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Calgary-based Petrobank Energy and Resources is buying out its partners in two joint ventures that are to use its innovative fireflood heavy oil recovery technology.


In a news release Tuesday, the oil and gas company that has been championing the toe-to-heel air injection or THAI recovery method said it is buying out partners Shell Canada and Baytex Energy Ltd. for a net $15 million in cash.

Neither Shell nor Baytex was the original partner in the THAI development deals, in which Petrobank provided the technology in return for land and resources.

Duvernay Oil signed on as 50 per cent partner on the Dawson project near Peace River, Alta., before it was sold to Shell and True Energy Trust was the first partner in the Kerrobert, Sask., project before the asset was sold in a package to Baytex.

“These acquisitions effectively consolidate and increase our Canadian heavy oil lands and add a combined additional 41 million barrels of conventional heavy exploitable oil-in-place at Dawson and Kerrobert as estimated by McDaniel & Associates Consultants Ltd. at Dec. 31, 2009,” Petrobank said in the release.

“We have now established full development discretion on all our domestic projects.”

Petrobank shares fell 41 cents to $39.59 on the Toronto Stock Exchange on Tuesday.

In a separate release, Baytex confirmed the sale of its 50 per cent interest in the project at Kerrobert but said it will receive $18 million cash and a gross overriding royalty on its interest in the lands, the latter to begin one year after first production.

“The disposed assets include approximately 1,300 net acres (520 hectares) of land as well as Baytex’s interest in the two-well pilot project that utilizes Petrobank’s THAI technology,” it stated.

No representatives of any of the three companies was immediately available to comment.

Petrobank said it plans to spud its first expansion well at Kerrobert before month’s end. The expansion, approved in August, includes a further 10 THAI well pairs and surface facilities.

The startup preheat ignition cycle is targeted for early in 2011 and production in the second quarter.

The THAI process encourages underground combustion of petroleum through the injection of air into a vertical well. An intersecting horizontal well then siphons off the resulting heated and softened oil.

Petrobank also has an owned THAI in situ oilsands pilot project south of Fort McMurray called Whitesands.

It said it will also proceed with a two-well project at Dawson as soon as regulatory approval is in hand and is targeting a minimum of 10 additional well-pairs as part of a near term expansion of the Dawson project.

Petrobank chief executive John Wright has complained in the past that the regulatory process in Alberta takes too long compared with Saskatchewan.

Analyst Al Knowles of Haywood Securities said he views the news as a positive for Petrobank.

“They’ve acquired their partners’ interest in these two THAI projects ... they like to have high working interests on most of the things they do,” he said.

He said the Kerrobert pilot developed good results over the summer and bodes well for production from the expansion.

“It’s 10 wells and each well is expected to do 600 barrels per day,” Knowles said. “So 100 per cent of 12 wells including the pilot .. is a pretty good start for them.”

Source: The Calgary Herald




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