energies. Interview with Pat Boswell
Calgary-based International Frontier Resources Ltd. is an overnight success story 10 years in the making. The tiny junior explorer grabbed headlines in the winter of 2004 with the Summit Creek oil and gas discovery in the central Mackenzie Valley, the first in the area since Norman Wells was found in 1919. The B-44 discovery well flowed some 20 million cubic feet (mmcf) per day of natural gas and 6,000 barrels per day of oil and liquids, also making it one of the biggest onshore wells ever drilled in North America. Last spring, the company again found itself in the spotlight after the Stewart D-57 became the first discovery in Cretaceous- aged rocks north of the 60thparallel. IFR is unique among smaller energy players because it has attracted giants like Husky Energy Inc., British Gas and Texas- based EOG Resources to farm in on its Far North prospects. Pat Boswell, IFR's president and CEO, is an industry veteran with more than 30years staking claims as a land man in Western Canada. It is the vision and persistence of its leader that has allowed IFR to weather more than a decade of ups and downs pursuing its Arctic dream. Even with a string of discoveries under its belt, it could be another half-decade before IFR starts realizing profits from those successes, after a pipeline is built to bring it to market. But Boswell remains undeterred. In the interim it has opened a new front in the North Sea, one of the hottest drilling basins for Canadian companies in the international arena. Boswell recently took some time to talk about the company's progress and its plans for the future. Q: What's your background and how did IFR come into existence? A: I've been in the business for about 30 years now. I started as a land man with a company called Hardy Oil and Gas Canada, which was a London stock exchange-based company. We sold that about 10 years ago and decided at the time that the Northwest Territories was under explored and that it was a good place to put together an asset base. Q: How did you get into the North Sea? A: Because of the seasonal nature of our exploration in the N.W.T., which is really between the months of December to March, we decided to look for a second area of focus and we went to the North Sea in June of 2005. Since that time we've put together five prospects over there, of which we're going to drill three exploration wells in 2007 and probably two more in 2008. Q: Why the North Sea over other areas of the world with greater exploration potential? A: Basically because of the expertise of our technical group in the U.K., it's their own backyard. We see the North Sea where the Canadian basin was 10 years ago, where the majors started to depart and we're seeing that in the North Sea right now. In fact, the North Sea is interesting because some of the most aggressive exploration companies are Canadian -- Oilexco, Bow Valley, Nexen, Talisman -- the whole group. Q: What are some of the challenges for a smaller company operating abroad? A: The biggest challenge over there is rig availability. There are basically 35offshore rigs and five to six hundred wells the DTI (U.K. Department of Trade and Industry) forecasts have to be drilled over the next few years. As a result of that, the cost base has gone up significantly. Day rates on rigs over there are currently$350,000 US a day versus $150,000 when we first got into the North Sea. Q: How do you get around that? A: We've partnered up with Oilexco and they have a rig. We're going to drill a prospect called Laurel Valley in March and it is wildcat drilling for a large reserve base prospect. We're very fortunate because those companies have very strong technical groups,too, and wherever you have wildcat exploration you want to make sure you have as many technical eyes reviewing the prospects as you can. We try to add value through our expertise. Q: What does exploration the North Sea and the Far North have in common? A: Our technical consultants in the North Sea also have a very strong background in the N.W.T. They did regional studies of the entire area about 10years ago and sold those non-exclusive reports to all the majors in Calgary. That was about the time the moratorium was removed -- there had been a 20-year moratorium on exploring up there -- and that was really the background of a lot of companies' understanding of the geology of the N.W.T., which in our view we see as an extension of the western Canadian basin. Q: Why the Arctic? A: It's an interesting area, it's under explored. On average there is one well for every 425 square kilometres in the N.W.T. versus one well for every 2.5square kilometres in Alberta. Right now we're in the early days; you explore for large structural plays that you can see on seismic and with the advent of new technology we're able to image these structures a lot clearer. We have about eight structural leads in the N.W.T. We will be drilling the Haywood structure next winter and what we're hoping is that it's the anchor field that will allow us to start putting plans together for a pipeline. It's a large structure, with a prospective resource in the 500 billion cubic feet range. Q: What about a pipeline? Is it a sticking point? A: Well Summit Creek is a very liquids-rich gas reservoir, but the remaining prospects we have out there are dependent on a central Mackenzie Valley pipeline, as are the prospects in the Colville Hills. My view is that the federal government has to step in and settle land claims with the natives. Once that happens, I think you'll see this move forward. The second option is if the group in the Central Mackenzie can prove up enough resource, it could build a pipeline from the Alberta border to the Central Mack. So it would be a two-stage pipeline, first up to Norman Wells and then on to the Delta. I see that having merit, but first we have to see some more exploratory drilling up there to prove up the resource base. We need that gas from the N.W.T. for southern markets and certainly for the Alberta oil sands. Q: Is there still an exploration culture in Calgary? A: No, but there's going to have to be. The model in Calgary was always to put together an exploration team that was good, you built your company to two or three thousand barrels a day and sold it to a royalty trust. Now that that model appears to be leaving, I think these companies that are getting up to three to five thousand barrels a day are going to have to become explorers. I see the return of the mid-size intermediate producing 20,000 to 30,000barrels through the drill bit.