This approval will allow the joint venture partners in the field to proceed with development, with first oil expected by the first quarter of 2008. Peak production from the field is expected to be 20,000 bopd (gross), 2,400 bopd (net) to Bow Valley, plus associated natural gas production.
Parnters in the development are Nexen as operator with 80%; Bow Valley with 12% and Atlantic Petroleum with 8%.
The Ettrick field was discovered in 1981 and has been appraised by seven wells drilled between 1982 and 1985. The field is located in the UK sector of the North SEa in Block 20/2a and 20/3a. Field development will be on a phased basis, with the first phase consisting of three producing wells and one water injection well. The second phase will consist of one or two additional water injection wells, dependent upon field performance. The wells will be tied back to a leased floating production storage and offloading vessel (FPSO).
With the approval of the Ettrick field development, the Bow Valley’s board has approved an increase in the 2006 capital expenditure budget to $120 million from the previously announced $105 million, with all of the incremental spending directed to the Ettrick project.
To finance the increased capital spending, Bow Valley has agreed to the terms of an increased debt facility with the Bank of Scotland for Bow Valley's U.K. subsidiary, Bow Valley Petroleum (UK) Limited. The US$150 million facility will finance Bow Valley's share of the development costs of the Blane, Enoch, Chestnut, and Ettrick oil fields and other ongoing capital requirements. The facility is outlined in a credit-approved term sheet comprising a US$125-million senior facility and a US$25-million mezzanine facility; it is subject to, among other things, the execution of full documentation.
Bow Valley's debt position is anticipated to rise to peak levels before first production from the fields late in 2006, before being rapidly repaid from forecast cash flows generated from the growing production profile. Under current commodity price expectations, Bow Valley expects to be able to maintain its corporate balance sheet at a debt to forward cash flow ratio at or below approximately one times the estimated forward 12 months cash flow.
"The field development plan approval of the Ettrick discovery is another significant milestone in Bow Valley's expanding U.K. presence,” said R.G. Moffat, Bow Valley’s president and CEO. “It represents the fourth U.K. North Sea field development that Bow Valley is currently participating in and provides visible growth for Bow Valley into 2008. The combined development projects of Blane, Enoch, Chestnut, and Ettrick are forecast to add approximately 60,000 (7,750 net) boe/d of new production volumes over the next 12-24 months. The resultant revenue and cash flow will enable the company to pursue an expanding exploration strategy in drilling three to five offshore exploration wells per year.”
“The continued support from the Bank of Scotland with the revised credit facility represents another testament to the economic viability of these projects and the credibility of Bow Valley's business strategy,” added Moffat. “The increased financing is expected to fully fund Bow Valley's share of capital for these projects in addition to providing financial flexibility to execute our business plan. I am extremely pleased with the progress made in advancing our U.K. development projects and positioning Bow Valley to confidently pursue new exploration opportunities in the North Sea.”
Bow Valley Energy Ltd. is an oil and natural gas exploration, development and production company with operations in western Canada and the U.K. sector of the North Sea.
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