An external evaluation of Cenovus' oilsands assets by an independent qualified reserves evaluator, McDaniel & Associates Consultants, has identified best estimate total bitumen initially-in-place (BIIP) on Cenovus lands of 137 billion barrels (Bbbls). This amount includes the bitumen production, reserves and economic contingent resources previously reported as well as an estimate of Cenovus’s share of all other bitumen on the company's lands.
Of that total, 56 Bbbls of bitumen is considered to be discovered BIIP. To qualify as discovered BIIP, the evaluator typically requires at least one well drilled per section of land. The BIIP numbers reported by Cenovus are the evaluator's best estimate, which provides the most reasonable assessment of the bitumen resource.
"This independent evaluation of the amount of bitumen on Cenovus lands confirms the enormous opportunity our company has before it," said Brian Ferguson, President & Chief Executive Officer of Cenovus. "We believe we have ample resource to achieve significant growth for decades. We will draw upon our 14 years of experience as a low cost bitumen producer and technology leader to unlock the value of our assets for shareholders."
Cenovus anticipates achieving growth at long term estimated average finding and development costs of approximately $8.00 per barrel. The production increase is expected to come from continued expansions at the Foster Creek and Christina Lake operations as well as new projects at Narrows Lake and Grand Rapids. The business plan also includes cash flow growth that will provide Cenovus with the flexibility to consider increased dividends after 2011 and potential share buybacks in future years.
"We have been very rigorous in our resource assessment and in developing our ten year business plan," Ferguson said. "We continue to work hard to deliver on our near term commitments to shareholders regarding existing operations. As we move forward, we plan to build a financially and operationally sustainable manufacturing style growth model. We believe this will put us on a path to doubling the net asset value of the company in the next five years."
Production from the next phases at Foster Creek (phase F) and Christina Lake (phase E) is expected to begin a year earlier than initially planned, pending timely regulatory and partner approvals. In addition, further assessment of the potential of these two assets has resulted in Cenovus increasing the expected gross production capacity to about 235,000 bbls/d at Foster Creek and about 258,000 bbls/d at Christina Lake by 2019, a combined 15% increase over the previous capacity estimate.
Narrows Lake, located near Christina Lake, is the next project expected to be developed. A regulatory application for the initial phases of that project is expected to be filed in the coming weeks and includes the possibility to apply solvent aided process (SAP) along with steam assisted gravity drainage (SAGD) production.
Grand Rapids is a new project in the Greater Pelican Region. The company plans to test a SAGD well pair at Grand Rapids this fall and possibly submit a regulatory application by the end of 2011. Cenovus' Greater Pelican Region also includes the current Pelican Lake polymer flood operation in the Wabiskaw formation and a potential future project in the Grosmont carbonate formation.
Evaluation work is underway for several other projects that are expected to start producing after 2019. Additional stratigraphic wells are being drilled to support the current application at the Telephone Lake project in the Borealis Region. Cenovus also plans to gather seismic data and drill stratigraphic wells on seven other promising oilsands assets in the coming years. Cenovus has decided to make public, during its 2010 investor day presentations, ownership information that was previously kept confidential about some of these lands. The goal is to have an inventory of regulator-approved commercial projects with a total capacity of 400,000 – 500,000 bbls/d net to Cenovus by the end of 2015. These projects would be in various stages of development and production.
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