Alaska vs Canol Shale Oil Hello Glacierman:
Thanks for the head-up on the Alaska Shale play (Shublik Shale). It makes for an interesting comparison to the Canol. Here are some of my thoughts. It would be great to hear your responses:
- The first thing I notice is how cheap the land went for in the 2010 and 2011 Alaskan lands sales. The heart of the play is on either side of the Alaska pipeline. Royale and Great Bear seem to have the best acreage. Together they paid $14.6 million for about 650,000 acres or $23 per acre. Pretty cheap compared to the Canol.
- The big companies like Conoco Philips and Exxon did not bid even thought they are the principals in the Pruduoe Field just to the north. Maybe the majors missed out, but it seems unlikely. They jumped on the Canol.
- Great Bear made a presentation in February 2011 in which they disclosed their estimates for the Alaskan Shale play. They say that they have 2 billion barrels on their lands and will ramp up production to 600,000 bopd.
- A number of tracts within the Great Bear play were put up for sale in the December 2011 land sale. This sale was after Great Bear disclosed what it was doing. The price of these parcels was still low at $40/acre with no interest from the majors. This seem very odd.
- The only company that is public in this play is ROYL. Great Bear is private. Royale Energy has a lot of stuff besides the Alaska Oil play so it is not a pure shale play. There are a lot of individuals bidding for land. Repsol bid $2.7 million but I think this is a Spanish oil company traded on the Madrid exchange. ROYl does not have very much good acreage in the oil window, but as you know it jumped when Great Bear said they have good cores.
Compared to the Canol:
- The big boys are involved in the Canol with the notable exception of MGM. Most are these companies are also involved in Alaska in a big way (Husky is the exception).
- The majors are willing to commit to spending about $600 million on the Canol, while they would not even put up a couple of million for the Alaskan shale. Hard to figure out why this would be.
- The Alaskan has an all weather road while the CMV does not and it has a oil pipeline which has hundreds of thousands of bopd spare capacity while the CMV pipeline can handle 50,000 bopd after expansion. Two big advantages for Alaska over the Canol.
- Alaska and Canol do not have a gas pipeline. This is going to be a problem for both plays.
- Alaska has royalties of 16 2/3% while the Canol has royalties starting at 1% and building to 5%. This is going to really help the Canol. This is significant.
- Alaska has three shale zones while the CMV has two: Canol and Bluefish. Great Bear claims that the Alaska shale play is the best in the world and feels it is better than the Bakken or the Eagle Ford. To me the Canol looks like to might be better.
- Here is how the Canol and Bluefish compare to the numbers published by Great Bear
Canol Shublik
TOC 8% 4% higher is better
Porosity 12% less than 10% higher is better
Thickness 70 m 70 m
Depth 1,500 m 2,700 m shallow is cheaper to drill, but lower pressure
Size 2 million 300,000 acres - my estimates
Naturally fractured YES Unknown
Thermal Maturity 0.9 0.5 to 2
Notes on Thermal maturity: less than 0.6 is immature for oil, 0.6 to 1.1 - oil window, 1.1 to 1.4 wet gas, 1.4 to 3 is gas.
So it doesn't look like all of Great Bear's acreage is in the oil window.
It looks like the Canol compares favourably to the Shublik. However, the only way to play this is MGM and ROYL. (Great Bear is private and IFR lands are in the gas window and their Summit discovery is too far from the pipeline to be economic.) Royale doesn't have very much good acreage. The stuff they picked up on the 2011 land sale is mostly moose pasture, but there are a couple of good tracts. However, with good promoters their stock will pop as it did when Great Bear said they got good core results.
The one thing that I think that the Alaska play has over the Canol is good stock promoters. Great Bear is publishing highly speculative numbers, but it sure gives the company a boost. They can get away with this because they are a private company.
I am concerned that speculative fever may not take hold for the Canol because the big companies involved in the Canol don't release much information because things like core results and even well test results are not material to their stock price. MGM will publish their results, but we are unlikely to hear much from the likes of Husky and Conoco.
I would love to hear anyones thoughts on this.