EnCana Acquires Acreage in Greater Sierra

EnCana Corporation has completed a major land acquisition program along the Devonian Jean Marie reef margin in the Greater Sierra region in northeast British Columbia. The company now holds more than 2 million net acres of land on the Greater Sierra play and is firmly established as a leading explorer, producer and landholder in B.C. -- one of the fastest growing gas producing regions in North America.

"We believe that the Greater Sierra natural gas field is a world class discovery which will be a key element of our long term gas growth strategy. The region's resource potential on EnCana lands is estimated at more than 5 trillion cubic feet of sweet gas in place, and we expect to recover more than half of that," said Randy Eresman, President of EnCana's Onshore North American division.

EnCana considers that its Greater Sierra lands contain the largest regional gas play discovered in Western Canada in the past decade. For the last four years EnCana has been steadily acquiring mineral rights and extending the productive area of this play.

"We first entered the Greater Sierra play in 1998 and each year our technical and operations teams have improved their understanding of the play, moving from the lower productivity carbonate platform to the more prolific reef margin. We are now in a position to predictably grow reserves at attractive full cycle finding and development costs of between C$1.25-$1.50 per thousand cubic feet," Eresman said. "To date we have booked about 600 billion cubic feet of established gas reserves in Greater Sierra.

"We had a very successful winter drilling program in this seasonal access area, drilling 45 wells and adding about 150 billion cubic feet of established reserves. Approximately half of these wells targeted the reef margin. We expect that daily gas production from Greater Sierra, currently about 150 million cubic feet per day from approximately 200 wells, will more than double in the next three years, and continue to grow after that. To date, 500 potential drilling locations have been identified and current plans are to drill about 100 wells a year. We are well positioned with infrastructure as the company owns seven gas plants with about 200 million cubic feet per day of processing capacity in the area. As well, we have long-term transportation commitments with Duke Energy Gas Transmission in B.C. and TransCanada PipeLine's Alberta system," Eresman said.

The Greater Sierra development taps the extensive Upper Devonian Jean Marie formation, a gas-rich carbonate present throughout much of northeast B.C. The most prolific wells are located east of Fort Nelson, B.C. along the reef margin that is about 3 to 5 miles wide, extending more than 175 miles south from the Northwest Territories border to the disturbed belt of the Rocky Mountains. Typical wells in the reef margin will produce from 2 million to 4 million cubic feet per day in the first year and then stabilize in the range of 1 million cubic feet per day with a reserve life of greater than 10 years. Each square mile of productive land on the reef margin contains an estimated 5 billion to 10 billion cubic feet of gas in place. To date, EnCana's success rate along the margin has been in the order of 90 percent.

The Jean Marie Formation can be compared to the modern day reef complexes of Australia's Great Barrier Reef. The reservoir's unique characteristic is that it is under-saturated with respect to water, resulting in up to 40 percent more natural gas per unit area in the rock compared to normally saturated formations.

EnCana has developed an expertise in the exploitation of non-conventional gas reservoirs, such as the Jean Marie trend. The company has been able to unlock the tremendous resource potential of this area through its innovative drilling techniques and its design of large development programs that benefit from economies of scale. EnCana has applied its technical expertise by drilling horizontal and under-balanced wells. Without the innovative application of these two technologies, the development of Greater Sierra would have been uneconomic. Horizontal drilling in this area involves drilling vertically for about 1,400 meters before turning the bit to then drill horizontally for about 1,000 meters through the gas-bearing rock. Under-v balanced drilling uses inert nitrogen foam instead of a water-based drilling mud. The use of conventional water-based muds in this type of formation would create a water phase trap that would severely reduce the productivity of the gas wells.

"Relative to other major fields in the Western Basin, Greater Sierra has comparatively few wells drilled," Eresman said. "We have an extensive land base, solid infrastructure and a low cost structure, with operating costs targeted at less than $0.50 per thousand cubic feet. This positions us to generate sizable, reliable and profitable gas growth. As an added bonus, there are shallower zones that we have yet to exploit that can only add to the value of Greater Sierra."

EnCana is forecasting natural gas sales of between 2,675 million and 2,745 million cubic feet per day in 2002, a 14 percent increase in average daily gas sales compared to the 2001 combined results for Alberta Energy Company Ltd. and PanCanadian Energy Corporation.


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