Cenovus Energy has almost doubled its daily oil production at its key Foster Creek project north of Cold Lake in the past year.
Just how well things are going on the major steam assisted gravity drainage project were highlighted in the company's first quarter report numbers released last week.
Cenovus said it has made great strides in production at Foster Creek in the last 12 months, and has boosted its average barrels per day production rate from 28,554 in the first quarter of 2009 to 51,126 for the first quarter of 2010. At $70 a barrel, that's a daily revenue hike in the range of $1.5 million before royalties.
As one of the Bonnyville-Cold Lake region's biggest players, Cenovus operates Foster Creek, but it is a 50/50 partner in the project with Conoco Phillips. Overall production for both Cenovus and its partner at Foster Creek is now averaging around 102,000 barrels per day, with the capacity to go to 120,000.
The production boost is good news for Alberta taxpayers as well as those who work for Cenovus or provide services to the energy giant in the Lakeland region.
That's because the project is now producing at a level that greatly hikes royalty rates paid to the government.
“Strong operational performance and a superior quality resource resulted in Cenovus's Foster Creek project achieving payout for royalty purposes in the first quarter of 2010, the result of cumulative project revenue exceeding cumulative project allowable costs,” the company said in a news release.
“As a result of reaching payout, the royalty rate increased from an average of 1.4 per cent in the first quarter of 2009 to an average of 9.7 per cent in the first quarter of 2010, with only a portion of the quarter reflecting the increased rate. Foster Creek is Alberta's largest producing steam assisted gravity drainage project to reach payout to date.”
Brian Ferguson, the company's president and chief executive officer, called the latest results a milestone.
“The achievement of payout at Foster Creek is a significant milestone that speaks to the quality of our assets and is a credit to our team,” Ferguson said.
The company's cash flow was actually down about three per cent from the same quarter in 2009, but the reduced revenue was concentrated in the natural gas sector.
While production was way up at Foster Creek, operating costs on the project for the first quarter of 2010 fell to $11.82 per barrel from $16.33 for the same period in 2009, Cenovus said. That reflects spreading out costs over increased production.
The company said additional production phases at Foster Creek continue to move through the regulatory approval process, and approval is anticipated later this year. Three additional phases would add 90,000 barrels a day to gross production from Foster Creek by 2017.
Drilling plans for 2010 include 14 new wedge wells. About 12 per cent of the current production on the project comes from wedge wells.
