AltaCanada Comments on Company 3Q Position, Financial Market

AltaCanada Energy has posted its third quarter financial report and has issued comments on the current financial climate.

Third Quarter Announcement

We are indeed living in interesting times. With the recent global liquidity crisis, and attendant drop in commodity prices, the market for junior oils has taken a downturn with prices generally far below underlying net asset values. AltaCanada has not been immune to this market activity and at the time of this writing, our shares were trading near an all time low. It is management's view that the underlying value of reserves and land, net of debt for AltaCanada, is significantly higher than the current share price. The market value does not reflect the value of AltaCanada's existing production and new infrastructure or the value of new production and reserves that will shortly be tied in from our Fort Belknap acreage. The market certainly does not reflect any prospective value associated with the Corporation's Jurassic and Bakken prospects. We recommend patience through this market turmoil and look forward to new company developments as we actively pursue our program.

We remain confident in the merits of our long term strategy of amassing a very large Montana land position (including our Fort Belknap Indian Reservation lands), of exploring low cost and low risk shallow gas prospects that can be tied in through infrastructure developments while at the same time providing a basis for the Corporation to initiate exploration of potentially significant Jurassic and Bakken horizons.

During this quarter AltaCanada's lender re-affirmed the Company's $10.5 million line of credit, which is currently drawn at $8.5 million, and approved our request for an additional development line of $2 million. The expanded development line is very significant as it enables us to complete and tie-in the current phase of our program without having to resort to difficult equity markets.

This new development financing will be used to complete our current milestone project, placing our Fort Belknap gas on stream. This new project, the culmination of several years of land acquisition and exploration, is an important step for both AltaCanada and The Fort Belknap Indian Reservation. Upon completion of drilling and pipelines, this will represent the first ever oil or gas sales from the Reservation and is demonstrative of the economic value of your company's investment there.

The Fort Belknap pipeline project, which commenced construction on November 24, 2008, consists of 8 1/4 miles of 6 inch steel pipeline to connect the Fort Belknap area with our extensive gathering system and compression facilities at Harlem, to the north. In addition, over 22 miles of 3 or 4 inch plastic pipe will be installed to connect 8 wells already drilled and tested, and 9 new wells to be drilled this quarter. The first of these 9 (4.5 net) wells will commence drilling on November 28, 2008. One well is expected to be drilled in November and the remainder in December. All of these locations are development wells to be drilled on seismically confirmed structures between existing tested wells at approximately one-mile spacing.

Based on test rates averaging 200 Mcf/d from the first 8 Fort Belknap wells, we expect an additional 3 MMcf/d (1.5 MMcf/d net) production increase once drilling, pipeline and tie-ins are completed through December, 2008 and January, 2009. All of this gas will be marketed at the Montana/Saskatchewan border and receives a premium to the AECO price. To date, under the NI 51-101 rules, minimal reserves were booked by our independent reserve evaluators at December 31, 2007; however, with the new gathering system in place we anticipate material reserve additions in our December 31, 2008 evaluation.


Establishing natural gas production on the Fort Belknap Reservation is a significant event for AltaCanada. This first 3 MMcf/d (1.5 MMcf/d net) represents production from only a portion of the four townships where we started our exploration program in November, 2005. Included in our 400,000 (300,000 net) acres are portions of 13 other townships on the Reservation which are equally prospective for shallow natural gas. Based on early reconnaissance gravity surveys completed on portions of six townships we have identified several leads that will be followed up with a 2D seismic program in 2009.

Investigation of several Jurassic oil leads identified by 2D and 3D seismic and a follow-up to a Bakken log show will be pursued next year, either with our own capital or with capital provided by joint venture partners. Oil potential in these deeper zones is significant.

Jurassic oil production on Montana lands adjacent to our large block totals 15 million barrels from depths of only 3,500 ft. A 3D seismic program shot by the Corporation at 100% interest has defined 4 Jurassic targets. Additionally in a separate area, other operators have successfully completed 4 horizontal wells targeting Jurassic units with initial production rates up to 500 bbl/d. AltaCanada has acreage offsetting these wells. We are planning activity in 2009 on these adjacent lands.

Horizontal drilling and new frac techniques in the Bakken Formation have been very successful in other areas of Montana. While Bakken tests have been rare in our area, one older well does present an excellent log show with 22 ft of indicated Bakken reservoir quality sandstone. This lead will be evaluated in 2009.


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